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 While insurance will cover much of the rebuilding, friends stepped
in right away with cash to fill the gap until the claim is settled.
As is becoming more common these days, they started crowdfunding
campaigns on popular sites - one on DreamFund.com, which holds money
in an FDIC-insured savings account, and another on GoFundMe.com,
which is linked to a personal bank account. Both sites collect a 5
percent fee from the donations and pass along a credit card
processing fee of about 3 percent.
For the $25,000 Wagner's friends raised on DreamFund, that amounts
to $2,000, and another $800 went to GoFundMe and its credit card
processors for the $10,000 raised on that platform.
A few people were put off after learning about the fees, Wagner
says, and simply handed him checks, which added another $10,000 to
the effort.
Nevertheless, raising money for personal causes through crowdfunding
sites is a skyrocketing business - GoFundMe says such fundraising
campaigns increased by 291 percent between 2013 and 2014, after
rising by more than 500 percent the year before. But the fees make
it clear the platforms themselves are, indeed, businesses rather
than purely charitable efforts.
More than 2,000 crowdfunding sites have sprung up to try to catch
the wave of this rapidly growing industry, says Howard Orloff, vice
president of Zacks CF Research and founder of
Crowdfunding-Website-Reviews.com. Of those, many are start-ups with
little staying power and many are aimed at businesses seeking
capital rather than personal causes. Some, like Kickstarter, one of
the best known sites, don't allow personal fundraising.
Regardless of type, the sites make money by taking a percentage of
pledges, which results in either a donation being reduced when it
reaches the recipient or a surcharge added to the donor so the
recipient gets the net amount pledged.
But when it comes to raising money for charity, that may be
changing.
On Dec. 15, popular crowdfunding site Indiegogo, which typically
charges 4 percent to users who donate through PayPal and 9 percent
for other payment options, decided to drop the fee for personal
fundraisers. Users of its new IndiegogoLife service only have to
sacrifice the 3 percent taken by the credit card processors.
Indiegogo co-founder Danae Ringelmann says the company didn't want
those who were in need of charity to be subject to the same charges
as those trying to launch a business.
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"Every dollar counts - we've heard that again and again and again,"
she says.
Dropping that platform fee is a "game-changer" in the world of
crowdfunding, Orloff says. "Smaller sites [like YouCaring.com and
Tilt.com] have offered no-fee crowdfunding for a while but none with
website traffic, and public trust, anywhere near Indiegogo."
By contrast, collecting the old-fashioned way - by accepting cash in
person or checks to be deposited in a bank - usually involves no
extra costs, although some banking fees may apply depending on the
kind of account you choose.
But real-world collecting like that has limitations of reach, and
not much possibility of the campaign going viral.
With crowdfunding , if the cause is popular enough to land on the
home page of one of the more popular sites "it can go pretty wild,"
Orloff says. "It can change somebody's life."
Indeed, the campaign to raise money for Wagner and his family went
far beyond the $5,000 he imagined - the $50,000 raised so far may
actually be more than they need.
"We didn't expect this at all," Wagner says. "If there is extra , we
want to help others. We hope to pay it forward."
(Follow us @ReutersMoney or at http://www.reuters.com/finance/personal-finance;
Editing by Paul Simao)
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