When to donate rewards to charity and when to give cash

Erin Hurd, NerdWallet

If you’re looking to give to charity this holiday season but don’t want to dip into your bank account, donating unused credit card rewards, hotel points and airline miles can be a helpful alternative. In some cases the charity can use the rewards for travel needs, and in other cases, the issuer can convert them to cash for the charity.

And nonprofits’ needs are skyrocketing amid the COVID-19 pandemic. A July 2020 analysis by Candid, a group that provides information about nonprofits, found that more than one-third of them may be forced to shutter as a result of the twin crises of the pandemic and recession.

Here are times it can make sense to donate from your credit card rewards stash and times when it’s not the best idea.

WHEN DONATING POINTS WORKS WELL

1. WHEN YOU (AND THE CHARITY) WILL GET GOOD VALUE FOR THE POINTS

Sometimes point values are diminished if you donate them. Other times, it’s a fair or even superior value.

Citi lets eligible cardholders donate ThankYou points to a handful of charities at a value of 1 cent each. That’s the baseline value you’d want for travel redemption, and it’s a better value than redeeming for cash back.

Those who hold eligible Chase credit cards can redeem their points for statement credits to cover donations to about a dozen charities, again at a rate that’s higher than the penny-per-point value for cash back.

There are third-party options, too. Miles4Migrants, a charity that uses donated miles to help people affected by disasters, works to get full value for gifted rewards. “We have a team of expert award bookers search for flights and give that information to the donator, who books the flight directly for the person in need,” marketing manager Cat Cooke said.

2. WHEN THE CHARITY GETS A KICKER

Through Dec. 1, 2020 (aka “Giving Tuesday”), American Express is offering a 10x match when you donate points to Feeding America. Discover lets cardholders donate rewards to several charities and contributes an extra $25,000 to one that receives the most donations annually.

United Airlines’ Miles on a Mission platform runs periodic campaigns to support nonprofits and will match your miles donation to eligible organizations up to a total of 500,000 per campaign.

3. WHEN YOUR SUPPLY OUTPACES YOUR DEMAND

Points and miles don’t earn interest and can be devalued. If you’re sitting on more points than you’ll use in the next two years, donating them may make sense.

Derrick Dye, an attorney and blogger at Travel-on-Points, earns millions of miles a year and strives to donate 10% of them, even if it’s not for outsize value.

“My wife and I feel strongly about supporting our nation’s veterans, and donating our Southwest Airlines points to the Honor Flight Network is an easy way for us to give back,” Dye said.

WHEN DONATING POINTS ISN’T IDEAL

1. WHEN YOUR POINTS LOSE SIGNIFICANT VALUE

Many loyalty programs don’t disclose how many dollars a charity will receive for your points or miles donation. But often it won’t be the same value you could expect if you used them for travel.
Marriott, for instance, offers a robust list of charities to which you can donate Bonvoy points — from as few as 2,500 points for a $10 donation, up to 125,000 points for a $500 donation. That’s a value of 0.4 cent per point, but you can more than double that if you use them for travel.

2. IF YOU CAN DONATE CASH REWARDS INSTEAD

Some cards may give you an option to earn rewards as points or cash back. And while points can sometimes offer a fair or excellent value when donated, cash back remains the most flexible reward of all.

You can give that money to any number of charities, not just ones that partner with the card issuer. Plus, you might reap tax benefits this way.

Because the IRS generally views credit card rewards as rebates and not income, donations of points and miles aren’t eligible write-offs — but monetary donations could be. If you redeem rewards for cash back and then donate that directly to a charity, you’re giving money, not points.

3. IF YOU HAVE ALTERNATIVE ‘FOUND FUNDS’

Another way to avoid tapping into your bank account or your rewards stash is to donate “cash equivalents.” One example: unused gift card balances that may be floating around your desk.
Charity Choice, a nonprofit that lets users send gift cards to more than 1,000 different charities, also accepts unused balances on existing retail and restaurant gift cards.

“There’s been an avalanche of interest in people donating gift cards, and buying charitable gift cards for their friends and clients,” Charity Choice co-founder Daniel Goodman said.

You’ll receive a tax receipt for the full value of the gift card you donate.