Charitable Giving in the USA Needs Credit Card Company Support

Americans are among the most generous people in the world. Charities Aid Foundation, a UK-based charity compiling data from 140 countries, creates an annual country-by-country index of charitable giving. It is constructed from three forms of activity: donating money, volunteering time, and helping strangers. In 2022, the United States ranked #3, closely behind Indonesia and Kenya, two countries where religion plays a strong role in the culture of giving.
   In 2020, Americans donated nearly $500 billion to charities—of which there are 1.5 million in the USA and fifteen million around the globe. That generosity excludes non-monetary support—volunteer hours and pro-bono services. A stunningly impressive 72% of that giving was made by individuals, while foundations accounted for 15%. Bequests, another form of individual giving, totaled 8%, and corporations came in at 5%.

Of the approximate 120 million households in the USA, 60% of them support charities with either time, talent, or treasure. While, in terms of total dollars, the greatest amount of money is donated by the wealthy, it is impressive that, as a per cent of “Adjusted Gross Income,” Americans making under $50,000 donate nearly 8.4%, almost double the percent given by those whose income is between $2 million and $10 million. In other words, the “sacrifice” of those lower-earning givers is far weightier than that of the truly well off. Likewise, Millennials—who today range in age from 27 to 43—are the most generous age group in the country, with 84% of them donating to charities in 2021. This should put to bed the obviously false notion that they are “spoiled” and “entitled.”

From a reading of the statistics, every “generation” level of Americans is imbued with the gift of giving—it’s as though that characteristic is embedded in our American DNA. Perhaps that gene derives from the “rags to riches” nature of much of our nation’s history. Over the last two centuries, immigrants seeking to escape the desperate economic conditions of their home countries, have made the oftentimes treacherous journey to our shores in the hope of achieving the “American dream” through hard work and perseverance.

There is no better example than Andrew Carnegie, who, at the age of twelve, left Scotland with his impoverished parents and younger brother and settled in Pittsburgh, Pennsylvania. Within a few decades, he had amassed a fortune in the steel industry, and then spent the last two decades of his life as a philanthropist, striving—and nearly succeeding—in giving away his entire fortune. At the time of his death at 83 in 1919, he had funded more than three thousand libraries and had established Carnegie institutions in both the USA and abroad that to this day support the arts, science, medicine, education. He left little to nothing to his small family; rather he bequeathed his entire estate to humanity around the globe.

That Carnegie spirit of giving is very much alive in today’s America, even if, in comparison, the ability to support may seem more like the “widow’s mite.” Technology has played an important role in supporting the not-for-profit world by making it possible for Americans to research and select from a wide array of charities that appeal to their sense of the good. It also eases the process of donating. Over the last decade, online giving has soared, growing more than twice the rate of total charitable giving in this country. Credit card giving has also grown, and today more than half of all donors prefer to use a debit or credit card.

And that gets me to the point of this column. Large foundations and corporations can take advantage of their size and administrative staff to send donations through wire transfers or checks. But for individuals, time is often better served by simply charging their donation on a credit card. And that’s where the rub comes in because the for-profit credit card companies are the beneficiaries of the charitable giving of Americans.

Every credit card charge to a charity has a processing fee tacked on by the named credit card company or similar intermediary—Mastercard, Visa, Discover, American Express, PayPal, etc. Those charges are not insignificant. Recently, I checked with several not-for-profit companies on whose boards I sit. On average, PER TRANSACTION, American Express charges 3.5% plus $0.30, while Mastercard, Discover and Visa charge 2.5% plus $0.30.  That is a serious dent in a charity’s top line—money that goes directly into the pockets of the credit card companies and removed from the coffers of the charity.

In addition, many individuals, in an effort to even out the lumpiness of their giving, spread their payments over twelve months, which incurs additional processing costs—note the per charge cost of $0.30. An annual donation incurs a 30 cent charge, whereas a donation spread over twelve months costs $3.60. In an effort to defray some of those expenses, charitable institutions are reaching out to the donors, requesting that they add the processing fee to their donation. But, in many cases, the individuals have already stretched to make a charitable donation.

The growth in credit card use by individuals making donations has generated a windfall for the card companies. I feel the urge to ask the question: Why won’t the credit card companies share in the American spirit of generosity by eliminating, or at least, reducing their processing fees for charitable organizations? Every penny of income is of immense value to a charity. At the same time, every dollar donated by an individual has been hard earned. Some support from the large credit card companies would go a long way to easing the burden for both donor and recipient. I, for one, would happily switch all my credit card charitable giving to any card company that officially announced its policy to reduce processing fees. Does anyone want to join me?