How Much Does Kickstarter Charge? COMPLETE Fee Breakdown

Kickstarter Fees and Hidden Costs: A Creator's Guide

Key Concepts:

• Kickstarter Platform Fee (5%)
• Payment Processing Fees (3% + $0.20 or 5% + $0.05)
• All-or-Nothing Funding Model
• Dropped Pledges (3-5%)
• Taxable Income (IRS implications)
• Sales Tax/VAT (EU, UK, US)
• Shipping Costs (Domestic vs. International)
• Pledge Manager

1. Kickstarter's Core Fees

• Platform Fee: A flat 5% of the total amount raised. This is non-negotiable. Example: Raising $10,000 results in a $500 fee for Kickstarter.
• Payment Processing Fees: Vary based on pledge amount.
  • Pledges over $10: 3% + $0.20 per transaction.
  • Pledges under $10: 5% + $0.05 per transaction.
  • Example: $10,000 raised from 100 backers results in $300 (3% of $10,000) + $20 (100 backers * $0.20) = $320 in processing fees.
• Total Core Fees Example: Raising $10,000 would incur $500 (platform fee) + $320 (processing fees) = $820, or 8.2% of the total raised.

2. Payment Timeline and the All-or-Nothing Model

• All-or-Nothing: Backers are only charged if the campaign reaches its funding goal.
• Payment Timing: Backers' cards are charged at the end of the successful campaign. If the goal isn't met, backers aren't charged, and the creator owes nothing to Kickstarter.
• Processing Time: Kickstarter takes up to 14 days to process payments after a successful campaign. This allows for handling failed payments and backer updates.
• Fund Transfer: After the 14-day window, funds (minus fees) are transferred to the creator's linked bank account. This transfer can take an additional 3-5 business days.
• Total Timeline: Creators should expect approximately 3 weeks from campaign end to receiving funds.

3. Sneaky Cost #1: Dropped Pledges

• Definition: Pledges that fail due to expired credit cards, insufficient funds, or fraud protection.
• Impact: Creators don't receive the pledged money and aren't obligated to deliver the reward.
• Typical Rate: Expect 3-5% of pledges to drop.
• Recommendations:
  • Budget for it: Account for potential dropped pledges in financial planning.
  • Reminder Messages: Send reminders to backers with failed payments, encouraging them to update their card information. This often recovers a significant portion of dropped pledges.

4. Sneaky Cost #2: Taxes (Income, Sales Tax, VAT)

• Taxable Income: Funds raised on Kickstarter are generally considered taxable income by the IRS.
• Sales Tax/VAT: Creators shipping physical products may need to deal with sales tax or VAT, especially when shipping to the EU.
• Kickstarter's Role:
  • Marketplace Facilitator: Kickstarter collects sales tax for items shipped to all 50 US states.
  • VAT Collection: Kickstarter collects VAT on items shipped to backers in the EU and the UK through their pledge manager.
• Creator Responsibility: Creators are responsible for understanding their tax obligations and should consult with an accountant or tax advisor. Detailed financial records are crucial for tax reporting.

5. Sneaky Cost #3: Shipping

• Impact: Shipping costs are deducted from the funds raised and can be substantial, especially for international backers.
• International Shipping Challenges: Customs fees, VAT, and additional carrier charges can significantly increase costs.
• Recommendation: Use a Pledge Manager:
  • Collect Shipping Costs After the Campaign: Avoid estimating shipping costs during the campaign and baking them into pledge levels.
  • Accuracy: Pledge managers allow for collecting exact shipping costs based on each backer's location and reward selection.
  • Tax Handling: Pledge managers can also handle tax collection, simplifying the process.
  • Timing: Shipping costs are collected closer to the actual shipping date (often 6-12 months after the campaign), providing more accurate pricing.

6. Conclusion

Kickstarter charges a 5% platform fee and payment processing fees (around 3% + transaction fees). Creators must also plan for dropped pledges (3-5%), taxes (income, sales tax, VAT), and shipping costs. Utilizing a pledge manager for shipping and tax collection is highly recommended.

7. Audiobook Giveaway

The creator is giving away a free audiobook version of their book, "Crowdfunded." Viewers are instructed to click the link in the description and provide their email address to receive the audiobook.