Should You Donate Frequent Flyer Miles To Charity?

It’s been several years since I’ve shared thoughts on effective philanthropy and donating miles. It certainly seems like we have more crises, more often, and more needs top of mind for help than ever before. I suspect that might not be correct in absolute terms, but the breadth of speed of information flow brings needs to the forefront constantly. And for many people, especially readers of this blog, miles may be an underexploited resource to help.

What Do You Want To Get From Your Philanthropy?

First I think it helps to be clear about your goal in giving. Often people make donations not because they want to do the most good at the margin but to,

  • feel good
  • tell themselves they’re doing good
  • get recognition (from the charity or from peers)
  • signal agreement with the cause you’re donating to

I do have thoughts and suggestions for those seeking out these other goals, but the advice in this post assumes you are trying to do the most good or at least get the most resources to the charity.

Should You Give Miles Or Cash?

There are usually two ways that miles can help a charity. In one version, they access your account (or a travel provider allows them to receive actual donations of miles into an account for their use) and the miles are used to book travel, with the usual restrictions applying. That can be useful for savvy charities, or for charities used to doing award bookings. But it can also just wind up meaning a lot of low value redemptions.

More common is donating miles and the loyalty program turns them into a cash donation. That’s a lot simpler, but the rate of cash conversion matters. Since the program is spending real money, the conversion rate is low – certainly lower than most readers of this site would ever accept when spending their miles for travel.

As a result most of the time you can get better leverage out of your miles than the charity can.

  • Use your miles for your own travel
  • Give the money you would have spent on that travel to charity instead

That way the charity is going to net more than if you cashed in your miles for a donation.

Let’s take this a step further. If you itemize your tax deductions, this approach is even more valuable. Your cash donations are (generally) deductible to a qualified non-profit, while mileage donations usually aren’t. And you can give more for the same net out of pocket.

Leaving aside those who have hit their cap on charitable deductions or who face the Alternative Minimum Tax, you can gross up your donation when it’s tax deductible to account for the tax savings.

Let’s say you’re in the 32% marginal tax bracket, and you’ve used to your miles to save $250 in after-tax money. Why not donate $368 to charity?

There are issues that can change the calculation, of course, besides your tax situation. For instance,

  • You need paid travel for elite status (most hotels though count award nights towards status, and some airlines do too – Delta through the end of next year and Virgin permanently on their own metal)

  • You might get bonused with additional miles for donating cash to an airline’s preferred charity, further tipping the scale (also giving you more miles to again consider whether to keep or donate)

For some though giving miles may just be easier than giving cash for those miles rich and cash poor – and not spending cash on travel.

Giving Points Can Be A Bad Deal

When you donate points it’s helpful to know how much (or how little) a charity will actually receive for those points.

In some cases points donations 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 charitable gift than to redeem for travel. A decade ago I embarrassed Hilton into making a six figure donation after pointing out the miniscule amount given to charity for Honors points donations at the time.

When you’re donating to a travel provider’s preferred charity, you probably want to know whether your donation will actually increase the total amount that’s given. The company may make a flat donation regardless of how much members give, the more members give the less of a ‘top off’ that’s needed.

That’s one reason I like United’s platform for charities to raise their own support, which I last highlighted when there was a campaign running for Give-a-Mile which actually uses miles for flights (instead of receiving cash at a low per mile value).

How Can You Be Most Effective In Your Giving?

Most of us see a cause, send some money, feel good about it – and call it done. But what if we actually want to believe that the organization we’re helping is making a difference, and our gift specifically matters? Here are a few ideas.

  • Focus your giving. A lot of small gifts won’t be as helpful. Plus the re-solicitation cost by charities is high. When you make a small gift you’re really just telling most charities “spend money to get me to give again (and again).” Many charities will spend as much or more than you give them trying to get your renewal, which is profitable overall because of the percentage that do renew and upgrade their support. Bigger gifts see less eaten away by re-solicitation expense.

  • 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.

  • Giving appreciated assets is better than cash. If you have appreciated stock, give that instead, you get the tax deduction for the current value of the shares and get to avoid paying capital gains taxes on their appreciated value. That’s true for nearly all assets that have grown in value. And that means you’re better able to afford to give more.

  • Give to a cause that engages you, and a charity that continues to engage you, because the most good will likely be done through your lifetime giving than a one off. It’s not the $100 that necessarily makes a difference, but the $100 multiplied out across years and perhaps when you consider leaving a portion of your estate (one of the ways that lower dollar solicitation programs pay out for charities over time, frequent donors may then remember the charity in their will).

  • Traditional metrics of efficiency are used wrong. Unless most money is being spent on overhead don’t directly compare overhead metrics – many charities game these anyway (what is a fundraising vs program cost is easy to play with) and deficits aren’t always signs of financial irresponsibility. Bonus points for putting their tax returns on their website?

    Maybe… but those are all publicly available online eg at Guidestar anyway. Deficits, transparency scores, are overhead percentages are used because they’re easier than actually figuring out whether an organization makes a difference or not, and it’s tough for small donors to invest enough in learning that for themselves.

  • Pick unpopular causes, they are probably getting insufficient investment versus following the crowd. Causes everyone else is giving to probably have too much relative to other causes, and relative to their marginal opportunities to make a difference.

  • Pick a person, not a cause. This isn’t a popular way to do philanthropy, and it won’t get you a tax deduction. But if you’re a traveler, and you don’t have big money to materially affect the direction of a charitable institution, perhaps you can achieve something of scale – with an individual you met along the way? A few hundred dollars may not matter to a mega-charity (though they won’t admit it) but it could help your tour guide in Africa or South Asia to fix the vehicle they use to earn a living, or maybe it would help them send their daughter to school?
  • If you are very wealthy some of these thoughts don’t apply. You don’t need to focus your giving to make a difference, for instance, because you can make several large gifts and take more of a portfolio approach (hoping that there are enough successes to balance out the failures).

    And if you’re going to come back to donating miles, maybe you could donate a little of your expertise using those miles as well?

    Related Posts

    Leave a Reply

    Your email address will not be published. Required fields are marked *