In a previous column ("Charitable Charge," February 2010), I took credit card companies to task for charging transaction fees when their cards were used to make charitable contributions. My point was that for all the bailout money they received with no strings attached they should be able to absorb the relatively small cost of assuring that a charity gets a full $1,000 when I use my card to contribute that amount.
Almost immediately I got an e-mail from Pam Girardo, spokesperson for the card issuer Capital One. She told me her company already does what I had urged Congress to require.
She directed me to the No Hassle Giving Site (www.capitalone.com/give) that promises when you use your Capital One card to donate, the company will cover all the transaction costs so that 100 percent of your donation reaches the charity of your choice. I was intrigued by the mechanism of the program.
It turns out a non-profit charity makes the program possible. The site is powered by a separate organization called Network for Good (NFG), an online charity portal. Technically, it is a donor-advised fund (thereby giving it tax-exempt status); its mission is to use the efficiency of the Internet to bring donors and charities together at a low cost. Capital One's arrangement started with grants to cover NFG's costs of handling Capital One cardholders' donations. Then the card issuer made the business decision to absorb all the transaction costs on its side. According to Girardo, this decision was made at a high executive level and was justified on the expectation that the program would encourage customer loyalty and result in more card usage overall.
Cardholders can make a donation to any of 1.2 million legitimate charities (those listed as such by the IRS) by using the Capital One site to search for the selected charity and click on "donate now." According to the fine print, the donation is actually made to NFG, thereby qualifying the donor to deduct the contribution on his tax return. In turn, NFG forwards the donation to the charity. It will honor the donor's request to designate the contribution to a particular program or in honor of someone else. If for some reason the named charity has been disqualified by the IRS, does not appear on the list or has simply ceased to exist, NFG will select an alternate charity. As a donor-advised fund, NFG has what the IRS calls "exclusive legal control" over donations to it, and it is not required to return donations when the named charity can't receive them. A NFG representative told me this legalism is not as harsh as it seems. The situation rarely arises. The cost and hassle of returning small donations is prohibitive for the charity. And, when the amounts and the particular situation warrants, NFG will revisit the rule.
The partnership of Capital One and NFG seems to be working as designed. In November 2009, the relatively new program passed $1 million in donations. This past January there was an 850 percent increase in donations from January 2009, and that was before the surge of donations prompted by the Haitian earthquake. On its own, since NFG was founded in 2001 it has raised $370 million for 50,000 charities.
Capital One is not alone among banks and card issuers in forgiving transaction fees on charitable donations. Other companies now forgive such fees on donations to Haitian relief, for example, but they tend to do so for a limited time, such as 60 or 90 days. Capita One believes it is the only company to absorb the fees on donations to any charity on a year-round basis.
So I give props to this big financial institution. It takes nothing away from Capital One that it has a business rationale (more card usage) for doing this good thing. It is, after all, a for-profit company. It deserves credit (pun intended) for giving this program to its cardholders, so they can give too.