Charities turn to gift cards to raise money during Christmas, winter holidays

By Ylan Q. Mui
Washington Post Staff Writer
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 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.

In addition, many charitable gift cards are never redeemed - a problem with traditional gift cards, as well. Callejon said that less than half of recipients of GlobalGiving cards log on to the site to pick a charity. The group's cards expire after a year, and any unused money moves to GlobalGiving's general fund or to campaigns to match donations, or the money is redistributed to other nonprofits.

Other groups, such as TisBest, said their cards do not expire but the funds also may be used for other purposes after a set period of time. The cards still can be redeemed any time.

"We tried to create vehicles to make sure those funds don't remain idle," Siegel said.

Susan Messina of the District said the cards have been a boon in both her personal and professional life. Confronted with the age-old dilemma of what to get the person who has everything, she bought a charitable gift card from TisBest for her mother's birthday this spring. Messina said she was surprised when her mom chose to donate the money to a nonprofit in Connecticut that helps children with cancer and serious blood diseases attend camp.

"I didn't know she had a particular interest in that area," she said. "Not only did I have a chance to do some good in the world . . . but I actually learned something."

Also, Messina works as director of communications at a nonprofit that has partnered with TisBest. Though the cards have raised only a few thousand dollars, she said they have helped increase awareness about her organization, the National Hospice Foundation, and about charitable giving overall.

"It makes a great deal of sense to take some of Americans' vast wealth . . . and give a card that can actually do some good," she said.

View all comments that have been posted about this article.

© 2010 The Washington Post Company