Charities jump on gift-card bandwagon[SIZE=-1]With fees, expiration dates, and other gotchas, gift cards can be more nuisance than gift. And charity gift cards and certificates are no exception.
Charity gift cards are like traditional gift cards, but instead of redeeming them for products or services, recipients use them to make donations. Although sometimes offered for use at a single charity, the cards typically are sold by networks that act as middlemen, forwarding the money when cardholders select from hundreds or even thousands of nonprofits. We?ve seen cards available with values of $10 to $10,000.
Like many other gift cards, charity gift cards usually have fees. Issuers, nonprofits themselves, charge around $5 to buy the cards and another 3 percent to 15 percent when card holders redeem them. Other drawbacks are hard-to-find terms and conditions and expiration dates (after which the issuers take the money for their own operations.)
Most cards can?t be redeemed for cash, and any tax deduction typically goes to the purchaser, not the recipient.
Once a card holder designates a charity, some issuers take up to four months to forward the donation, a delay that charity watchdog American Institute of Philanthropy criticizes as unwarranted.
The cards are becoming popular among nonprofits. Even a majorcharity watchdog, Charity Navigator, is selling one card, issued byNetwork for Good. Charity Navigator rejects criticism that therelationship is a conflict of interest. But it also failed to discloseits commission for every card sold, which it says was an oversight andwill be corrected.
The one standout is the Kiva giftcertificate. It can be used only at Kiva to make micro loans toentrepreneurs in developing countries. Because lenders expect to getrepaid, Kiva certificates generally are not tax-deductible. While thatsounds like a drawback, it means that recipients can cash out Kivacertificates at any time, preferably after making some micro loans.(Kiva loans have a 96 percent repayment rate.) Kiva certificates haveno fees, although they convert to a tax-deductible donation to Kivaitself if not redeemed within a year. Any deduction benefitscertificate holders, another rarity.
WHAT TO DO
- Before giving a charitable donation as a gift, make sure your recipient wouldn?t prefer receiving a traditional gift.
- Instead of giving a charity gift card, consider giving directly tothe group or groups that ultimately would benefit, perhaps in your giftrecipient?s name. You?ll cut out the middleman, along with the fees andother gotchas.
- Before giving a card, check out the terms and conditions, includingin online FAQs and help files. Print out copies for your recipient, andkeep a receipt for tax purposes.
- If you receive a card, don?t assume that the organizations listed on the issuer?s site are worthwhile. Here's some advice from the Consumer Reports Money Adviser newsletter on how to check out charities.
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