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Reward miles for charity

Loyalty programs are making it easy to donate unused points


 
Reward miles for charity

Japanease Red Cross/Getty Images

Spurred by images of devastation in Japan, donations to charities like the Red Cross are soaring. To make it even easier to give, many companies with loyalty programs are now letting members donate their points to relief efforts. Just last week, Shoppers Drug Mart launched a one-month campaign encouraging customers to donate their Optimum points to the Red Cross, which it will match with cash donations up to $150,000. But while charitable giving is certainly a good thing and is to be encouraged, not all points-for-charity programs are the same, and it’s important to read the fine print before deciding if this is the best way to help out.

Canada’s largest loyalty program, Aeroplan, was one of the first to make such an offer available. It set up a special Aeroplan Miles account for the Red Cross, and kicked things off by donating one million “miles.” Since then, members have donated an additional 440,000 miles to the account, according to Isabelle Troitzky, communications director at Groupe Aeroplan. The Red Cross can redeem the miles to pay for flights or buy merchandise like computers through the Aeroplan website.

The problem is, Aeroplan miles are notoriously hard to value depending on the product or flight reward they’re redeemed for. One mile might be worth 0.06 cents for a one-way business-class flight from Vancouver to Tokyo, 0.01 cents for the same flight in economy class, or just 0.006 cents for a laptop computer. In short, it’s hard to know whether the Red Cross will get maximum value from your gift. Other plans, like Air Miles, are less opaque, since the points are converted into cash donations. For instance, a donation of 200 air miles is the equivalent of a $25 gift. Troitzky says Aeroplan never considered giving donated miles a cash value. “Everything we do is through our currency, which is Aeroplan miles,” she says. “We stick with what we are good at.” Of course, that also means a donation through Air Miles will result in a charitable tax receipt, which isn’t the case with Aeroplan.

It’s also important to remember that donating points and miles is a big help to loyalty programs, since they have vast sums of unclaimed points on their books. In Aeroplan’s case, the company has an off-balance sheet liability of $1.3 billion in future redemption costs, according to analysts. When members donate their miles and they’re used by the Red Cross, that liability is reduced. Troitzky says that isn’t a factor when Aeroplan sets up a donation program. She says the liability issue was dealt with by rules introduced several years ago that cause unused points to expire after seven years.

For those who’ve given up trying to redeem their points for flights, gifting miles is a fast and easy way to help Japan. But if you want to know for certain the value of your gift, go to the charities directly and donate cash.


 

Reward miles for charity

  1. You don't get a tax credit for the donation of points, so it seems more sensible to donate cash and use the points for things you would have spent the cash on. But I realize that charity is mostly irrational appeals to emotion.

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