'Tis the Season for Scammers: 3 Steps to Spot Charity Fraud

Brian Cody |

For many people, the holiday season is when you enjoy family and friends and give a little back to those in need. Charitable giving is its highest during the holiday months. While many legitimate charities are out there looking for support, there are also scammers looking to take advantage of the holiday goodwill. Not sure whether a charity you want to contribute to is on the up-and-up? Below are a few steps you may take to see if the charity is fraudulent.

Step 1: Do Your Research

The first place to start is with a bit of research. In many cases, this may be the only step you need to identify the validity of a charity. Check out one or more organizations that help verify charity information, such as Charity Watch, BBB Wise Giving Alliance, and Charity Navigator. These organizations will provide you with some insight into the charities and how their funds are spent.1

Step 2: Look at Their Payment Method

There are many ways to give money easily and securely to charity. Many charities will accept a check, credit card, or money transfer method, such as PayPal. These are all reasonably secure methods of sending money and have some recourse against fraudulent transactions. If a charity is fraudulent, it will likely ask for less conventional payment methods such as cash, wire transfer, gift cards, or virtual currency.1

Step 3: Look for Potential Red Flags

Once you have researched and verified their payment method, look for any other possible red flags before agreeing to contribute. Most fraudulent charities will have one or more red flags you may not think of until you look closer.1

Red Flags to Look Out For

Scammers may use all kinds of tricks to get you to give them money, but some of the most common danger signs include:

  • Not Providing Documentation for a Charitable Contribution: If the charity is legitimate, they will provide you with paperwork proving the status of their charity and your tax-deductible contribution.
  • Pressuring or Rushing You to Make a Decision: You shouldn't feel rushed into contributing and shouldn't feel pressured to do so or afraid not to. If you get this feeling, end the conversation.
  • Using a Name Close to the Name of Another Charity: If the charity asking for the donation sounds familiar, but the name is slightly different, there is a good chance it is a scam. Scammers will use similar names, hoping you don't realize the difference.
  • Claiming That 100% of Proceeds Goes to Charity: All charities have overhead costs so that they are able to operate, so if the person is claiming 100% of your contribution will go to the charity, the charity is likely a fraud.2

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking #1-05378014


1 How To Spot A Charity Scam, Business Insider, https://www.businessinsider.com/10-ways-to-spot-a-charity-scam-2011-5

2VERIFY Fast Facts: 4 ways to spot charity donation scams,” WFAA, https://www.wfaa.com/article/news/verify/scams-verify/4-ways-to-spot-charity-donation-scams/536-ad41a2d0-f92a-44a4-8c37-0bd5add680f6