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Credit Card Issuers Profit First From Haiti Donations

 
By Eva Norlyk Smith, Ph.D.
January 14, 2010
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As the world rushes to help with the relief efforts of the devastating tragedy in Haiti, an unlikely party stands to profit from the outpouring of care and concern: credit card companies.

According to the Huffington Post, most donations to relief organizations are made using credit cards, either through hotlines set up for donations or on the websites of relief organizations. All credit card charges come with an interchange fee, or transaction fee, of about 3 percent. As a result, only about 97 cents of each dollar donated actually reaches the beneficiaries.

If 3 percent sounds like little but chump change, think again. As much as 85 percent of donations taken in after major disasters like the Haiti earthquake are paid through credit cards. According to Huffington Post estimates, credit card companies may be raking in as much as $250 million a year in profits from charitable donations. Most card issuers are reluctant to wave the transaction fee, claiming that the money goes to cover processing costs. However, the true costs of each transaction are a mere fraction of the average 3 percent fee charged; credit card companies pocket the difference.

American card issuers in this regard are far behind their U.K. counterparts. According to the U.K. Card Association, credit card issuers in the U.K. waive the credit card transaction fee for fundraising efforts to provide humanitarian assistance following major disasters and crises worldwide.

Rep. Betsy Markey (D-Colorado) on Thursday appealed to credit card issuers to waive processing fees for donations to the Haitian relief efforts, sending a letter to the heads of the all major card issuers. More appeals are sure to follow. Even before Markey sent the letter, American Express announced that it would rebate transaction fees to about 65 relief organizations involved in raising funds for Haiti relief efforts. Amex also announced that it will donate $250,000 to relief organizations, and it will match employee donations for relief efforts.

If you live in the U.S. and are considering making a donation to help relief efforts and Haiti, what can you do to make sure that the entire donation gets credited to the relief organization of your choice? Consider using one of the following options:

Capital One’s No Hassle Giving Site.
Capital One will pick up the transaction costs for donations submitted through its No Hassle Giving Site, ensuring that 100 percent of your money gets donated to the charity you choose. You can even choose to use some of your Capital One rewards points for the donation. You have to be a holder of a Capital One Visa or MasterCard to be able to donate at the site.

American Express GivingExpress® Online.
Through its GivingExpress service, American Express offers a service similar to Capital One’s. Amex does charge a (discounted) transaction fee, but has announced that it will rebate the fee to for donations to relief organizations listed on the USAID website in support of Haiti relief. You can choose between millions of charities and nonprofit organizations, and make the donation using either your American Express card card or rewards points accumulated on your Amex card. The service allows cardholders to set up recurring donations and to spread donations out over the year, and you earn rewards points on donations charged to your card.

Text Message Donations.
Donations via cell phone text messages are becoming increasingly popular. They are quick, easy, quick, and don’t have a transaction fee; instead, the amount gets billed to your next cell phone bill. Here are a few options:

  • A $10 donation to the Red Cross. Simply text “Haiti” to 90999. The Red Cross has put up a website where you can track the mobile giving by state and the total amount donated.
  • A $5 donation to Yele Haiti. Text “Yele” to 501501. Yele Haiti is a nonprofit organization led by hip-hop singer and Haiti native Wyclef Jean, which undertakes charitable projects in Haiti.

Lastly, a word of caution. Major natural disasters bring out the best-and the worst-in people, and the Haiti disaster is no exception. Numerous scams have cropped up purporting to be fund-raising for victims of the Haiti earthquake; many of them are “text to” scams or illegitimate websites. According to the Internet Storm Center, hackers are using SEO techniques to make links related to searches for Haiti donations appear high on Google. When unsuspecting consumers click on the link, they are directed to a compromised website, where malware is downloaded to their computer.

To protect yourself, if you are considering giving a donation, go through the Capital One No Hassle Giving site or American Express GivingExpres or use this list of organizations that help Haiti earthquake victims. Further, if you get solicitations for donations from an organization you haven’t heard about before, check it out first at the BBB’s website.


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