Whom to give charity?

I will post the source as soon as I remember to look for the paper in Urdu where I read this hadith next time I go downstairs, but to the best of my memory:

A man came to the Prophet (pbuh), and asked - "If someone asks us for money, how do we know if they really deserve charity or not?"
The Prophet (pbuh) replied, "Give charity to the one who deserves, and also to the one who does not deserve, so that Allah (swt) may reward you for the deeds you deserve, and also reward you that which you do not deserve".