Crowdfunding: Know before you donate

Published on Saturday, 29 June 2013 23:05 - Written by By Mechele Agbayani Mills Tyler Better Business Bureau

Crowdfunding refers to a collective effort of individuals who network and pool their resources, typically through online fundraising. Crowdfunding websites are established to allow solicitation of money for a variety of purposes — organizations or individuals to which the funds are given can be, but are not necessarily charitable. Some contributions through these sites may not be tax deductible as charitable donations.

Forbes magazine recently reported that crowdfunding has quadrupled since 2011, moving from a $32 million to a $123 million market. Securities administrators have found nearly 8,800 Internet domains with crowd funding in their name, and a Google search of the word returns more than 10 million results. As crowd funding websites grow in popularity, BBB cautions consumers looking to make contributions.

While online giving provides a quick and easy mechanism for supporting those in need; donors should remember to ask questions and do their homework so they know what to expect when contributing through crowd funding websites.

BBB advises consumers looking to make a contribution through a crowdfunding website to:

Research the organization or individual to whom you are contributing. Ask questions and know exactly what you are supporting before contributing toward any cause.

Go to if the organization is affiliated with a company, and do an Internet search for negative information about individuals involved with the organization. Always investigate before you give.

Know how much of your donation is going to the charity.

Check for hidden fees. Most crowd funding websites have processing fees that can be tacked on for credit card handling. These fees can be added on top of your donation or taken out of what money you contributed to your particular cause.

Read the terms and conditions before making your donation. Make sure you understand the terms of the organization and the conditions of their fee structure. It is important to understand what the website is asking of you and what you are signing up for when you make a donation.

Check the privacy policy. Read the websites privacy policy and ensure that you have a secure Internet connection before divulging any personal information.


Ask if the donation is tax deductible. When giving to a crowdfunded charitable cause, keep in mind that contributions are typically not tax deductible. If it is important to you that your contribution can be deducted from your taxes, you may want to choose another outlet for donation.

Report suspicious accounts. Many websites will allow you to report a suspicious project Be sure to provide as much detail as you can (links to the page with the concern, links to an account, details of the problem, etc.)

For more advice about how to be a savvy consumer or donor, go to To report a fraud or scam, call the BBB Hotline at 903-581-8373.



About BBB Charity Information Service: BBB Wise Giving Alliance, www.give . org, produces reports on more than 1,200 nationally soliciting charitable organizations, and local Better Business Bureaus report on another 10,000 local and regional charities. BBB Wise Giving Alliance does not rank or rate charities but rather seeks to assist donors in making informed judgments by providing objective evaluations of charities based on 20 standards that address charity governance, finances, fundraising, appeal accuracy and other issues.

There is no charge to charities for the evaluation, and the resulting reports are accessible to the public at