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The Business of Giving

Exploring philanthropy, non-profits and socially motivated business, from the Gates Foundation to your donation. A fresh look at the economy of good intentions.

December 10, 2009 at 12:58 PM

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Consumer report clashes with charity gift card vendors

Posted by Kristi Heim

Charity gift cards are springing up as a new way to give a gift and let the recipient pass it on to the non-profit of his or her choice.

The cards have been growing in popularity as people combine holiday shopping and philanthropy on tight budgets. But the non-profit Consumer Reports warned last month that charity cards are saddled with some of the same issues as gift cards in general -- including added fees and expiration dates.



TONY AVELAR/ASSOCIATED PRESS

Spending on regular gift cards is expected to drop this year, according to the National Retail Federation. But charity gift cards are becoming a popular tool for some non-profits.

The card issuer generally charges about $5 to purchase the card and may charge another 3 percent when the recipient redeems the card to make a donation, according to the report. The tax deduction goes to the purchaser, not the recipient. And card issuers sometimes take up to four months to forward the donation.

Three of the top charity gift card producers took issue with the report and complained that "Consumer Reports is driving money away from charities at a time they need it most." The cards serve a useful purpose by redirecting "money that was being spent on unneeded and unwanted stuff" to charity.

Seattle's Paul Shoemaker, founder of Social Venture Partners, also weighed in with support for the charity cards.

"In our experience, charity gift cards introduce many potential donors to charitable organizations that they otherwise would not connect with," he said. "That is a good thing at a time when so many non-profit organizations are struggling to survive."

CharityChoice, JustGive and TisBest, which are all non-profits themselves, say they have repeat users who have been happy with the experience and terms. They point out that donors would pay the same 3 percent processing fee for any online donation.

Seattle-based TisBest was created to provide "non-material options available in a world of many, many material choices," said Executive Director Jon Siegel.

The American Institute of Philanthropy, a charity watchdog, recommended people give to charities directly. "Why hand over a chunk of your contribution to a third party web site when you can give directly through a charity's own site?" it asks.

The institute also frowns on the practice of earning interest on donations by delaying their transmission to the charity. "If the site allows you to give to hundreds of thousands of charities, your $25 donation may sit in its bank account for awhile," it said.

Consumer Reports advised people to consider giving directly to the charitable group in someone's name and cut out the middleman.

But obviously that takes away the option of letting the recipient choose where to give, which may be worth a few extra dollars. Either way, the blending of commercial tools and charitable goals seems like an unstoppable trend, and one that will benefit from good watchdogs. If done right, it has the potential to get many more people involved in giving than traditional philanthropy.

Before giving any card, it's a good idea to check out its terms and conditions, which are usually listed on its Web site under FAQs.

Retail gift card sales are expected to decline this year as people hunt for bargains and try to steer clear of expiration dates, added fees, lost cards or stores that may go out of business, according to a recent survey. Still gift cards will account for almost $25 billion this year, according to the National Retail Federation. That's a significant market for charities to try to tap.

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