10 red flags to consider before giving to a charity

It’s important to know that the money you’re donating is being put to good use. Shutterstock/Shchus

Giving to charity is an act of generosity that can make a difference. Unfortunately, scammers often prey on people with good will. Whether you’ve been asked outright for money or uncovered a cause that you care about on your own, taking steps to avoid fraudsters can help you make the most of your heartfelt contributions.

You’re asked to wire money.

Charities that ask you to pay in cash only or wire money to the cause should raise a red flag.

According to the Federal Trade Commision, you should “never wire money to someone claiming to be a charity. Scammers often request donations to be wired because wiring money is like sending cash: once you send it, you can’t get it back.”

The charity is brand new.

Do your research. Africa Studio/Shutterstock

A charity without a solid reputation isn’t necessarily risky, but it deserves a closer look. Charities that pop up overnight, especially in times of severe trouble, warrant even more consideration.

After virtually every disaster, scam artists come out of the woodwork to defraud individuals wishing to help victims,” former California Attorney General Jerry Brown warned. “Give only to reputable organisations so their donations don’t end up lining the pockets of criminals and opportunists.”

The charity won’t stop calling.

If you’re getting a lot of phone calls, changes are the charity has high overhead costs. Feng Li / Staff / Getty Images

The Center for Investigative Reporting notes that cold-calling donors is one of the most expensive ways to raise money. “Charities that use paid telemarketers often let the fundraisers keep 80 to 90 cents of every $US1 raised. Most of the money you think is going to needy veterans or dying kids is paying telemarketers’ overhead and profit.”

If a charity won’t stop contacting you, listen to your instincts to steer clear of giving to the specific cause.

The organisation claims 100% of donations go to the cause.

There are going to be administrative costs associated with a charity. Shutterstock/Peter Bernik

On the other side of the spectrum, understand that charities do have administrative costs. Unless they can explain how they are operating without using any donated money, think twice about their legitimacy.

According to Charity Navigator, charities should spend less than 33.3% of donations on overhead costs. The website stated, “We believe that those spending less than a third of their budget on program expenses are simply not living up to their missions.”

The information about the organisation and its impact isn’t clear.

You should know where your money is going before writing a check. Flickr / David Goehring

Steer clear of charities that lack information and their mission, identity, operating costs, and impact – you should have a good idea of how your money will be used before you make an official donation. If you’re not sure, go ahead and ask.

To spare yourself the stress and avoid a potential scam, conduct intentional research. Check the charity’s website, social profiles, and any printed material you have access to. You can also look to see if the charity lands on any troublesome lists. An online search can help turn up reviews and any other missing information, which can help evaluate if a cause is legitimate.

The charity or nonprofit isn’t registered.

There are websites where you can check if a charity has been registered. Shutterstock/Yuricazac

Reputable causes, charities, and nonprofits in good standing should be available via public record.

Can you find the charity or nonprofit you’d like to donate to on the Better Business Bureau (BBB) Wise Giving Alliance website? Does it come up when running a search on GuideStar or with the US Internal Revenue Service? If the cause, its state of registration, and consumer reviews aren’t listed and available, it may be time to ditch your idea to donate.

The charity has terrible reviews.

Donating to a charity that won’t put your money to good use can be incredibly disappointing. snickclunk/Flickr

Although not all charity evaluating websites review charities, theBBB Wise Giving Alliance, affiliated with the Council of Better Business Bureaus (BBB), does. The website has free reviews of 1,300 national charities and local BBBs have evaluations on an additional 10,000.

According to their website, roughly 40% of the charities evaluated meet all 20 benchmarks of accountability; ones that do are designated a “BBB Accredited Charity.”

Be sure to check how your charity is rated on the site.

The charity is sitting on a lot of cash.

The money you donate shouldn’t sit without being used. デニス モジョ / Flickr

As a donor, you want to know your donation is being put to work, not sitting there useless. Therefore, it should be a red flag if the charity you’re considering donating to is sitting on excessive cash.

According to Wise Giving Alliance standards, “the charity’s unrestricted net assets available for use should not be more than three times the size of the past year’s expenses or three times the size of the current year’s budget, whichever is higher.”

This might be something you might need a professional to evaluate or you can look at how the BBB’s Wise Giving Alliance rates said charity.

The charity is playing on your emotions.

According to Scam Watch, a common tactic used by scammers is playing on your emotions. If the charity claims to help children who are ill or other emotionally powerful causes, make sure you’ve done your research and know the charity is legitimate before donating.

A scammer might also make you feel guilty if you don’t want to donate.

They claim they need the money immediately.

In most instances, there shouldn’t be an extreme sense of urgency. Flickr / Don Harder

A reputable charity will understand that you, as a donator, want your money to go to good use and will do the necessary research to ensure this happens.

That being said, if a charity claims that they need money urgently, this should be a red flag. This is especially common after a natural disaster. In fact, the National Consumer’s League (NCL) warns specifically against this kind of scam.

According to a release by the NCL staff, “Following high-profile disasters such as the 2004 Indian Ocean tsunami, the 2007 Virginia Tech shootings, and the 2010 Haiti earthquake, there were numerous reports of consumers receiving solicitations from fraudulent charities. Regardless of the specifics of the disaster, the scammers use the visibility of these disasters in the news media to generate sympathy and cash from their victims.”

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