Crowdfunding sites like GoFundMe are surging as Americans go online to cover costs | #scams | #elderlyscams
“Before I started the GoFundMe for my sister, I ordinarily wouldn’t have thought to do one unless it was kind of a once-in-a-lifetime case, like cancer or legal expenses,” Mitchell said. “This is a crisis and that’s why I’m doing it.”
The pandemic has been disastrous for millions of families across the United States. Roughly 8.5 million jobs have not returned since February 2020. Meanwhile, more than 564,000 people have died of the coronavirus, and 100,000 small businesses closed permanently in just the first three months of the crisis. The government has provided help, including through multiple relief packages that sent out three rounds of stimulus checks and extended unemployment benefits. But for many people it hasn’t been enough — or come quickly enough — to avoid eviction, put food on the table and cover a growing pile of monthly bills.
Enter crowdfunding, which has taken off more than ever in the past year as a way to supplement income. Sites like GoFundMe, Kickstarter or even Facebook allow people and businesses to establish a cause — or set up a page laying out why they (or someone they are raising the money for) need money, and what the cash will go toward.
After demand spiked last year, GoFundMe in October formalized a new category specifically for rent, food and bills. More than $100 million had been raised at that time year-to-date for basic living expenses in tens of thousands of campaigns during 2020 — a 150 percent increase over 2019.
Both Vancouver-based FundRazr and U.K. crowdfunding website GoGetFunding report similar, though smaller, trends for last year, as well as honeymoon sites PlumFund and HoneyFund.
But a year into the pandemic, some individual crowdfunding campaigns are reporting little success raising donations to cover basic expenses. And the movement illuminates a widening divide in the country during the most unequal recession in modern history.
The pandemic has disproportionately affected minorities and those who work low-wage jobs, while many others who were able to work from home — a trend favoring more educated workers — often had a smoother year, at least financially. Workers in the bottom 25 percent of earners faced an unemployment rate of around 22 percent in February, compared with the overall rate of 6.2 percent, according to the Federal Reserve. And data from nonprofit Opportunity Insights, which is based at Harvard, found that employment rates for low-wage workers dropped 30 percent as of February when compared to January of last year.
Still — particularly as pandemic fatigue worsens — it’s getting hard to raise cash for basic expenses this way.
Daryl Hatton, CEO and founder of FundRazr said when he browsed through the campaigns for basic expenses, most were getting little or no donations.
“I saw a whole bunch of zeros,” he said. Crowdfunding still tends to work best when people have a compelling story to tell, and even the tough last year hasn’t budged some donors’ opinions on what makes a worthy ask.
GoFundMe hasn’t seen a slow-down on activity related to basic expense campaigns. It “continues at an elevated rate,” company spokesperson Bobby Whithorne said.
Mackenzie Doyle, a 21-year-old student in Lincoln, Neb., was diagnosed with a chronic illness last year just as the pandemic hit. The public rush to buy over-the-counter cold and flu medicines in the face of coronavirus concerns — the very meds Doyle needs to treat her condition — caused the cost of her necessary treatments to rise, and she started a GoFundMe to help her pay for medicines and rent. At first, donations poured in from friends and family. But now, money trickles in only once every two or three months.
“It very quickly dies down,” she said. “You have to constantly be reaching new audiences or new people in order for it to stretch out.” Crowdfunding helped her for a while, and Doyle is now relying on stimulus checks, her work driving for Postmates and selling clothes online for income.
Crowdfunding for basic costs like rent and groceries surged in the wake of pandemic-related furloughs and layoffs starting last spring. So many asked for help that a Twitter campaign to gather rent funds started by best-selling author Frederick Joseph raised $100,000 in rent relief in its first week, Joseph said. GoFundMe helped him formalize the campaign on its site, and it topped $339,000 in donations there. The company’s charitable arm also has a large fundraiser that has raised about $338,000 to dole out grants for people’s basic necessities.
The monthly bills category is now one of GoFundMe’s largest and has made up 13 percent of all new fundraisers since it was added in October, the company said. The campaigns range from people who have lost their jobs or been evicted to those who have suffered a health emergency and need help paying rent, and more. Meanwhile fundraisers for food in January spiked 45 percent higher than a year before, the company said.
On Facebook, people raised $175 million for coronavirus-related fundraisers on the flagship site and Instagram between early March to late December last year, said Elizabeth Davis, a product manager on Facebook’s charitable giving team.
GoFundMe makes money from many of these new campaigns it hosts and fosters — the company charges credit card processing fees, but primarily makes money from “tips” left on each donation. The tip level is automatically set at 12.5 percent of a donation, though donors can change the amount or decline to tip the company.
Still, crowdfunding is not a sustainable way to keep money coming in and hasn’t made much of a dent on a broad scale in the past year — although it can help some individuals, said Elise Gould, a senior economist at the Economic Policy Institute, a nonpartisan think tank.
Unlike the government programs of the past year, where benefits were intended to be applied equally for many people, crowdfunding has no such rule. Some campaigns go viral online — they might get news coverage or get pushed onto the front page of GoFundMe’s social media-like site, and suddenly, quickly, exceed their target goals.
Other campaigns never get anywhere close to their caps, or even get off the ground. Nora Kenworthy, an associate professor in the school of nursing and health studies at the University of Washington Bothell, is conducting research on crowdfunding’s impact on the pandemic. Her team’s preliminary findings show that more than 40 percent of coronavirus-related fundraisers on GoFundMe never received a single donation.
Mitchell, who is raising money to help his sister get a car, said he sometimes gets impatient when he sees people are viewing his posts about it on social media, but not donating. The campaign has raised $940 of his $2,000 goal in its first month, and his sister hasn’t been able to buy a car yet. He knows he’s lost a few followers from crowdfunding fatigue.
“You have to pluck the right heartstrings for people to pay attention,” he said. “It can be kind of sickening. I know how bad my crisis is, but I also know how bad this crisis is for a lot of people.”
GoFundMe says it provides advice on how to frame requests for average users. But inherently, crowdfunding tends to favor those who are connected with people with the means to give. A campaign for a child might be viewed as more “deserving” and draw more donations than for an adult.
Crowdfunding also has occasional scams, or people or businesses trying to collect money by telling a fake story or never producing a product. The Federal Trade Commission cautions people to research creators’ backgrounds before donating. GoFundMe offers a guarantee to refund donations in some cases if a campaign was found to be fraudulent. FundRazr tries to cut down on these scams by allowing people to raise money for a specific product they might need (say, a piece of medical equipment), and only receive the equipment after the manufacturer confirms they’ve reached their goal.
Despite the downsides and uncertain funding levels, online crowdfunding works for some. And the stigma around asking other people for money has morphed and lessened with the rise of online crowdfunding. Social media users, often from younger generations, add tipping websites like Kofi or Patreon to their profiles. Requests for people in need to “drop their CashApp or Venmo in the comments” are common to raise support.
The requests to help with basic expenses stem from pandemic-related job loss to health crises to just a string of bad luck, showing how many people come close to struggling financially. A Pew Research study from last April found only about 23 percent of lower income adults said they had savings that would stretch for three months in case of an emergency.
Cristopher Hernandez, a 23-year-old grocery store worker in Houston, created a GoFundMe in January after he was diagnosed with lymphoma. He had to take time off work to get treatment.
He’d donated to other GoFundMes in the past, but had never considered making one himself, until he was stuck without a steady paycheck, watching his medical bills rise. He swallowed his pride and set up a campaign, which has raised more than $12,000 of his $15,000 goal. He’s been using the funds to pay for health insurance, groceries and transportation to treatment.
At first, his friends and family chipped in as he posted it on Facebook, Twitter and Instagram. Then he shared it on Nextdoor, and donations from his community poured in. Even the local president of his grocery store chain chipped in.
“I was like, ‘wow’ every time anyone donated,” said Hernandez, who is almost finished with chemotherapy.
Crowdfunding does help connect communities and neighbors, said Una Osili, an associate dean and professor at the Lilly Family School of Philanthropy at Indiana University. It’s not as common to ask for help or, say, borrow some sugar from a neighbor as it used to be, but technology can fill that need in some ways, she said.
“It is, you could say, an efficient response to say, ‘I can start a campaign, I can get my friends mobilized,’ and there’s a feeling of agency and resilience, that you are making a difference,” Osili said.
Chrissy O. experienced this type of one-on-one humanity firsthand after she lost her job during the pandemic and started a GoFundMe to help her pay rent and for gender-affirming care, including hormone treatments.
“I’m just surviving all the time,” she said. “I’ve been surviving my whole life.”
O., who asked to be identified by her last initial to avoid being harassed online, received a $600 donation from a single person, right as the December stimulus checks went out. It gave her hope and boosted her spirits. She immediately wrote to the donor to thank them. The campaign has been a real help, but she is still focused on finding ways to pay for food and rent in the near term — her campaign has raised $1,617 of her $3,000 goal.
Despite the surge in crowdfunding, it doesn’t replace other societal safety nets, experts said.
GoFundMe’s chief executive Tim Cadogan published an op-ed in USA Today in February, calling for more robust government programs to help people and insisting to Congress that GoFundMe “can’t do your job for you.”
“We’re not meant, I think, to be a long-term source of support for everyone’s basic necessities,” said principal project manager LiMin Lam.
The government has expanded unemployment benefits, doled out stimulus checks and forgiven some taxes during the pandemic, significant steps that Gould hopes the system will learn from and continue to adopt in certain cases. But, she said, the past year also showed how ill-equipped in some ways our social safety net was to deal with a crisis of this scale — a key example was unemployment systems that were overrun with requests and inaccessible to many people for weeks or months. That delay was devastating to many.
“So many people are living on the edge financially,” Gould said. “Maybe they’re able to make their bills when they have their paycheck, but you lose your paycheck, and maybe you can’t pay your rent this month.”