Change for Change

¶ … Change" concept reflects a model where the company partners with credit card companies. The terms of this partnership would be that the credit card companies agree to "round up" sales, donating this amount to charity. The idea has promise in terms of being a good way to generate funds for charity, but there are some critical issues that need to be worked out. The first of these issues is the credit for the donation itself.

In essence, the customer who holds the card is authorizing that the bill be rounded up and the rounded amount be donated to charity. The cardholder is deducted the proverbial two cents. The question is whether it is the cardholder or the card company that is credited with the donation. The value in the donation is that the money can be written off of taxes, so this is a benefit that both the cardholder and the card issue would want.

The way that the proposal is written, it sounds as though the credit card company would get credit. This provides the consumer with no incentive to sign up for the card -- they are spending money while a major financial institution is getting the tax credit, which is poor optics. Alternately, it could be that the credit card company is merely the facilitator of the transaction.

However, since they are collected the funds, and there are transaction costs associated with collecting the funds, splitting off the donation and then transferring that donation to the charity, the card company is being asked to donate transaction capacity, with the donation coming from the individual. The Change for Change program as formerly designed asks card issuers to simply process these transactions free of charge as part of their social responsibility objectives.

The first problem with this is that these companies can probably think of a lot of less cumbersome ways to be socially responsible, like making their own donations to charity. The second problem is that there is no incentive for a card issuer to do this -- all it does is reduce their profits and generates no revenue. However, there may be a solution to this, that would allow the card issuers to support this endeavor.

Change for Change needs to gain allowance for the card issuers to write-off their transactions costs associated with the program as an in-kind donation to the charity. This creates part of the incentive required, and the other part is that the deals with the card issuers will include extensive marketing opportunities with the charities and projects to whom Change for Change ultimately disburses the funds. The marketing opportunities may further entice the card issuers to sign on to this program, despite its costs.

These incentives are certainly more compelling than the original plan of relying on altruism, something that cannot really be expected of a credit card.