Can you crowdfund your credit card debt online?

It is legal to raise money on crowdfunding sites to pay off credit cards – but there's a low rate of success, a lot of rules and risks to consider

The Fine Print with Fred Williams

Fred O. Williams is senior reporter for CreditCards.com. A business journalist since 1987, his work has appeared in Kiplinger's Personal Finance magazine, the Buffalo News and USA Today.

Can you crowdfund your credit card debt online?

You can try to raise funds to pay off your credit card debt through a crowdfunding site such as GoFundMe – if your cause is legitimate. However, you may want to consider other options as the rate of success is low and you may be at risk of becoming a victim of fraud.

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"Last year I was scammed by a man who saw my GoFundMe campaign and promised to pay off my credit cards," said Marie Gelsomino, a Pennsylvania resident and artist who ran up credit card debt after losing her day job.

The fake benefactor asked for her banking information, supposedly to send her money, which did not arrive. "Like a fool, I fell for it."

Gelsomino started a campaign in 2016 to pay off $2,300 in card debt. Since then, she's raised $560 on GoFundMe – which is fairly successful for a debt repayment campaign. She also increased her goal to $3,600 and started a separate campaign to fund car repairs.

See related: Should I try to crowdfunding or a loan for my startup?

How crowdfunding personal debt works

On GoFundMe, the best-known crowdfunding site for individuals, people can launch a campaign for nearly any legal purpose, representatives of the site said.

It is up to donors to decide if the purpose is worthy. Other sites that support personal campaigns, such as GiveForward and YouCaring, have been absorbed into GoFundMe.

  • Personal campaigns are distinct from business crowdfunding sites, such as Kickstarter, which support startups or specific projects.
  • In a personal campaign, the organizer sets a goal on their own behalf or for someone else. They describe the need for help in an appeal and say how the funds will be used.
  • The site checks the person's identity and takes payments on their behalf, which the organizer can transfer to their bank account.
  • GoFundMe charges 2.9 percent plus 30 cents in transaction costs for processing payments.

Pitfalls of crowdfunding

Scammers may try to request your bank account information by offering to pay off your debts, then attempt to access your accounts.

Gelsomino's encounter with a scammer was not unique, said Adrienne Gonzalez, founder of the watchdog website GoFraudMe. "They'll say, 'If you send me your bank account information, I'll put $3,000 in your bank account,’" she said. "Otherwise really intelligent people fall for these scams – it amazes me."

Harm can be avoided by taking donations only through the fundraising platform and not sharing your bank information with any one individual. Here are other ways thieves can thwart fundraising efforts:

  • Fraudsters may make phony donations to test a stolen card number.
  • Once the transaction is found to be fraudulent, the money can be clawed back from your bank account.
  • Donations may disqualify recipients from food aid, housing subsidies or other income-based benefits.
  • While gift income is not subject to taxes, it may be considered income by public benefit formulas.
  • The open nature of the fundraising platform means anyone – including social service agencies – can see how much a campaign has raised.

Gonzalez said she knew of a woman in Texas whose public benefits were canceled after she raised $28,000 for a grandchild's medical bills.

See related: 5 reasons not to put medical bills on credit cards

Garnering support for card debt can be difficult

"I have not received many donations for my credit card debt campaign, and not everybody I contacted has been supportive of my actions," Gelsomino said in an email interview.

In fact, the $560 she raised toward a $3,600 goal is a better success rate than many campaigns. A search of the GoFundMe site shows that most appeals involving credit card debt generate little or no donations.

Card debt is not a common use of the site, representatives said, which more often sees appeals for medical problems, injuries, animals and emergencies.

However, card debt may contain elements of other, more sympathetic hardships, such as medical bills or education expenses that wind up on a card.

  • Campaigns should be specific about why the money is needed, representatives of the site told CreditCards.com.
  • Detailed appeals provide a fuller picture of the person in need, and give donors more assurance that the person's story is real.
  • To get shared and re-shared on social media, an appeal should start with donations – and testimonials – from friends and family, GoFundMe representatives said.
Tip

Tip: Crowdfunding may be one creative way to pay off credit card debt – but not the only one. From toiling 100-hour work weeks to sending every penny of their income to debt and not buying nothing new, read "You did WHAT to pay off your debt?" to draw inspiration from six people and the creative ways they found to pay off their card debt.

Legal consequences of misleading crowdfunding campaigns

The crowdfunding site's 11,400-word terms and conditions agreement requires campaigns to abide by a host of rules, such as not offering prizes and avoiding statements that are "fraudulent, misleading, inaccurate, dishonest, impossible or imitating any other person or fundraising campaign."

People who promote a dishonest appeal may face stiffer consequences than just being thrown off the crowdfunding site.

Colorado resident Kristin Ashley Eagle was arrested and charged with theft and fraud for allegedly making false claims of illness in a GoFundMe campaign, the Loveland (Colorado) Reporter-Herald reported.

And legal repercussions may be facing a New Jersey couple who organized a viral campaign to help homeless veteran Johnny Bobbitt, who says he received little benefit from all the donations that poured in.

Just being honest will keep GoFundMe campaigns out of trouble, even if their objective doesn't seem very altruistic.

"I spent all my money on pizza and now I can't afford to be a twitch streamer and have to use dialup," Ontario, Canada, resident Mackenzie Swim said in an appeal launched in March 2018. "Your dollerydoo's help."

His $1,000 campaign has attracted a single, offline, anonymous donation of $5, according to the crowdfunding site.


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Updated: 10-17-2018