How Does GoFundMe Work?

MINNEAPOLIS (WCCO) — The site GoFundMe has helped people raise more than $3 billion since it started in 2010.

But this crowdfunding site and others take a share of the donations.

That has Marianne from Elk River wanting to know: How does GoFundMe work? Good Question.

People used to ask donations be sent to an account at a local bank. But now that more and more people are online, how people raise money has changed.

Advertising firm Fallon realized this and began consulting clients regarding crowdfunding campaigns because they considered them to be marketing campaigns.

gofundme How Does GoFundMe Work?

(credit: CBS)

“You had to make a compelling appeal to people for whatever project you were raising money for online and because it was so publicly visible and shareable, if you didn’t do a good job at that, that it could not go anywhere,” said Marty Wetherall, Fallon’s director of innovation. “But, if you did a good job, it could really travel.”

According to GoFundMe, the company takes 5 percent of the amount donated plus a 2.9-percent credit card processing fee, which is about 30 cents.

“There’s pretty large staffs of people running these sites,” Wetherall said. “When they get all the traffic they get and when they’re processing all these payments, they have cost of doing business.”

GoFundMe’s competitors — like Crowdrise, Fundrazr, Fundly, Razoo and Kickstarter — have similar fee structures.

YouCaring charges only the processing fee, but then asks people to voluntarily give an extra 5 to 10 percent.

Wetherall says it’s up to the person raising the funds to decide whether the value of the visibility and shareability on a popular fundraising site outweighs a donation campaign that people might not be familiar with.

GoFundMe says it uses the best secure payment encryption technology for its donations.

Beneficiaries can withdraw funds from their accounts as soon as donations come in. Those withdrawals usually take five to seven days.

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