Each year, the more than 1.5 million nonprofits in the United States spend about $1.8 trillion annually to keep their operations running. Those organizations range in size from neighborhood-level groups to massive global operations. But they all share a fairly common problem: They’re limited to either a standard business credit card or debit card for expenses.
Typical business cards require a personal guarantor, adding an awkward layer of liability to whomever signs the paperwork. Some also have fees, and their reward points structure isn’t ideal for groups that really just need more funds to complete their mission. On the flip side, debit cards are problematic because they take a substantial cash balance if you’re buying things regularly. Plus many don’t have the same level of consumer protection and fraud alerts.
The Charity Charge nonprofit business credit card aims to solve those problems by offering no annual fee, a 1% rebate directly against the group users’ account balance, and the ability to offer employees multiple cards with throttled spending limits. As the name makes clear, it’s the latest offering from Charity Charge, a public benefit corporation that uses financial technology to empower nonprofits.
The cards are issued by Commerce Bank and use Mastercard’s payment network. They’re available to any group with at least two years of financial data. The annual percentage rate of 14.9% is technically several points below the national average but by definition nonprofits should be fairly diligent about paying these off. Their budgets aren’t designed to carry debt like consumers do.
Stephen Garten, the founder and CEO of Charity Charge, came up with the idea after launching a consumer credit card that allowed users to direct 1% cash back to charities in mid-2016. As Fast Company reported, that concept was novel in its generosity: Other charity card deals offered lower rates of return and some had additional fees to process donations.
The Austin-based company’s original goal was to redirect the estimated tens of billions of dollars in reward points that get accrued annually but not spent. “It was essentially a new way for nonprofits to earn recurring revenue through the everyday purchases that their supporters were making,” Garten says. Although the company won’t release exact numbers, it says that consumer cards have since been issued to thousands of customers who have directed funds to at least 1,000 different nonprofits.
When Garten met with the directors at those charities, he often heard a familiar question: “What about us?” he says. “No one had bothered to really understand the differences between a [traditional] business and a nonprofit.”
Charity Charge’s nonprofit Mastercard works like most co-branded cards: Commerce Bank issues the credit line, which is managed through MasterCard’s payment network. Whereas Charity Charge’s consumer cards earn revenue from those companies based on how many people sign up for services, the business-based card is different. The company makes money through a share of vendor processing fees.
So far, more than 100 nonprofits have piloted the concept, including the international humanitarian aid group Global Impact, chapters of the United Way, Junior League, and YMCA, and a collection of Montessori schools. The company has also partnered with PurchasingPoint, a discount program for nonprofits so that cardholders receive deals at FedEx, Enterprise, and Staples and other affiliated places that businesses often rely on.
“I’ve had so many groups say to us, ‘The bank put us through so many hoops . . . You guys were just easy to deal with,'” Garten adds. “I just want groups to be able to focus on their mission.”