A Popular Fundraiser...Affinity Cards
By Teresa Ambord
Without donations, most charities could not survive. That’s no secret. Most charities are always on the look out for ways to bring in steady streams of income to fund their projects. One reliable way is affinity cards, or credit cards that bear the logo of not only the issuer (such as VISA or MASTERCARD) but also the non-profit organization.
Here’s how this works:
The card issuer donates to the charity a percentage of all money spent or transferred, or cash-advanced to the cardholder. The percentage is small, say one-quarter to one-half percent. That’s about 50 cents for every $100 spent by the cardholder. Small potatoes? Maybe. While affinity cards are a very popular and successful way to raise funds, there are some potential drawbacks. So before you jump in, you need to consider the facts to make sure this is right for your organization.
Important Points:
- Choose a reputable card, since your reputation will be linked with theirs.
- Keep the application process simple. People are busy and want a minimum of extra hassle.
- You will need to market your agency’s affinity card in order to build up a foundation of cardholders.
- If the affinity card has a high rate of interest, they may not get as much use as other cards. Typically affinity cards come with interest rates of 15 to 20 percent. But they often do not have annual fees. The lower you can keep the costs for the consumers, naturally the more they will be used. The best cards to utilize have high lines of credit, no annual fees, low fees for balance transfers and cash advances and of course, low interest rates that do not leap after a period of time.
- Look for cards that offer perks, like frequent flier miles, that add value to the use of the card, though with affinity cards, these “extras” may be hard to find. A more likely scenario would be to find a card that offers a discount, for example, Elvis Presley Charitable Foundation VISA card offers a discount on Graceland and related costs.
- You need to find out how the money contributed by the card issuer will be characterized. If the money is considered a royalty instead of a donation, you could be receiving taxable income, since this would be considered unrelated business income. Before signing up for a program, consult your agency’s tax advisor.
Is This A Good Source of Funds?
In spite of the drawbacks of higher interest rates, affinity cards are enormously popular. Cardholders seem to like knowing they are supporting causes that are important to them, through their credit purchases. The biggest beneficiaries of affinity card donations are public education, children’s causes, environmental programs, crime prevention, and animal charities.
One very successful use of affinity cards has been Target’s Take Charge of Education program, which has generated close to $20 million for a variety of education and environmental programs, in spite of the fact that the interest rates on these cards tend to be high.
If you wonder why card issuers are eager to participate in affinity programs, the answer is not necessarily altruism. Charities who join these plans generally turn over their mailing lists so that the card issuers can make appeals. That opens a new field of potential customers to the card companies, in exchange for donations. Also, banks like affinity card customers because they are loyal, based on their interest in helping the causes they support. And banks experience fewer losses among those who have charitable inclinations.
If you decide that affinity cards will work well in your fundraising plan, this can be a real win/win situation. But be patient. It could take up to two years before your agency sees significant funds. During this time, you’ll be building your base of cardholders, and the cardholders will (if you’ve chosen a good card) learn that the card issuer is trustworthy. In the meantime… your agency name is frequently before the public.
