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Effective effective altruism: Get $400 off your next charity donation
For those of you unfamiliar with Churning, it's the practice of signing up for a rewards credit card, spending enough with your everyday purchases to get the (usually significant) reward and then cancelling it. Many of these cards are cards with annual fees (which is commonly waived and/or the one-time reward will pay for). For a nominal amount of work, you can churn cards for significant bonuses.
Ordinarily I wouldn't come close to spending enough money to qualify for many of these rewards, but I recently made the Giving What You Can pledge. I now have a steady stream of predictable expenses, and conveniently, GiveWell allows donations via most any credit card. I've started using new rewards cards to pay for these expenses each time, resulting in free flights (this is how I'm paying to fly to NYC this summer), Amazon gift cards, or sometimes just straight cash.
Since the first of the year (total expenses $4000, including some personal expenses) I've churned $700 worth of bonuses (from a Delta Amazon Express Gold and a Capital One Venture Card). This money can be redonated, saved, spent, or whatever.
Disclaimers:
1. I hope it goes without saying that you should pay off your balance in full each month, just like you should with any other card.
2. This has some negative impact on your credit, in the short term.
3. It should be noted that credit card companies make at least some money (I think 3%) off of your transactions, so if you're trying to hit a target of X% to charity, you would need to donate X/0.97, or 10.31% for 10% to account for that 3%. The reward should more than cover it.
4. Read more about this, including the pros and cons, from multiple sources before you try it. It's not something that should be done lightly, but does synergize very nicely with charity donations.
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Comments (17)
There is a related practice where you can switch your current account. At least in the UK, there are several banks that will pay you from £100 to £150 for switching your current account to them. Like the above practice of churning, this will have a small negative impact on your credit score in the short term, but is otherwise fine. The bank will do all the switching for you, and transfer all your direct debits, standing orders, etc, from the old account. Once you have received the switching bonus (normally within a month of the switch), you can then always switch back. Naturally, you should choose a no-fee current account to switch to (all of these offers allow that). Note that some of these switching bonuses require you to have at least two Direct Debits and pay in a certain sum of money per month, so read the fine print.
The following offers are currently available in the UK (not necessarily an exhaustive list):
What you do with the money is of course up to you, but this is compatible with effective altruism. I have taken advantage of all of these offers at one time or another, and heartily recommend it.
EDITED TO ADD: Many of these bonuses cannot be claimed if you have already received the bonus too recently. So it's not like you can make £600 a month doing this!
http://www.moneysavingexpert.com/ is the best way to learn about these.
Amazon smile is nice too, .5% for a bookmark. Cant easily link from phone.
Shop for Charity is much better - 5%+ directly to GiveWell-recommended charities, plus browser plugins people have made that apply this every time you buy from Amazon.
Just a notice for anyone wondering: They stack.
Nice. Though it appears that everything is going to SCI atm - you cant pick where the money goes, which may be important for some.
What a coincidence - I just cancelled my ordinary monthly donation two days ago so as to give a year's worth all at once and do this with a new credit card.
One time donations also work a bit better with matching, as you have more that you can throw at once.
How can most people manage to find matching situations?
In my experience, micro optimizations like these represent yet another thing to keep track of. The upside is pretty small, while the potential downside (forget to cancel a card?) is larger. If you're ok with paying the attentional overhead or it's a source of entertainment, go for it.
Personally I'd rather use a standard rewards card (mine is 1.5% cash), not have to think about it, and spend my limited cognitive resources on doing well at my job, looking out for new opportunities with large upsides, working on side projects, or networking.
For those of us on low incomes it matters. People past points of diminishing returns, perhaps not.
I also now have three credit cards that between each of them manages 3-5% back on large fractions of my day to day spending, I just need to remember which one to use at which stores.
If you don't want to bother signing up for a bunch of cards, the US Bank Cash+ card gives 5% cash back for charitable donations, up to I think $2000 per quarter. This is a worse percentage but lower-effort and does not ding your credit (as long as you don't miss payments, obvs).
Also, as I understand, it's actually better not to cancel the cards you sign up for (unless they have an annual fee), because "average age of credit line" is a factor in the FICO score. Snip them up, set up auto-pay and fraud alerts and forget about them, but don't cancel them.
It does not seem like the expected value of the probability of something slipping through the cracks would pay for the marginal increase in the credit score.
Disagree. Autopay minimum and set up charge alerts for anything that goes to the card. Approve of your heuristic in general - in thos case, though, the automation works well and reliably.
I was more making a point about the value of a credit score - mine is near perfect anyway. I have a mortgage and three permanent credit cards that I maintain, and no real blemishes.
How do you get to know your credit score?
For people who would otherwise not have multiple credit cards, the increase in credit score can be fairly substantial.
In addition to Dorikka's comment, you are not liable for fraudulent charges; usually the intermediating bank is.