how does Gofundme work

How Does GoFundMe Work? – A Complete Guide For 2022

Khyati Hooda
By Khyati Hooda 9 Min Read

GoFundMe is a crowdfunding website that allows anybody to raise funds for charitable purposes. You can launch campaigns in various areas, including crises and medical. This article will go through the facts concerning GoFundMe. If you’re wondering how does Gofundme works – we got you covered.

There are other online contribution platforms, but GoFundMe is the most popular. It’s becoming a common sight in living rooms and hospital wards as a method to gather funds for everything from a prom dress to life-saving treatments not covered by health insurance.

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What exactly is GoFundMe?

GoFundMe was founded in 2008 and is headquartered in Redwood City, California. It has evolved to become one of the most successful crowdfunding sites in the world since its inception. The site has raised more than $10 billion in donations from 130 million people worldwide through various campaigns. 

It is a simple crowdfunding tool that allows anybody to collect donations for humanitarian causes. Businesses and individuals can create campaigns using this platform. You may initiate campaigns in various categories, including humanitarian and medical.

GoFundMe makes money by charging consumers a fee for each gift received. Furthermore, it is known as platform and transaction fees—again, the firm profits from donations made directly to the site by users.

How does GoFundMe work?

GoFundMe allows people to collect money for several causes. GoFundMe campaigns can provide financial assistance, such as paying for cancer treatment or reimbursing surgery expenses. So how does Gofundme work? Here are some examples:

  • GoFundMe can be used for emergencies, For Example:- Assisting victims of natural catastrophes.
  • Education, For Example:- Promote education to assist youngsters in purchasing schoolbooks.
  • Memorial, For Example:- Pay homage to a buddy who has passed away.
  • Medical, For Example:- Such as funding a cancer treatment or paying for surgery

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By now, you might have understood what is GoFundMe, but you don’t know how GoFundMe works? So, we will talk about it here. GoFundMe allows you to send campaigns by email, text message, or social media. After that, a user may share their campaign with friends, family, and anybody else who may be interested.

GoFundMe Charity is a service provided by GoFundMe to influential organizations. It enables them to track campaign progress, collect recurring donations, create branded campaigns, and sell event tickets. GoFundMe may be accessed via its website, iOS, or the Google Play Store.

How does GoFundMe work & make money?

GoFundMe earns money by charging fees to donors. Fees are paid by the individual, team, or organization in charge of the campaign, not by the contributor. If a person pays $100 to a cause, they will get between $90 and $98 depending on where they live. There are two sorts of costs on the platform: platform fees and transaction fees.

This money is utilized to pay server fees and personnel salaries. The transaction charge defrays the costs of processing the user’s payment. There is a 2.9 percent tax in most countries plus a $0.30 fixed price ($0.30 in the United States).

Fees for both categories vary by country. GoFundMe charges 2.9 percent transaction costs (with no platform fees) in the United States, but 5 percent platform fees and 2.45 percent transaction fees in Belgium.

Furthermore, GoFundMe Charities charges differently depending on the plan that consumers choose. Finally, GoFundMe’s revenue is partially earned by donations made directly by its users. 

a. Platform Fees 

Campaign costs are those incurred by the organization to run the campaign. An entity can be a company, a group, or an individual. There is no platform cost for anyone who wants to start a fundraiser in the United Kingdom, Australia, Canada, the United States, or most major European nations. 

The actual platform cost varies per nation for the remainder of the world. In Luxembourg, for example, the platform charge is 5%.

b. Fees for transactions

Transaction fees are applied to cover the costs of processing. Transaction costs in the United States are 2.9 percent + 30 cents. The amount of transaction costs, like platform fees, varies per nation. Luxembourg, for example, levies a 1.4 percent processing fee on all donations.

c. Charity via GoFundMe

GoFundMe Charity is a vital fundraising tool that enables organizers to generate more dollars by engaging donors. Businesses may have access to all donor and fundraising information in one place and design unique contribution buttons and email campaigns.

Furthermore, fundraising campaigns may be integrated with third-party systems such as WordPress, Salesforce, and Mailchimp.

There are two subscription plans available:

Free: Each gift is subject to a 1.9 percent processing fee + 30 cents. It guarantees that the charitable organization receives 97.5 percent of the real estate.

Flex: Each gift is subject to a 2.2 percent + 30-cent processing charge, guaranteeing that the charity receives at least 94.5 percent of the donation. Donors may, however, choose to cover the processing cost, ensuring that the charity gets the natural gift.

Related: How Does Gofundme Make Money?

Business Model of GoFundMe

So, how does GoFundMe work and make money? GoFundMe, like every other crowdfunding website, is used to generate revenue from two sources: platform fees and transaction fees. Platform fees may be considered mediation costs used to keep GoFundMe running. 

On the other hand, assist in covering the third-party expenses of employing a payment provider to handle contribution payments securely.

Until November 2017, GoFundMe charged a 5% platform fee, 2.9 % transaction fee, and $0.30 per gift in the US market. In this arrangement, if a user donates $100 to a cause, the individual who began the crowdfunding campaign will earn between $90 and $95 after GoFundMe’s platform, and transaction fees are deducted.

However, GoFundMe contributors felt that, while the platform cost of 5% was reasonable because it helped GoFundMe continue operations, they wanted 100% of the money to go to the cause. 

Encouraged by the donors’ suggestions and the positive emotion around GoFundMe, the firm decided to discontinue platform fees in the US market and instead encourage contributors to offer an additional voluntary tip to the platform in good faith.

Even though GoFundMe’s board of directors was first hesitant to transition to a voluntary virtual tip model, the “effective rate” of user donations proved sufficient to make the company profitable. 

After the user tip model was proven popular in the United States, GoFundMe expanded it to foreign regions. At the time of writing, GoFundMe does not charge a platform fee in the following countries: the United States, Canada, Australia, the United Kingdom, and the majority of major European nations. 

It’s worth noting that GoFundMe still charges processing fees and a small per-donation fee in these countries.

GoFundme still charges platform fees in the remaining countries, but the business will progressively phase them out in the future. We hope this guide on how does GoFundMe works helped you to understand their business model.

Conclusion

If you’re searching for a quick and easy way to raise funds for a good cause, Gofundme is an excellent choice. Gofundme has you covered for everything from taking it step by step to making your campaign appear more professional. 

The platform is intended for individuals in crisis and is as simple to use as it is effective. This article will help you to know how does GoFundMe works. Stay tuned with us for more such articles. 

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Posted by Khyati Hooda
Khyati is an entrepreneur, marketing consultant and growth hacker. She helps sustainable revenue growth through marketing for SaaS and subscription companies. Her expertise lies in building scalable customer acquisition strategies and implementing effective digital marketing campaigns that drive high-quality, low-cost leads for startups. Khyati has managed over $50M in marketing budgets across various industries including technology, finance, education, retail, consumer goods and more - successfully delivering over 15x ROI for her clients.
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