Posted by Alex Jackson on September 23, 2016
So you’re ready to buy a lot you found a great looking shelf pull lot just under $2k and think well why not just put this on the credit card and get some flyer miles or reward points. Before you do this just ask yourself one question are you 100% sure that you will be paying the balance in full each month? And if not ask yourself can your margins afford it? Let’s face it, credit cards are super convenient but let’s look at the actual costs of your purchases. For example, you found a lot that costs $1600 and your freight costs are $210 if you were to pay this amount with a credit card there would be a 3% credit card fee of $54.30. Let’s compare this to the average cost of a bank wire $15-$30 and you’re looking at anywhere between $24-$39 in expenses for the convenience and compared to a bank deposit which can be done at any Wells Fargo branch for free and saving you the full $54.30. Things start to get ugly when you look at your credit cards interest charges these days interest rates are all over the board as low as just over 10% highs close to 20% or higher let’s take the current national average of 15%. To calculate your monthly interest charge we are going to use the following formula
balance X daily periodic rate(APR/365) X Days in billing cycle (29 days In this example) = Interest charge for the month
$1864.30 X .0004 x 29= $21.62
Add this $21.62 to the $54.30 credit card fee and we have now added $75.92 or just under 5% to the cost of the lot. Now you may say 5% is no big deal but if this is not paid in full this will carry over to the next month’s billing cycle racking up more interest charges. Also remember we have not yet taken into consideration other costs associated with selling this merchandise on average you can expect to pay between 13%-15% of the sale price to ebay and Amazon not to mention your other miscellaneous expenses. Again 5% may not seem like a lot but it is a lot when you consider this 5% Is paid before your first sale and factor in your other expenses and you might realize that this 5% can represent the difference between being profitable and maximizing your profits.