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Improve Your Charitable Giving: Let Not Your Left Hand Know What Your Right Is Doing

Improve Your Charitable Giving: Let Not Your Left Hand Know What Your Right Is Doing

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    According to virtually every religious and ethical tradition, meaningful charity does not draw attention to the giver, and dignified charity does not draw attention to the recipient.  Here I will offer an economist’s perspective on the Biblical injunction to “let not the right hand know what the left is doing” in charitable giving and will argue that this results in more efficient charity (meaning that it increases the bang we get from every charitable dollar) in addition to strengthening the moral community.

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    One reason economics is a dismal science is that it shows us how the best of intentions executed with the greatest fidelity and sincerity can nonetheless worsen the problems people are trying to solve because they change incentives.  Some of the most basic ideas in economics concern the fact that people respond to incentives, people make decisions at the margin, and there is no free lunch.  The hidden wisdom in Biblical teachings about charity embody recognition of and respect for these principles.  I don’t know whether this is intentional or not; I’m not a theologian.  Regardless, this verse teaches an important economic lesson.

    Let me be absolutely clear, here.  I am not arguing against benevolence.  Far from it.  I agree that we should help people who are less fortunate than we are.  My argument here is that there are effective ways to do this and uneffective ways to do this.  Letting not our right hand know what our left hand is doing makes our charity more effective.

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    This follows readily from the idea that people respond to incentives.  When charity is predictable and well-known, people will expend resources trying to become the beneficiaries of others’ charitable endeavors.  This is socially wasteful, and the entire value of the prospective transfer will be competed away as people fight over the most lucrative begging positions in town, rent children, or pay to have limbs amputated to increase their begging take (Tyler Cowen discusses this in his book Discover Your Inner Economist).

    It also follows readily from the proposition that there is no such thing as a free lunch.  The money we are giving to charity has to come from somewhere, and it isn’t always clear that it will do more good, socially, if it is given to someone than it would if it were left in a bank account and lent to an entrepreneur.  That isn’t for me to decide, of course, but it is worth considering.

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    There are, of course, good reasons to be totally open about your giving–when you are trying to honor someone, for example, by naming a building or lecture series or something after them, or when you explicitly want to change people’s incentives.  If you just want to give people stuff, though, then your charity is most effective when it is given in secret.

    So when you are giving, don’t let your right hand know what your left is doing.  And don’t let anyone else know, either.  Unless you’re explicitly trying to change people’s incentives, you do the most good when your charity is kept quiet.

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    Last Updated on March 4, 2019

    How to Use Credit Cards While Staying Out of Debt

    How to Use Credit Cards While Staying Out of Debt

    Many people will suggest that the best thing to do with your credit cards during these tough economic times is to cut them up with a pair of scissors. Indeed, if you are already in huge debt, you probably should stop using them and begin a payback strategy immediately. However, if you are not currently in trouble with your credit cards, there are wise ways to use them.

    I happen to really love my credit cards so I will share with you my approach to how I use mine without getting into deep financial trouble.

    Ever since about 1983 when I got my first Visa card, I continue to charge as many of my purchases as possible on credit. Everything from gas, groceries and monthly payments for services like my cable and home security monitoring are charged on credit. Despite my heavy usage, I have maintained the joy of never paying any interest fees at all on any of my credit cards.

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    Here are some tips on how best to use your credit cards without falling into the trap of paying those nasty double-digit interest fees.

    Do Not Treat Credit Cards as Your Funding Sources

    Too many people treat their credit cards as funding sources for major purchases. Do not do this if you want to stay out of trouble. I use my credit cards as convenient financial instruments so I do not have to carry around much cash. In fact, I hate carrying cash, especially coins. When you buy things on credit, the purchases are clean and you will not get annoying coins back as change.

    I do not rely on my Visa, MasterCard or American Express to fund any of my purchases, large or small. This brings me to my golden rule when it comes to whether I will pull out any of my credit cards either at a retail or online store.

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    I never purchase anything with my credit cards if I do not have the actual cash on hand in my bank account.

    If I really cannot pay for the item or service with cash that I already have at the bank, then I simply will not make the purchase. Remember, my credit cards are not used as funding sources. They are just convenient alternatives to actual cash in my pocket.

    Make Sure to Always Pay Off Balances in Full Each Month

    The next very important part of my overall strategy is to make absolutely sure that I pay the balances in full each and every month no matter how large they are. This should never be a problem if the cash has been budgeted for my purchases and secured in the bank. I have always paid my full balances each month ever since my very first credit card and this is why I never pay interest charges.

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    Using Credit Cards with Rewards

    Most of my credit cards are of the “no annual fees” type, including one MasterCard on a separate account I keep at home as a spare in case I lose my wallet or incur any fraudulent charges. However, I do use a main Visa card which does have an annual fee because all purchases on that card reward me with airline frequent flyer points. For me, the annual fee is worth it since I do travel and I get enough points to redeem many free flights.

    You have to decide for yourself if you will charge enough purchases on credit each year without paying interest charges to warrant a credit card that rewards you with airline points (or other rewards). In my case, the answer is “yes” but that might not be the case for you.

    I occasionally use a MasterCard or American Express card on small purchases just to keep those accounts active. Also, I have been to the odd retailer that accepted only a certain type of credit card, so I find that having one from each major company is quite handy. Aside from my main Visa card which earns the airline points, the rest of my cards are of the “no annual fees” variety.

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    So this is how I use my credit cards without getting into any financial trouble with them. This strategy is recommended only if you are not in debt, of course. In fact, it is worth keeping in mind once you’re out of debt so that you can keep your credit cards active and treat them responsibly.

    What are your credit card usage strategies? Let me know in the comments — I’d love to hear what methods you use.

    Featured photo credit: Artem Bali via unsplash.com

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