By Gerri Detweiler
Shortly after Hurricane Sandy decimated parts of New York and New Jersey, Jet Blue announced it would match donations to the American Red cross, dollar for dollar, up to $50,000 through JetBlueGives.org. The match has since been raised to $100,000 and some $500,000 in donations have been received so far. Donors also get 6 TrueBlue points for every dollar donated, so all around it's a great way to do something good for the thousands affected by this disaster.
But when I visited the donation page, the small print at the toon the donation page made me pause:
All donations are processed via PayPal and include a PayPal processing fee of 2.9% plus $0.30.
I did some quick calculations, and figured out if there were 1000 donations averaging $50 each that would mean PayPal would earn some $1,750 in fees. (2.9% of $50,000 is $1,450, and 1,000 x 30 cents = $300.) Somehow the idea of PayPal profiting from the disaster didn't sit well.
That's one of the ongoing problems with making online charitable donations: you're not just donating to the charity - you're also "donating" to the companies involved in processing those payments. In the case of credit card donations, that percentage usually ranges from 2 – 4% of the donation, which can add up to thousands of dollars in income for the credit card companies and banks involved. A couple of years ago, the Huffington Post estimated that banks and credit card companies make some $250 million a year off these fees.
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Even the Better Business Bureau warns (emphasis added):
Be wary of claims that 100 percent of donations will assist relief victims. Despite what an organization might claim, charities have fund raising and administrative costs. Even a credit card donation will involve, at a minimum, a processing fee.
If you'd like to get the most bang for your charitable buck, there are ways to get around these processing fees. Here are five of them:
1. Use your Capital One Card at Capital One No Hassle Giving: This program is the gold standard that other issuers should follow. It allows you to use your Capital One card to make donations, with 100% of your donations going to the charity. Capital One picks up the processing fee. You'll find some 1.2 million verified charities that qualify at the Capital One No Hassle Giving site. This program is provided all year long, and not just in response to a specific disaster, as is the case for some of the other programs listed here.
Even better: If your goal is to help victims of Hurricane Sandy, consider directing your donation though this program to the American Red Cross or the National Voluntary Organizations Active in Disaster. Capital One will match up to $200,000 in donations made to those organizations through November 16, 2012.
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2. Pay With PayPal. Hopefully JetBlue will apply to have the processing fees I mentioned above refunded. PayPal announced it will be waiving fees for certain types of donations related to the Hurricane Sandy relief effort. First, if you give through PayPal's donation page, 100% of the money you give will go to the charity you select. Options include American Red Cross, the Salvation Army, Team Rubicon and the Humane Society of the U.S.
In addition, nonprofit charities involved in the relief effort who accept donations through PayPal between Oct. 29 and Nov. 19 may apply to have their processing fees refunded. I'd like to see PayPal develop a year-round program similar to Capital One's, but this is a start.
3. Use your American Express Card. Use your Amex card to donate to one of the ten charities listed on the Members Give website and American Express promises to waive transaction fees on donations made between Oct. 29 and Dec. 31. According to the American Express MembersGive website, non-profits normally pay a processing fee of 2.25% for payments processed through JustGive, the charitable organization that processes donations.
4. Donate through MainStreet Bank aircharity. With this program, MainStreet Bank will "waive all fees for donations received through credit card or electronic check to ensure that 100% of each donation reaches the American Red Cross." Donors can visit airbanking.com/SandyReliefFund.
5. Write a Check. Most charities will be more than happy to take a donation by check. Some charities allow you to donate online with an echeck. If so, the fees are likely less than those of credit or debit card fees, plus these payments are easier for the charity to process than checks that arrive by mail. If your only option is to send a check, use your bank's free bill pay if it's available. You won't even have to pay for the stamp to mail it!
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Gerri Detweiler Credit.com's Personal Finance Expert, Gerri focuses on financial legislation, budgeting, debt recovery and consumer savings information. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of TalkCreditRadio.com. Have a question for our experts? Get the answer in the Credit.com Forum.