"It's kind of a buzzword right now, but I don't think people really understand what crowdfunding is," she said.
Basically, crowdfunding refers to online fundraising. Anyone can pitch an idea and ask for donations, and the range of causes runs the gamut, from disaster relief to students soliciting funds for a school trip to business start-up capital.
Many causes raise thousands in a matter of hours. But Driggs warns that most crowdfunding sites take a fee from each donation. GoFundMe.com, for example, deducts a 5 percent fee from each donation plus a 2.9 percent processing fee through PayPal or WePay. If you reach your goal on RocketHub, you'll pay a 4 percent commission plus a 4 percent credit card handling fee. Kickstarter charges a 5 percent fee for the total plus a 3 to 5 percent processing fee; indiegogo charges 4 percent of the overall total raised along with a 3.5 percent credit card fee.
"Our concern is that consumers don't know that there may be fees involved," she said. "The person may not understand that all the money they're giving is not going to go to that person or organization."
She added that many crowdfunding causes are not tax deductible. If that deduction is important to you, she advises giving to an established charity.
Either way, Driggs counsels people to take five minutes to check the fine print on crowdfunding sites, including terms, conditions and policies, particularly about privacy.
"If you take that time, then you'll know you're donating to someone or some organization that will actually use your money wisely."
Things to consider before donating on a crowdfunding site:
Read about the site's policies, terms and conditions and its fee structure.
Understand you may not get a tax deduction on your contribution.
Make sure the website securely encrypts all transactions using Secure Socket Layer (SSL) technology. Look for https at the beginning of the website address.
Check out charities through www.bbb.org or through the Utah Department of Commerce.
Source • BBB of Utah