5 Ways To Avoid Crowdfunding Scams

It was the type of story that could restore your faith in humanity. Last year, news stories surfaced about a homeless man who gave his last $20 to a woman stranded on the road with no gas. She and her husband were so impressed with the man’s generosity that they started a GoFundMe campaign to help the man get back on his feet. All the major news outlets featured the heartwarming story and helped boost the crowdfunding campaign to over $400,000.

You may have heard by now that the trio concocted the entire tale, which began to unravel when greed got in the way, and the “homeless veteran” sued the couple. Bam! That’s the sound of your belief in the basic goodness of people plunging off of a cliff. Even major news organizations were taken in. GoFundMe has promised to return all the donors’ money, but the real damage is to legitimate campaigns that may suffer as a result of prospective givers’ newly born cynicism.

Unfortunately, the list of recent fraudulent campaigns is long, when you include other giving sites like Kickstarter, Fundly, and FundRazr, among others. The thing to remember, however, is that a certain percentage of people will always take advantage of others, and scams are as old as humanity itself. One bad incident shouldn’t cause you to write off every cause as fake, or to deny your charitable impulses. Billshark wants to show you five ways to protect yourself and your money when you feel moved to donate to a cause.

1. Investigate, investigate, investigate

In the case noted above, even news organizations—who have access to far more experience and resources than the average person—were conned. But that doesn’t mean you don’t have some ways to research the legitimacy of a crowdfunding campaign. You can read the campaign description and goals to see where the money is going, what it will be used for, and who is managing the money.

Try to verify the facts of the campaign online, and contact the campaign manager for details of how the campaign is going. Be suspicious if you see the same person trying to fund the same project on several crowdfunding sites—it might be all about the money. Also, examine the person’s social media sites. Are they on multiple sites or just one that appears to have been created recently? Do the “friends” or comments appear to be real and do they corroborate the person’s story?

GoFundMe offers the following guidelines:

You should be able to answer the following questions by reading the campaign:

• How is the campaign organizer related to the intended recipient of the donations?
• What is the purpose of the campaign and how will the funds be used?
• Are direct family and friends making donations and leaving supportive comments?
• Is the intended recipient in control of the withdrawals? If not, is there a clear path for the funds to reach them?

2. Take your time

Unless you know the people involved, don’t be the first to contribute. Wait and see how the campaign is going, and whether the organizer provides follow up news, either through social media, the funding site or such personal journaling sites as CaringBridge. See who else contributes, and what kind of comments they leave. And once a campaign has reached its goal, that is supposedly all the money that they need, so look for other places to give.

3. Keep it local

If the campaign is for people in your area, it’s easier to verify its legitimacy. Someone whose house burned down, for example, will have been on your local news shows and in the newspaper. Through the magic of social media, you may even know someone who knows someone who knows and can vouch for the people involved.

4. Be safe online

As always, any type of financial transaction online can be hacked. Be sure to look for the “https” and tiny padlock in your browser’s URL bar that signals that the site is secure. And consider using a reloadable credit card that is separate from your bank account for this and other online purchases.

5. Keep your emotions out of it

So many of these stories are heart-wrenching and make you want to do something to help. The sad fact is, the world is full of suffering, and your help will always be needed somewhere. It’s better to be skeptical and do your homework before you jump in to contribute to a cause that tugs at your heartstrings.

There’s no reason not to give to charitable causes if you feel moved to do so. Fraud is common in every area of life, and—fortunately—relatively rare. Just take steps to protect yourself before you donate.

And let Billshark find you extra savings on your bills for this or any other purpose.