As the holidays approach, giving season arrives as well. In 2023, Americans donated $557.16 billion to charities, and a large majority — 64% — did it using their credit or debit card. While donating to a good cause is one of those things that’s truly a win-win, when you donate using a credit card, you and the charity aren’t the only winners. The credit card companies are also scoring a win, and they’re probably doing it at the expense of the charity. If you’ve ever wondered how credit card companies can sign you up with no annual fee, here’s why: they charge merchants. Every time you use your credit card to pay a merchant or non-profit, the merchant pays a fee to the credit card companies. These fees vary based on the credit card company, and can range anywhere from 0.1% up to 3.5% of the transaction. So, when you make a donation to a charity, the nonprofit has to pay the credit card processing fees. In real terms, this could mean that they only see $97 out of every $100 you donate. It doesn’t sound like much, but on a large scale, it can make a huge difference to a charity organization that’s subsisting on a shoe-string budget. Unless you’re paying your credit card off each month, credit card companies are also collecting interest from you. If you have a credit card with cash back rewards, consider using those rewards to donate to a charity. Not only will the charity get the full donation, but you won't incur any interest either.
