So here’s something out of the blue: donating your credit card rewards points to charity is apparently all the rage these days. According to a recent Fox Business article, there are a billion reasons why rewards cards owners should eschew gift cards and flyer miles and instead cash those cards out for the sake of those in need. Now, a billion is quite a lot, and it’s no surprise that the article is a little short. But our problem with the concept of using your rewards points for charitable purposes is that no matter how you try to justify it, it seems almost offensively superficial.
Don’t get us wrong. We love charities, we support charities and we donate to charities. As a matter of fact, we just donated to the Taylor Morris Fund, which was established to help a Navy EOD tech who lost all of his limbs in Afghanistan. But we didn’t skim off our rewards points to do it. We just wrote the guy a check. We feel that this method of charitable giving is superior for a couple of reasons.
First, when you make a charitable contribution by check, it’s a tax write-off – but you can’t write off rewards points donations. Since your card issuer is making the donation in your stead, they’re the ones reaping all of the tax benefits. Sure, the card company will give you credit for your donation if you’d like, but in the IRS’s eyes, they’re the ones doing all of the good.
Second, donating via rewards points seems more than a little condescending, doesn’t it? Think about it. Rewards points are a disposable commodity that you amass after spending a staggering amount of money with your top-shelf “excellent credit” credit card. They’re not gold dollars. In fact, they’re quite literally worthless until you exchange them for something.
So when you toss them over to a charity, you’re pretty much telling the recipient: “Here, I’ve amassed these silly things because I’ve spent a lot of money and I have so much more money that I see no reason to keep them. You can take them off my hands.”
But there’s another reason why donating rewards points to charities doesn’t make sense. The redemption systems themselves pretty much guarantee that your donation will be far from significant. Take American Express’s rewards structure. You earn about one point for every dollar you spend. The minimum donation is 1,000 points. So you need to spend around $1,000 just to get enough points to make the donation. Once you do, all those charges will translate into a whopping $10 gift to charity.
It might be $10 that you wouldn’t have had otherwise, but it’s still just $10 – and it cost you $1,000 to earn. Unless you’re in the habit of charging thousands of dollars to your card on the regular, you’d be far better off just writing a check. That way, your $10 donation will only cost – wait for it – $10.
Donating your rewards points to charity is the equivalent of buying that Ethos water from Starbucks. Are you helping people in need? Yeah, but you’re really just giving your sense of self-righteousness a big old pat on the back. There’s a name for people like that. They’re called armchair philanthropists.
Don’t be an armchair philanthropist. If you want to donate to charity, do it the right way. Then use those credit card rewards points to get yourself a gift card, because you know what? You will have earned it.