#TipTuesday: 6 Tips to Practice Safe Crowdfunding
Each Tuesday, BBB puts out a new set of tips every consumer can use to keep themselves safer and smarter when making financial decisions.
June 30, 2014

Over the past decade, crowdfunding has increasingly become the outlet of choice for individuals and organizations seeking to raise money for a new project. Crowdfunding typically occurs on a website dedicated to raising money for any number of things: small business start-up money, charitable causes, funding for an independent film, etc. Instead of seeking a large sum from just a few donors, crowdfunding relies on great numbers of Internet users contributing small amounts to reach the same goal.  

This new method of raising money, while incredibly effective in its ability to garner funding, unfortunately has its drawbacks. Crowdfunding websites are constantly on the lookout for individuals looking to capitalize off unsuspecting donors by posting phony charitable causes or asking for money on a project they never intend to complete. While some crowdfunding sites fiercely protect their donors from phony causes, others aren't as vigilant, so for this week's edition of #TipTuesday, BBB has these tips to help you make the best decision when choosing a crowdfunding cause.

Tip #1: Know your recipient. Your best option is only giving to people you personally know; unfamiliar individuals posting charity-themed projects are much more difficult to verify. At the very least, familiarize yourself with a site's gatekeeping requirements (Facebook page, PayPal account, etc.) before contributing to a cause.

Tip #2: Charities can be checked. Crowdfunding websites and projects produced by tax-exempt charities provide more opportunities for verification. Visit the "About" page of the charity's website, confirm its registration with state government agencies, and get information from third-party monitors like BBB to find out about local charities.

Tip #3: Ask for updates. A project that provides updates of progress, expenditures or accomplishments provides greater assurance that the individual or organization is legitimate. Ask for a detailed description of how and when the collected funds will be used before giving.

Tip #4: Verify disaster causes. Con artists tend to strike most when the emotional iron is the hottest. If you desire to donate after a natural disaster or great tragedy, ask for a cause's connection to the event and independently verify it before moving forward. 

Tip #5: Read the fine print. Crowdfunding sites will vary in terms of their privacy policies, including under what conditions donations will be refunded (if at all) and whether the donor or project organizer will be charged for things like administrative or credit card fees.

Tip #6: Favor specialization. If a crowdfunding site specializes in a certain area (medical bills, school projects, overseas fundraising), there is a higher likelihood that they will have the experience to spot problems as they emerge. A site that allows any type of crowdfunding activity may result in more challenging oversight hurdles.

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ABOUT BBB: For more than 100 years, Better Business Bureau has been helping people find businesses, brands and charities they can trust. In 2013, people turned to BBB more than 132 million times for BBB Business Reviews on more than 4.5 million businesses and Charity Reports on 11,000 charities, all available for free at bbb.org. BBB Serving E. Washington, N. Idaho & Montana, founded in 1912, is one of 112 local, independent BBBs across North America.  

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