5 warning signs before giving

While financial contributions can help those in need, it’s essential to vet the charity you’re donating to thoroughly. You have the best intentions and want your money to go to deserving causes, but the organization or individual receiving your hard-earned money might not have those same intentions.

Here are some valuable tips on how to avoid a charity scam.

1. Limited or no web presence

A woman uses her computer to research an organization she is considering donating to

Thanks to the internet, it’s never been easier to verify an organization. Virtually every individual and organization has a website and social media accounts these days. A five-minute Google search could save you the disappointment of giving to a fraudulent cause during the coronavirus pandemic.

A charity might seem legitimate on the surface, but there are tricks that scammers use to get you to open your wallet. For instance, scammers might pick names for their “charities” that sound real, use a caller ID from a local area code to contact you or use vague sentimental claims about how your donations will be used, according to the Federal Trade Commission (FTC).

Independently-run fundraisers aren’t free of scams either. Granted, individuals do start fundraisers on platforms like GoFundMe or Facebook to fund good causes. Sadly, you’ll find hundreds of fundraisers for medical bills and funerals on these platforms. However, donating to people you don’t know is far riskier than donating to a verifiable nonprofit.

Take the elaborate GoFundMe scam created by Mark D'Amico and Katelyn McClure, for example. The pair managed to dupe people into donating $400,000 to a cause they said was going to a homeless man. Instead, the pair spent the donations on personal items such as a BMW, clothing and luxury handbags.

They were caught, thankfully, but not all charity scams catch the attention of authorities. If you do come across a clear-cut scam, you can report it to the FTC.

2. You're asked for donations in cash, wire transfer, bitcoin or gift cards

A man looks skeptical upon being approached for a suspicious request for money

“Real charities won’t ask you to pay by cash, money transfer, gift card, or bitcoin,” wrote Jennifer Leach, an associate director at the FTC. “That’s how scammers ask you to pay.”

The FTC recommends only making donations via check or credit card. You can also use an online payment program, such as PayPal, that offers fraud protection.

If you stumble upon a charity that won’t take a safe payment method, skip it, and find another organization more deserving of your dollars.

3. You feel pressured to give

Two people are having a stressful discussion, and the woman looks worried about being pressured to give.

You should donate because you want to and care about a cause, not because you feel pressured. Relentless pressuring of consumers to donate is a telltale sign of a scammer.

Leach of the FTC advised: “Scammers want to get your money as soon as they can. They might start calling, pressuring you to give — or even saying you made a pledge.”

She recommends researching the organization online. Google their name with the words “scam, “review” or “complaint.” You might be surprised by what pops up.

Some nonprofits and charities do solicit donations or check in with one-time donors to ask for more donations. If you don’t want them to contact you anymore, simply ask to be removed from their calling list or unsubscribed from their emails.

4. It gets too personal too quickly

A man is called on the phone regarding giving a donation and shows a skeptical look on his face as the caller asks for personal information.

If a “charity” requests your social security or bank account numbers, make a break for it. If a donation scammer gets ahold of your personal information, it makes it all the easier for them to make you a victim of identity fraud.

There’s no reason why a reputable charity organization needs to know anything about you, especially if you’re just donating. All they should need is a credit card number or a check.

5. It's hard to figure out their 'mission statement'

A woman tries to learn more about a charity but she looks skeptical as she ends a phone call.

People at reputable charities are usually passionate about the work that they do. Therefore, they shouldn’t have a hard time communicating their organization’s mission and programs. A phone call with a spokesperson should be a suitable method for gauging the group's guiding purpose and passion.

“Scammers make lots of vague and sentimental claims but give no specifics about how your donation will be used,” cautions the FTC’s website.

If the "spokesperson” you speak with has a hard time communicating their organization’s purpose, move on, and find another organization to support.

Beyond a phony mission statement, someone behind a charity scam might also say that your donation is “tax-deductible.” In truth, a donation is only tax-deductible if made to a 501(c)(3) nonprofit. It’s unlikely that scammers are associated with such a nonprofit because 501(c)(3) organizations are legally required to report certain financial information to the Internal Revenue Service (IRS).

5 signs an organization is trustworthy

There are many organizations worthy of your donations. Follow these guidelines when deciding with which charities to share your time, talent and treasure.

1. They’re registered with all the necessary agencies

A woman looks satisfied while looking at her phone.

According to the IRS, about 40 U.S. states have enacted charitable solicitation statutes, which usually require organizations to register with the state before asking residents for contributions.

States with those requirements have online databases showing the organizations that are authorized to fundraise, says Stephen Urich, president of charity registration company Labyrinth, Inc.

“It can be a good starting place for donors to look at these to make sure the charity is compliant with state law and authorized to fundraise in the state,” he says.

In addition, a nonprofit should be able to be searchable on the website GuideStar. Can’t find them? You should rule them out immediately, says Anthony Babbitt of grant-making organization the Babbitt Family Foundation.

“This is a voluntary site, meaning charities update their information themselves,” says Babbitt. “However, the list is created from registered nonprofits with the government.”

2. The money is spent wisely

3 people sit at a table and look at information about a nonprofit organization to see how money is spent

There are websites you can use to research an organization’s budget and money management. GuideStar also has this insight but so do these resources:

States with charitable solicitation statutes have databases that indicate whether an organization is adequately registered and reveal crucial financial information.

“Often, there is useful information there, such as a copy of the charity’s annual IRS filing (IRS form 990) and their audited financial statements,” says Urich of Labyrinth, Inc.

TThese financial documents have information like the nonprofit’s budget and its CEO’s salary. From there, you can deduce some of the institution’s money management. If you see that a CEO is getting a considerable part of the organization’s budget, it’s likely that donations aren’t going to charitable programs.

3. They have good ratings

A couple looks at the ratings of a charity organization they want to donate money to.

No matter how you feel about business review platforms like Yelp and Google, they can be a great way to get a reading on an organization's legitimacy.

If you find reviews describing the charity as a “scam” or “untrustworthy,” it likely is. Sure, there might be fake reviews praising an organization when it doesn’t deserve it, but it’s a good idea not to rule out user-generated reviews.

Like Yelp, charity-vetting websites also have methods of rating to which you can refer. These are more specific to nonprofits rather than Yelp, which is geared towards retailers and restaurants.

For example, CharityWatch has a letter-grade rating system, not unlike the one we used in school. Charities are graded on how much they spend on programs, how much they spend on fundraising and other important factors.

“Charities that are A-rated generally spend at least 75% or more on their programs, so more of your money goes to causes you want to support,” Stephanie Kalivas, an analyst at CharityWatch, told Consumer Reports in 2019.

4. They’re accredited by third parties

A woman looks at a report to determine the worthiness of a charity organization.

Accreditation from third parties is a good sign because that means there’s more oversight of the charity’s processes and programs.

Getting this approval from some organizations is a thorough process. To become accredited by BBB Wise Giving, for example, charities have to meet specific standards. Documentation on the following must be submitted:

  • How the organization is governed.
  • The ways they spend their money.
  • The truthfulness of their representations.
  • Their willingness to disclose basic information to the public.

They also must meet 20 standards set by BBB Wise Giving. These standards include board oversight, conflict of interest policies and how they use donations. More specifically, 65% of their total expenses must be spent on charitable programs, and no more than 35% of their total contributions must be spent on fundraising.

Not all legitimate charities might apply for accreditation on BBB Wise Giving and similar platforms. However, if you're unsure about donating to a particular charity, looking for ones with that accreditation is a good way to weed out bad ones.

5. They've had an impact on the communities they serve

A woman wearing a mask embraces a little boy being helped by a charity during COVID-19.

Measuring social impact might be a difficult thing for charities to do, but legitimate ones will have examples of past successes. A nonprofit can be well funded and have a great mission, but it’s not worth donating to if they’re not accomplishing their goals.

When looking for a charity’s impact, you could ask the organization for examples of past successful projects, testimonials from clients or community members they served, or statistics on their accomplishments.

Another good way to look at a charity’s impact is to look for any news reports written about them. Is there a glowing article about that charity’s food drive or fundraiser? A feature on a particular community member aided by that nonprofit? If so, these are good examples of that nonprofit’s track record.

Give, but give cautiously

There’s a lot of people that need help right now. There are over 3 million COVID-19 cases in the U.S. and 17.8 million Americans unemployed as of June 2020. Not everyone is getting the support they need from government entities or their friends and family, so charities strive to pick up the slack.

Doing your due diligence by planning your donations and researching the legitimacy of a charity organization before donating not only helps you. It also helps people in need by making sure worthy causes are financially healthy enough to be able to make a difference.

Lara McCaffrey is a California-based writer for MoneyGeek.

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