The Truth About Earning Points When Donating
Some credit cards do not count charitable donations as “special spending categories,” which may limit your points earnings. For example, some Chase cards only recognize payments to charitable organizations as “general spending” and limit them to 1 point. American Express generally supports charitable organizations, but may classify payments to organizations not approved by the IRS as “personal transfers” rather than donations. In this case, no points are earned, and no tax benefits are provided.
Capital One occasionally offers promotions on charitable spending, such as 5X points campaigns during the year-end period. However, these promotions are temporary and vary by card. Some card issuers do not automatically classify donation platforms (such as GoFundMe or Patreon) as “charity.” Therefore, even if the user believes they are making a donation, they may not earn points or have the expenses recognized for tax purposes. Some loyalty programs (e.g., Citi ThankYou) allow accumulated points to be used directly for donations. However, the value per point is typically low, often up to 50% less than the value of travel reservations.
Donations and Credit Card Fees: The Facts
Many charities experience a deduction of 2% to 3% from credit card transaction fees when accepting donations. For this reason, some organizations encourage methods such as ACH or direct bank transfers. Visa and Mastercard occasionally run “zero processing fee” campaigns. Especially during disaster periods (e.g., after an earthquake or major fire), they waive transaction fees for card donations to ensure the full amount reaches the organization. Some donation platforms (e.g., Network for Good, JustGiving) may charge an additional service fee of up to 5% for credit card payments. This results in a significant portion of the donation going to the platform.
The Real Face of Donations from a Tax Perspective
In the US, the IRS only considers donations made to organizations with 501(c)(3) status as tax-deductible. Making a donation by card does not change this, but it is mandatory to check the eligibility of the organization receiving the donation. Some users wish to use their credit card statement as “donation proof”; however, the IRS clearly states that a donation receipt or digital confirmation is required for tax deductions. A card statement is not sufficient.
Some financial advisors suggest that donations that earn points may reduce tax benefits. This is because “unconditional donations” are the basis for the IRS. If you receive a direct benefit (points, miles, gifts, etc.) from a donation, the value of that benefit must be deducted before applying the tax deduction. The U.S. tax system has limited tax deductions for individual donations under the standard deduction since 2020. However, this does not always apply automatically when making donations with a credit card; it must be claimed.
Exceptions and Strategies for Earning Points and Miles
Some users convert their loyalty points into donations by using their credit cards' miles redemption systems, even if they do not earn points. However, this method is typically limited by a low conversion rate (e.g., 1,000 points = $10 donation). Some cards offer special bonuses to users who exceed certain donation limits throughout the year. For example, some premium cards may offer +10,000 bonus points for annual charitable donations exceeding $500. However, these benefits are typically buried in the card agreement and go unnoticed by most users.
For cards targeting high-income groups (e.g., AmEx Platinum), large donations may be reported by the concierge service and a donation receipt provided to the cardholder. This provides critical convenience for tax purposes.
Credit Card Companies' Approach to Donations
American Express offers point matching in some special donation campaigns to encourage users. For example, when 1,000 Membership Rewards points are donated, the company transfers the same amount of points to the donation organization in its own name. Chase occasionally supports the donation category under its “Pay Yourself Back” program, allowing donations to be reimbursed in points. This program is temporary and is usually active during year-end campaigns.
Some cards do not report donations as a separate spending category. This may prevent users from noticing donations when analyzing their spending. This lack of distinction increases the risk of errors in tax calculations. Discover may collect points from users through its own donation program and direct them to charities. However, users cannot contribute directly, but only to a few organizations pre-selected by Discover. The purpose of the donation is therefore limited.
Consumer Misconceptions and Facts About Donations
Some users believe that if a donation does not earn points, it is unnecessary. However, this belief can lead to overlooking long-term tax advantages and personal financial balance. Some people say that donating with a credit card provides instant emotional relief, but making donations a regular occurrence (e.g., automatic monthly payments) provides more sustainable assistance and ensures consistency in annual tax returns.
Some card users find that even if they label their spending as “non-profit organization,” the donation is not accepted. This is because some politically or religiously based organizations are not recognized by the IRS as tax-deductible donations. Donations can also sometimes cause issues with credit card limits. High-value donations can strain the card's payment capacity, which may result in interest charges even if points are earned.
Card Selection and Strategic Donation Tactics
When selecting the most suitable card for donations, it is not only the points that matter, but also the transaction fees. Some cards prioritize low-commission donations or reduce this rate to zero with special campaigns. Users often focus on shopping when selecting cards that support the donation category. However, donations can be a significant expense during the year. If this detail is overlooked when selecting a card, points may be lost.
Some experts recommend spreading donations throughout the year rather than making a single large donation at the end of the year. This is because some cards classify donations as a “bonus category” during certain months. This allows for strategic timing to earn more points. Some card users make donations to the same charity both through their card and by converting points into donations. This dual contribution can provide special thank-you benefits (such as VIP event invitations) when direct communication is established with the organization.
Special Considerations for Donations Made Through Digital Platforms
Donations made through digital wallets like Apple Pay and Google Pay may be recognized by the card issuer as a different category. For example, donations made via Apple Pay may be scored differently than direct card donations. In some platforms (like Facebook Fundraisers), payment card information goes directly to the platform's payment system rather than the organization. This can affect both the points earned and the tax receipt process. Shopping platforms such as AmazonSmile offer indirect donation opportunities through card spending. However, in such systems, the user does not make a direct donation; a small percentage of the purchase is directed to the organization. This does not qualify for tax deductions.
Donation Applications Integrated with Loyalty Programs
Some hotel loyalty programs, such as Marriott Bonvoy, allow users to direct their accumulated points directly to charitable organizations. However, the value per point in these transfers is significantly lower, typically ranging from 0.3 to 0.5 cents. United Airlines' MileagePlus program does not award additional miles to members who donate miles, but it does provide symbolic thank-you letters and occasional social media recognition to those who make significant donations. This can mean social prestige for users.
Aeroplan (Air Canada) allows users to direct their miles to charities in the health and education sectors. One notable feature is that mile donations made during certain periods are matched; that is, when 10,000 miles are donated, the system adds another 10,000 miles, doubling the donation. In some airline loyalty programs, donated miles are non-refundable. This makes the donation a “final decision” for users. Therefore, it is recommended to read the detailed rules before making a donation.
International Donations and Cross-Border Impact
Users sometimes make donations to aid campaigns in other countries using their credit cards; for example, an American citizen in Canada may make a donation to disaster relief in Turkey. However, these donations are generally considered “non-tax-deductible” by the IRS. Some international aid platforms (such as GiveIndia and GlobalGiving) work with US-based partner organizations to offer tax deductions to donors in the US. Donations made through these organizations are considered valid by the IRS, while direct donations are not.
Card companies may charge currency conversion fees and additional transaction costs for international donations. For example, for a $100 donation, the user may be charged a 3% currency conversion fee and a 2% processing fee, and the donor may not even be aware of these costs. Some platforms offer a “USD fixation” feature to make it easier to donate via credit card. This means that even if the country where the donation is made is different, the payment is fixed in dollars. This way, the user does not experience a currency shock, but the transaction fee may increase.
Point-Based Incentive Systems for Organizations
Some large charitable organizations enter into special agreements with certain credit card brands to offer users special campaigns in exchange for their donations. For example, the American Red Cross occasionally offers thank-you gifts (t-shirts, mugs, etc.) to donors who use Visa. These gifts may be considered “contributions” for tax purposes, so they must be deducted from the donation amount. Some religious-based charitable organizations send donors symbols of spiritual value (thank-you letters, prayer lists, certificates). Although these are non-monetary items, the IRS may scrutinize such cases in detail.
In some donation campaigns, donors who contribute above a certain amount are offered special event invitations or online seminar participation. Such returns may violate the “unrequited” principle of tax deductions for donations.
Noteworthy Anomalies and Real-Life Examples
In 2022, a user made a total donation of $50,000 via a major donation platform using a credit card and earned 75,000 points. However, part of these donations were reported by the platform as “service fees” and were not eligible for tax deductions by the IRS. Some users attempted to exploit campaigns by making multiple small donations to the same organization to earn points. However, the system detected and did not award points for repeated donations made on the same day, for the same amount, and to the same organization.
Some credit card users wanted to remain anonymous when making donations, but this was not possible because the card company forwarded the transaction records to the charity. This created problems for some donors with social sensitivities.
Different Aspects of Donating with Crypto-Based Credit Cards
Some crypto-supported cards (e.g., Coinbase Card, Crypto.com Visa) allow users to make donations using their crypto balances. However, a key point to note is that such donations are technically classified as “sales.” A donation made with a crypto credit card involves converting the crypto asset into fiat currency and then making the payment. This may result in capital gains under the US tax system. In other words, a tax liability may arise before the donation is made.
Some users think they are paying with cryptocurrency when making a donation, but they do not realize that the transaction is converted to dollars in the background and sent. This does not provide points or cashback benefits because the transaction is processed as a “crypto sale” rather than a “charity” transaction. Crypto-enabled cards typically do not support the donation category in their points system. Some cards offer a fixed 1-3% crypto cashback on every purchase, but transactions in the donation category may be excluded from this system.
Donation Tactics to Trigger Annual Spending Bonuses
High-end credit cards offer special benefits when certain annual spending thresholds are reached. For example, users who spend $30,000 receive elite status, free lounge access, extra miles, or free travel credits. Some users strategically make donations toward the end of the year to make up for the remaining amount needed to reach the threshold. For example, by donating the remaining $2,000, they both contribute to a social cause and trigger the annual bonus.
Such donations create a double benefit as they both trigger card benefits and provide tax deductions. However, the official status of the donation and the documentation process must be checked, otherwise it may be rejected by the IRS. Cards such as AmEx Platinum offer concierge services or travel gifts in exchange for spending a certain amount by the end of the year. Donations made to reach these spending limits can bring prestige to the cardholder while also offering invisible financial benefits.
Fraud, Fake Charities, and Security Risks
Fake websites created to steal credit card information under the guise of donations emerge every year, especially during disaster periods. Credit card traps are set up by mimicking the names of organizations such as FEMA and the American Red Cross. Users face the risk of their card information being misused when making donations on websites without an HTTPS certificate. Links that appear to redirect users to legitimate organizations are actually designed for phishing purposes.
Some fake donation platforms send automatic receipts to users, making them believe their donations were processed, but the IRS does not recognize these receipts. Genuine charitable organizations provide IRS-approved receipts, which include an EIN (Employer Identification Number). Credit card companies may automatically reject donation transactions due to suspected fraud during certain periods. This situation is particularly common when donating to small, foreign-based charitable organizations. The cardholder may be required to manually approve these transactions.
Some users, when contributing to donation campaigns shared on social media using their credit cards, may unknowingly make a peer-to-peer payment. This does not earn points or provide tax deductions; in some cases, the money may even become unrecoverable.
Final Notes and In-Depth Observations
Making donations via credit cards is valuable not only financially, but also socially and psychologically. Users are generally motivated to make donations in order to “make a meaningful contribution,” but the background of the transaction can be complex from a technical, legal, and tax perspective. The vast majority of individuals who make donations (especially those in the middle-income group) do so without checking whether the donation earns points or offers tax advantages. This leads to a loss of opportunity in terms of personal financial management.
Credit card companies' attitudes toward donations may change from year to year. Therefore, the card usage guide and loyalty program terms and conditions should be read carefully each year.