It’s that time of year when we are planning for new holiday shows and building our inventory to support those shows. Our current “A game” isn’t good enough for one of the shows so we need to build a new display. But, like many of you this time of year, we are cash strapped.
Lucky me! I found free stuff from my credit card company!
I hate credit cards. But I have found them to be a necessity at times when we have several thousand dollars of show fees that need to be paid and only a few hundred dollars in the bank. I detest paying a corporation 15% of what I charge in annual interest fees. It’s a scam – so much so that some of my personal retirement funds are invested in the banking industry.
While it would be ideal to run a business entirely on a cash basis – meaning that you only spend what you have in the bank – there are times when that is impractical. Money needs to be spent on supplies and materials for custom orders. Investments need to be made in new equipment or tools. All of this spending is to provide an opportunity to make even more money at a later time.
When using your credit card (is only one, right?), there are some tactics that you can employ to make sure your finances don’t get out of control.
1. Don’t Use Them!
This is the ideal situation and highly recommended. When you don’t use credit cards, you don’t pay fees to anyone. All the profits you make are yours to keep.
2. Don’t Use Them for Monthly Subscriptions
Many of you will have monthly bills that are required for your business. Our monthly bills include our cell phones, email service, web hosting, trailer storage, a subscription to ShipStation, and a subscription to Adobe for the software we use to edit photos and videos. If these charges (all valid and necessary) are automatically charged to your credit card, it is very easy to just forget about them as the balance owed on your card grows each month.
3. Pay The Full Balance Every Month
If you use your credit card, did you know that you don’t pay any interest if you pay the balance every month? There is a grace period for most credit cards where there is no interest due if it is fully paid within a certain number of days. This may vary by card, so make sure you read the fine print so you don’t get surprised.
This is a numbers game for the credit card company. If you pay your card every month, then they don’t make any money off of you. Credit card companies are not stupid and they understand human nature far too well. They know that you will be tempted to only pay the minimum just like the vast majority of their other customers. This is how they got so big.
4. Pay More Than The Minimum
If you can’t pay the full balance, pay more than the minimum due. If you only pay the minimum on your card, it could take decades to pay off your debt. This means that you are paying 15% or more every year for every dollar on your credit card. If you pay more than the minimum, it reduces the amount of time to pay off the card dramatically.
5. Incorporate Interest Fees Into Your Pricing
Personally, I think that this one is unethical, but it is the “cost of doing business”. I also think that this is why prices seem to be increasing on just about everything we buy. The temptation to use “other people’s money” is so great that it is becoming commonplace and increasingly frequent. Like the Federal Government, companies are becoming so debt-burdened with easy money that their prices must increase just to pay the interest.
If you reduce your “cost of doing business”, then you can be more competitive or more profitable. Just me sayin…
6. Put Everything On Your Credit Card
This is a drastic departure to everything that I wrote so far but put everything on your credit card. This means that all purchases go on your credit card. This also means that all revenue goes on your card as well. If you are operating at a net profit, your credit card balance will be negative – meaning that you have paid more than you have charged.
This will require a great deal of discipline and control. It makes it even more tempting to go buy a new toy even without doing any analysis of the wisdom of having this toy.
We are not doing this, but I am exploring the math behind it.
7. Take Advantage of the Free Stuff
This was the original impetus for writing this. I got $400 in gift cards from my credit card company. I’m going to use this to buy the stuff I need to make a new display so we can improve our A game.
I also got Monica a $100 gift card to Old Navy for her birthday! Half of you will think I am a smart guy while the other half will call me cheap. It was to make up for something that I am building for her that wasn’t done in time. She will still get her real present.
Yes, I know that the gift cards weren’t really free, but, just like Amazon points, I choose to live with my distortions that I got over on the credit card company.
Be careful with your credit card and debt in general. One of the reasons that you started your business was so that you didn’t have to work for anyone else ever again. You fired your boss! Using your credit cards makes you beholden to your credit card company. It’s a new boss, just with a different name.
See you at market!