What is Credit Card Breakage?

At first, the term “credit card breakage” may look like a typo because “breakage” is most commonly used in relation to gift cards, but there’s much more to it than that.

In the retail and payments industry, breakage is a term merchants use to describe the un-redeemed value that consumers hold in gift cards, airline miles, and other “rewards” mechanisms. For example, when you finally get around to using that $50 Red Lobster gift card, but the meal is only $46 – the remaining $4 is the breakage (or money that a company pockets without exchanging a good or service.)

So how does this relate to credit cards? Unused points.

Each year 31% of credit cardholders never redeem their credit card reward points, according to BankRate’s Money Pulse Survey. And in total that’s over 60 million consumers not using the points they’ve earned. Additionally, as mentioned in Forbes, those rewards add up to over $16 billion worth of credit card rewards expiring each year. Most nonprofits already have a plethora of grant deadlines, award applications, development budgets to balance, and more – so prioritizing credit card points just slips through the cracks.

So where does that money go?

Back into the pockets of banks and credit card issuers.

While breakage may be considered insignificant or accepted among other institutions, we believe that nonprofits should never experience breakage. Funds are vital in changing the communities that nonprofits all around the world serve. Instead of getting a credit card with points that you forget about or rewards that really don’t apply to your organization, look for a card that is made specifically to meet the needs of nonprofits by providing applicable discounts, perks, and of course automatic cash back.

Another thing to look out for in your credit card evaluation process is what various companies actually mean by “cash back.” Some companies advertise this but make it a very manual process of monthly paperwork or messy redemption schemes, so it’s important to decipher marketing language from reality. Search for a card that automatically gives you rewards in the form of a rebate on your monthly statement.

Rewards are not something NGOs should be missing out on, and cash back is the most transparent and valuable option. This is a huge reason why we stand by our nonprofit business card and believe its the best solution for NGOs. Our Nonprofit Credit Card gives you the option to give 1% of all purchases back to your organization as a direct rebate on your statement. However, if you find our card isn’t a good fit for you for other reasons, we still implore you to evaluate credit card providers carefully. Look beyond the perks and into the fine print.

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Abby Pesek

National Accounts Manager at Charity Charge

I was first exposed to Charity Charge when Stephen presented to my Social Entrepreneurship class during my junior year at the University of Texas. At the time I was also president of the UT Service Scholars program where I was personally volunteering and coordinating on behalf of other students to volunteer in the community. Participating in the service-learning course opened my eyes to a career that focuses on service and supporting the nonprofit community so joining the Charity Charge team has been a perfect fit.