When You Donate to Charity, Are You Donating to a Bank Too?

What's Hot

23 Upgrades Under $50 to Make Your House Look AwesomeAround The House

Trump Worth $10 Billion Less Than If He’d Simply Invested in Index FundsBusiness

Do This or Your iPhone Bill May SkyrocketSave

11 Places in the World Where You Can Afford to Retire in StyleMore

19 Moves That Will Help You Retire Early and in StyleFamily

What You Need to Know for 2017 Obamacare EnrollmentFamily

8 Things Rich People Buy That Make Them Look DumbAround The House

50 Ways to Make a Fast $50 (or Lots More)Grow

32 of the Highest-Paid American SpeakersMake

The 35 Two-Year Colleges That Produce the Highest EarnersCollege

5 DIY Ways to Make Your Car Smell GreatCars

Amazon Prime No Longer Pledges Free 2-Day Shipping on All ItemsMore

More Caffeine Means Less Dementia for WomenFamily

7 Household Hacks That Save You CashAround The House

5 Reasons a Roth IRA Should Be Part of Your Retirement PlanGrow

30 Awesome Things to Do in RetirementCollege

Beware These 10 Retail Sales Tricks That Get You to Spend MoreMore

The growing use of online charitable giving is a boon to nonprofits. But there's an unintended beneficiary of this cyber generosity: The banks processing all those credit card transactions are raking in millions.

How would you feel if you learned that when you donate $100 to a charity, you’re adding only $97 to the charity’s coffers, while making some nameless bank $3 richer?

That’s probably what’s happening if you donate by credit card – something that’s becoming increasing popular as charities join the rest of the world online.

According to this recent press release from Convio, a provider of software to the non-profit industry, their clients raised more than $1.3 billion online in 2010, up 40 percent from 2009.

It’s easy to see why those doing the donating prefer plastic. Credit cards are convenient, donations are documented, and cardholders can accrue perks like frequent flier miles or reward points.

But that convenience comes at a cost to the charity on the receiving end. They typically pay processing fees – known as interchange fees – ranging from 1.5-3 percent of each donation. Result? Not only is the charity receiving less money than you intended to donate, you’re contributing to the coffers of an organization you may not regard as all that charitable.

Credit card processors have waived their fees for some online donations. For example, shortly after the Haiti earthquake, MasterCard waived fees on donations to the Red Cross and a handful of other charities. Visa, MasterCard, and several major banks did the same after the Japan disaster. But in general, when it comes to interchange fees, banks consider charities no different than merchants. If they take plastic, they pay.

What’s a Good Samaritan to do?

  • Nothing: Donating online is a convenience, and processing these transactions is an expense for Visa, MasterCard, and the various banks involved. So one option is to simply ignore the interchange fee and move on. After all, if you donate $100, Visa, MasterCard, and the banks may be taking in $3, but at least $97 went to the charity.
  • Increase your donation to cover the charity’s processing costs. For example, rather than donating $100, donate $103.
  • Find another way to pay: If you bank online, simply send a payment to the charity via online bill pay, something that typically doesn’t cost you or the charity anything. You might also allow the charity to debit your bank account. And, of course, there’s the old fashioned option: Send them a check.

Regardless how you donate, you might also want to check out 3 Things to Do Before Giving to Charity and Is Your Charity Still Charitable? Here’s How to Find Out.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!


Read Next: 19 Cheap or Free Ways to Cut Your Winter Energy Bills

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 1,750 more deals!