Charities turn to gift cards to raise money during Christmas, winter holidays
Monday, December 20, 2010; 7:04 PM
Gift cards long have been heralded as the savior of last-minute shoppers during the holiday season. Now, they also are coming to the rescue of the procrastinating philanthropist.
The newest version of the gift card allows recipients to donate the money on the card to a nonprofit of their choice. These so-called charitable gift cards are issued by nonprofit organizations such as GlobalGiving and TisBest that vet the charities to ensure they are legitimate. The groups estimate that they have raised millions of dollars for causes ranging from teaching entrepreneurship to women in India to promoting humane farming.
"We just saw that it didn't make any sense that you would walk into Safeway or go shopping on Barnesandnoble.com and you could give a gift card," said Donna Callejon, chief business officer for GlobalGiving, based in Washington. "Why didn't that concept translate into the charitable sector?"
GlobalGiving began issuing the cards four years ago, just as gift cards began exploding in popularity. Online sales are up about 23 percent from a year ago, Callejon said, and the group has sold about 26,000 cards this year - with an additional 1,000 orders expected in the two days before Christmas. Another service, CharityChoice, recently began allowing users to send gift cards for donations as small as $2 through Facebook.
Charitable cards are a sliver of the nearly $25 billion in holiday gift card sales forecast by the National Retail Federation, a trade group. Shoppers are expected to spend an average of $145.61 on the cards, up 4 percent from last year. The group's surveys also show gift cards are the most requested item on consumers' Christmas lists for the fourth year in a row.
Brent Watters, an analyst with financial services research firm Mercator, said the charitable gift card sector remains too small to track. But nonprofits say there is growing interest in the trend, and sales at some organizations have risen despite - or perhaps because of - the tough economy.
Overall, charitable donations to the nation's largest nonprofits plummeted during the recession. According to an analysis by the Chronicle of Philanthropy, contributions declined a record 11 percent in 2009, the largest drop in the two decades since the annual survey was launched. This year, donations were expected to recover by just more than 1 percent.
Still, some groups said they found a silver lining in the downturn: Faced with tighter budgets, many holiday shoppers are reevaluating how to spend the money they have.
"We see a lot of people looking at the difficult economic times and saying, 'Rather than just giving my grandchildren another thing, I'm going to encourage them to do something good in the world,' " Callejon said.
That philosophy is what prompted TisBest to launch what it dubbed the "51 Bucks Challenge," which calls on shoppers to donate 10 percent of the $510 that the NRF estimates households will spend on holiday gifts. TisBest was launched in 2007 and has grown at an annual rate of about 50 percent, Executive Director Jon Siegel said. The group works with about 250 charities and has raised nearly $2 million. About half of its gift cards are bought by businesses as presents for employees and clients to use to donate to charity.
"We're kind of wrapping the gift of charity," Siegel said.
But even charity comes at a cost. For example, TisBest charges $1.95 for the plastic cards, though e-mailed gift cards are free. And most organizations also subtract a processing fee of roughly 3 percent for donations made with a credit or debit card. However, those fees are charged for credit or debit card purchases of any kind at any retailer and have faced scrutiny from Congress and the Department of Justice.