In this report

Charities jump on the gift-card bandwagon

Last reviewed: November 2009

With fees, expiration dates, and other gotchas, gift cards can be more nuisance than gift. And charity gift cards are no exception.

Charity gift cards are like traditional cards, but instead of redeeming them for products or services, recipients use them to make donations. Although some cards are for donations to a single charity, they typically are sold by networks that act as middlemen. The card recipient selects from hundreds or even thousands of nonprofits, and the issuer forwards the donation to the chosen charity. We've seen cards available with values of $10 to $10,000.

Like many other gift cards, charity cards usually carry fees. The card issuer, which is sometimes the charity, generally charges about $5 to purchase the card. The issuer may charge another 3 percent or more when the recipient redeems the card to make a donation. Issuers say that the fees help to cover credit card or check vendor-processing fees that the charities would otherwise have to pay.

Many charity gift cards share other drawbacks with regular cards, including hard-to-find terms and expiration dates. After a charity card expires, some issuers take the money to pay their operation costs. Most cards can't be redeemed for cash, and any tax deduction typically goes to the purchaser, not the recipient.

Once a card recipient designates a charity, issuers sometimes take up to four months to forward the donation. That delay is criticized as unwarranted by the American Institute of Philanthropy, a charity watchdog.

Despite their drawbacks, the cards are gaining popularity among nonprofits. Even Charity Navigator, a well-known charity watchdog group, sells one. It's called the Good Card and is issued by the Network for Good. Charity Navigator receives half of each card's $5 purchase fee to cover handling and processing. Good Cards usually expire six months after they're issued, and the value of unredeemed cards goes to the Network for Good. Charity Navigator rejects criticism that selling the cards is a conflict of interest.

What to do

  • Before giving people charity gift cards, make sure that they wants one. Instead of giving a gift card, consider giving directly to the charitable group or groups, perhaps in your gift-recipient's name. You'll cut out the middleman, along with the fees and other gotchas.
  • Consider giving cash directly to those on your list and let them make the donations themselves. They decide where the money goes, and may prefer a charity not on a card's roster.
  • Before giving a card, check out its terms and conditions. You can usually find them online under FAQs or help tabs. Print out a copy for you and your recipient, and keep your receipt for tax purposes.