Mommy Points offers a nice roundup of opportunities to earn points donating to charities that support disaster relief, as well as opportunities to redeem your points for charitable donations.
By all means review the list, perhaps it will inspire you to be more charitable than you otherwise would have been.
At the same time, it’s worth considering the ethics and efficacy of small mileage-earning donations.
- Is it ethical to earn miles for your charitable donations?
- Is that even charitable?
- Will your donation actually benefit any of the causes that you think they will?
Earning Miles for Donating to Charities that Partner With Frequent Flyer Programs is Probably Ok
If a charity that you believe does good work also earns points for your donation, consider that — especially if it’s a charity that partners with the frequent flyer program you’d be earning with.
In that case you can assume that the miles you’re earning are being provided by the program itself as a way of generating contributions for the airline or hotel chain’s favored cause, or at least that the points are being provided at a substantial discount.
Donating to a Charity That is Buying Miles is Probably a Waste
If you’re going to be earning points for a donation to a charity with no obvious connection the program then it’s highly likely that the charity is purchasing the miles to rebate to you as a marketing expense. They’re ‘paying to acquire you as a donor.’
The bet is that they may not be making money on the acquisition campaign, they may even be losing money. But they expect to be able to re-solicit the people who give, and a meaningful percentage will give again. It’s the likelihood of future gifts that makes it profitable to buy miles to give to donors as part of a new donor prospecting campaign.
Put another way, your small donation is really paying for the organization to market to you in the future rather than funding current relief efforts.
That’s the reality of small donor fundraising — it makes sense for the organization to invest in finding donors, since someone that gives once is part of a pool that’s highly likely to give again. And it’s the stream of future contributions that are profitable to a charity.
But how does that make you feel about your gift, if the charity actually loses money raising the donation from you?
Maybe it makes sense, you earn miles while introducing you to a charity and inviting them to market to you going forward. Even if you think you won’t give again, statistically you are reasonably likely to (How well do you know your future self? Perhaps not as well as the charity’s data analysis does). In that case it’s your future charity that’s noble, consider the mileage payment quid pro quo and even a pre-commitment device for the good you will do later.
Donating Your Miles in Exchange for Cash to a Charity is a Bad Deal
The value per point is very low. Just like redeeming points for merchandise is costly to a frequent flyer program and so the value you get tends to be pretty low, turning points into cash for charities is similarly costly. While I can easily get 1.5 cents or more per Hyatt Gold Passport point when I redeem for a room, they’ll only credit 0.5 cents per point when donating to the Red Cross. Priority Club only gives 0.4 cents per point. Hilton only 0.25 cents per point.
The amount the loyalty program gives may not even increase. When giving to a charity that the program is contributing to as well, the total amount gifted may not increase as a result of your donation. They usually commit a certain amount of cash and will probably give it whether you redeem your points or not. That’s true even with matching gifts, either because they’ll still make the gift even if their members don’t donate or because the matching amount is fairly small and with a large program the total available match will likely be exceeded by total member giving.
In some cases it may even save the loyalty program money. With low per point values when redeeming for a charitable donation, it may cost the program less to redeem for the gift than to redeem for travel. When hotels are full, most hotel programs pay the property nearly its full average daily room rate. In contrast, redeeming for a charitable gift gets points off the books on the cheap.
Instead of redeeming miles for a charitable donation, consider redeeming your points for travel and using the cash saved (by not paying for the trip) for charitable giving.
Since you’re likely to do better than half a cent per Hyatt Gold Passport point or a quarter of a cent per Hilton point, this means you’ll be freeing up more cash for charity than working through the loyalty program.
What’s the Most Effective Way to Give?
Recognize that the amount you give ‘for storm relief’ isn’t likely to actually go to storm relief. Charities are mobilized now, they’re drawing down existing resources, in most cases the best case scenario is that you’re likely replenishing resources to be used for a future disaster.
That’s good — but it’s not the story you’re probably telling yourself about what you’re accomplishing.
If you’re a relatively small fish in charitable giving, consider:
- Giving to one charity is a more efficient use of your money than giving to several. There are fixed costs to process your gifts, including data entry and receipting/acknowledgments but especially followup informational mailings to you and subsequent donation requests. Each organization you give to multiplies out those costs. Giving to just one charity means the fixed costs are contained, with more marginal dollars spent on the purpose you care about.
- Don’t believe what you see on ratings sites like Charity Navigator. Non-profits game the numbers, and ratios derived from non-profit tax returns often give the opposite picture of a charity’s financial stewardship from the reality of how they run their business.
- You’re better off not monitoring the effectiveness of your giving anyway. Monitoring is costly, not worth it if your gift is small. And you’re probably giving to feel good. If you find your gift isn’t as effective as you thought, you’ll probably give less.
- You should probably give more than you do. Pick a percentage of your income and stick to it. Tell other people about it, and the specific cause that you’re supporting, as a commitment mechanism.
- Or just give away your money later, rather than now. It’s how Benjamin Franklin, whose estate was worth a pittance, wound up as a $7 million donor.
[I]nstead of donating money to charity, you should invest the money at compound interest, then donate it to charity later after your investment has paid off… the real rate of return on investment has been higher than the growth rate for 3000 years and this pattern shows no signs of changing. If you donate the money today, your donation grows with the growth rate, but if you invest it, it grows with the interest rate.
But if you wouldn’t otherwise give but-for the miles, and the opportunity introduces you to charitable giving there’s a chance you’ll continue. And so while that’s certainly a second-best, it’s better on the whole for society than if you weren’t being charitable at all.