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Giving Tuesday: How Credit Cards Can Help

Giving Tuesday is an annual event, held the Tuesday after Thanksgiving, that encourages charitable giving during the holiday season. If you use your credit card to make a donation, it's possible to earn points, miles or cash back while supporting your favorite causes. You can even donate your rewards to some charities.

Here's what you need to know about using credit cards to make the most of Giving Tuesday this week.

[Read: Best Rewards Credit Cards.]

Where Can You Donate on Giving Tuesday With Your Credit Card?

If you're planning to use a credit card on Giving Tuesday, first look for a reputable charity, then confirm the organization accepts donations by credit card.

Peter Lipsett, vice president at donor-advised fund DonorsTrust, suggests using a tool such as Charity Navigator to choose organizations to donate to. This site offers a rating and evaluation system for more than 9,000 charities in the U.S.

Giving Tuesday offers a search tool for finding reputable charities. At last count, more than 64,000 charities were listed as partner organizations.

If you're looking for other research tools, you can also try these options:

-- IRS Tax Exempt Organization Search

-- Better Business Bureau Wise Giving Alliance

-- CharityWatch

-- GuideStar

If you're donating online, the charity's website should say whether you can donate using your credit card. Giving Tuesday's search tool includes contact information for each charity listed on the site, if you want to confirm.

"The Federal Trade Commission recommends you only donate to charities that accept credit cards or checks and avoid those that require wire transfers and gift cards, as they are probably scammers," says Andrew Latham, managing editor at financial education site SuperMoney.

[Read: Best Cash Back Credit Cards.]

Lipsett offers another tip for donating to charity with your rewards card: "Remember that the nonprofit will be paying credit card fees on the back end," he says. "For smaller organizations, that can really add up. However, they'd rather pay that fee than miss out on your gift, if that is the best way for you to donate."

Consider a Rewards Card That Gives Back

While it's common for credit cards to allow direct charity rewards redemptions, some credit cards automatically earn rewards that go to nonprofits. Cards that offer this feature include:

Charity Charge World Mastercard. This card earns 1% cash back on all purchases, which is automatically donated to up to three nonprofits of your choice.

Susan G. Komen Cash Rewards Visa credit card from Bank of America. The Susan G. Komen breast cancer charity receives $3 for each new and annually renewed credit card, along with 0.08% of all purchases made with the card.

World Wildlife Fund Credit Card. Through this Bank of America card, the World Wildlife Fund receives $3 for each new and annually renewed credit card, along with 0.08% of all purchases made with the card.

AARP Credit Card from Chase. Each restaurant purchase made with the card earns 10 cents for the AARP Foundation for the Drive to End Hunger.

REI Co-op Mastercard. This year, REI says it will donate 10 cents from every purchase made with the REI Co-op Mastercard to the National Forest Foundation, up to $1 million in total donations.

Additionally, the U.S. Bank FlexPerks Travel Rewards Visa Signature Card earns two points per dollar for all charity donations made with the card.

But while a charity credit card might be your first choice, do your research.

"Although there are some credit cards that market themselves as charity credit cards, it's smarter to look for the card that offers the highest reward rates," Latham says.

Your best option may be a card that offers one flat rewards rate on all purchases versus one that features tiered rewards.

For example, say you have one cash back card that pays you 3% at supermarkets, 2% on gas and 1% on all other purchases. With that card, you'd earn 1% back on charitable donations.

Now, assume you have a second cash back card that pays a flat rewards rate of 1.5% or 2%. The Citi Double Cash Card, for example, offers 1% back as you make purchases and 1% back as you pay them off. There are no categories to track, no rewards earning caps and no annual fee.

This card may be the better choice for making charitable donations, since anything you charge earns the same amount of cash back. And you can always decide to donate the cash back you earn from this card.

Maximizing Giving Tuesday Rewards

If you've got a rewards card you plan to use and a charity to donate to, the next step is maximizing your rewards.

If you're opening a new credit card account for Giving Tuesday or holiday shopping, you may be able to increase your rewards if you qualify for an introductory bonus. For example, you may be able to earn a $200 cash back sign-up bonus or 50,000 travel miles as a new cardholder, assuming you meet the sign-up bonus spending requirement.

Next, consider whether earning cash back is best when making your donation. For example, if you anticipate taking an expensive trip within the next six months, then it might make sense to choose a card that offers airline miles or points that could be applied toward airfare or hotels.

On the other hand, if you're looking for a way to pay down holiday-related credit card debt, you might prefer cash back instead.

Latham says that regardless of which type of rewards you choose, pick a card that offers the highest rewards rate for charitable donations. And choose a donation amount that fits your ability to give.

What Are the Tax Rules for Claiming Charitable Donations?

Aside from earning rewards on credit card donations this Giving Tuesday, you could also reap another benefit in the new year. The IRS allows taxpayers to claim eligible donations as a tax deduction, up to a set limit each year. For the 2019 tax year, you can generally deduct qualifying cash donations, including those made via credit card, up to 60% of your adjusted gross income.

Credit cards can help you claim charitable donations appropriately. The IRS requires you to keep a documented record of your donation, whether you pay by credit card, cash or check. A credit card statement offers documentation.

[Read: Best Airline Credit Cards.]

Can You Donate Points and Miles On Giving Tuesday?

While you can certainly earn rewards from donations made on Giving Tuesday, think about how you could put rewards you've already earned to work for charity. For example, if you have a pile of cash back ready to redeem, you could use it to make a donation. You can make the donation, then redeem your cash back to offset the purchase on your statement.

Some travel rewards programs and credit card issuers offer portals that allow you to donate your points or miles. For example, United Airlines offers Miles on a Mission, a program that allows you to donate air miles to charity partners or campaigns. American Express allows cardholders to donate Membership Rewards points through the JustGiving program, which is open to more than 1.5 million registered U.S. charities.

"Many of the airlines and hotels offer the option to make a donation of your points for use by service members, for disaster relief, or for migrants fleeing war-torn nations," Lipsett says. "If you are cash-poor but points-rich, donating points from your card or rewards programs is a terrific way to share the charitable spirit."

Latham says it's typically simplest and fastest to donate cash back rewards. "Airline miles and rewards program points are not always easy to donate, and their actual value is fuzzy when you don't control how they're used."



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