Important Newbie Question, Please Help

[f3adventure]

"Here's an example, say I am a male gigalo with lots of women. I am currently satisified with the amount of women I have."

Ummm... what?

From credit cards to male prostitution. Are you kidding?

[RyanBuller]

Okay guys, answer this one last thought, okay?

There's two fees I have to pay: the discount rate/trans... and the equipment fee.

My current customers only pay with cash, but say I want to "tap into" the Visa/MC market and get some of those sales.

If the two fees I pay to try and "tap in" are all tax write-offs, what do I have to lose?

If I make a rule saying, purchases $10.00 and over, you can use Visa, what's wrong with that?

And what rule can my beauty salon friend make? Say an accountant, a doctor, etc?

Do you understand what I mean?

[RyanBuller]

1. So it's like, I make a rule saying they must buy more, so that when I swipe the card I make a profit.

2. I have to pay taxes anyway! 33% tax bracket, I pay a good $65,000 a year in taxes! If this is a business expense, it would all come out of the $65,000.

3. So the only thing I can make is money, not lose money? Is there any risks?

Terrace
Please clarify

[RBean]

A "tax write-off" is just another way of saying "expense." I wouldn't base my decision on something like this using the income tax consequences as a reason. If you just want to save the money on the fees, then don't accept the cards. On the other hand, accepting credit cards is a "customer service issue" (in my opinion). You accept the credit cards so that your customers don't think bad thoughts about you and will say nice things about you behind your back. Of course, a liquor store isn't going to be affected by that like some other types of businesses. I wouldn't recommend the "$10.00 and over rule" although plenty of businesses do that. The problem is the message you are sending to your customers. Not taking credit cards or setting a minimum amount for credit cards sends a message to your customers that they are "the enemy" and they are costing you money. They'll be loyal until "Mega Corp" opens a store down the road.

[RBean]

Originally Posted by Cashflowfmp

1. So it's like, I make a rule saying they must buy more, so that when I swipe the card I make a profit.

2. I have to pay taxes anyway! 33% tax bracket, I pay a good $65,000 a year in taxes! If this is a business expense, it would all come out of the $65,000.

3. So the only thing I can make is money, not lose money? Is there any risks?

Terrace
Please clarify

No, this is a misunderstanding. The business expense is subtracted from your gross income, not the tax payable. That's a big difference.

[RyanBuller]

Dancho, come back bro! Please clarify, I don't know what you mean.

I make about $200,000 in sales a year.

My net income is around $80,000 a year.

I pay 33% tax bracket.

Please explain to me bro. Please.

My utilites, business expenses like taking credit cards, aren't they all tax write-offs. I believe my tax guy wrote off my utilities, and rent last year.

Tell me bro, what do you mean? If I accept credit cards, won't they be able to be written off on taxes I have to pay?

Plus am I getting away with not taking them, or, is my current customer base just not using them because THEY KNOW, I don't take them?

There was a small greek restaurant near the office i used to work out of. It didn't take credit cards, but it was known as the LEAST EXPENSIVE good place to eat in the area. Full Service dining room and everything. You could get a sandwich fries and soda brought to your table by a waitress and get oout the door for under $6 leaving a nice tip. They didn't take credit cards, everyone who ate their regularly knew this for those that didn't there was an ENOURMOUS sign on the door that said "We Don't Take Credit Cards... So we can keep our prices low." This place was jam packed for lunch everyday of the week and jam packed for dinner every night. The food was good, they offered good service, it was inexpensive BUT they had started their business long before the proliferation of credit cards, subsequently they had a large loyal customer base that knew their policy ahead of time. Did they lose some business???? yes they did , I'd seen people turn around when they got to the sign and I myself would find lunch elsewhere if i didn't have cash on me but ultimately they were operating at capacity anyhow so they didn't lose out.

[Tyla]

Hi Terrace! Welcome to the forums!

I can only respond as a consumer. I am in the process of setting up a credit card payment ability for my own business as well.

Like a lot of folks here, I don't carry cash except for a few dollars. I guess if I wandered into a business that didn't accept debit cards or Visa, for example, I could always run out to a bank machine. But then I would likely expect a discount for my inconvenience.

It sounds like you're doing very well with your business as is. If you are satisfied with your income and don't feel the need to expand, then you don't need to fix what ain't broken.

Personally, when I go into any storefront establishment and they don't accept at least Visa or Mastercard, I tend to walk out for two reasons. One, it doesn't inspire confidence if a brick and mortar store doesn't accept them. Secondly, I know if I place a purchase on my credit card, I have approximately 30 days in which to pay, interest-free, no matter how much money I have in my pocket.

Allowing your customers to use their credit cards is a convenience to THEM, not you. At the same time, this is another marketing technique. In my mind, it's stating to them that you want to make doing business with you as pleasant and hassle-free as possible. You could possibly consider accepting credit cards as just another method of informal advertising. (A cheap one, at that.)

We all have to spend a little money to make a lot of money. Only you can decide whether this applies to your business as it pertains to accepting credit cards.

Is there a market out there that is yet untapped?

What do you think? How many inquiries do you get asking if you accept credit cards?

If the demand isn't there in the market you work within, I wouldn't sweat it. On the other hand, if you're in a tourist area or get a lot of outside traffic, you may have some "walk-outs."

Maybe this question applies more to your buddies in their own various businesses.

To me, accepting credit cards sends a strong message. It shows clients that you aren't concerned with the nickels and dimes (of merchant fees and commisions) and are willing to accomodate whichever method they elect to pay you with.

Karen

P.S. The benefit may also depend on how close your business is located to an ATM.

[AffiliateHookup]

I guess I am kind of with Aaron on this one...

I really am not even going into the male prostitution example...

You are by rights prohibitted from placing a minimum purchase on credit card purchases by agreements with all of the major providers.

Others have said it correct about tax deductibility. It is deducted from the profit, as an expense. It is not deducted from the tax that you pay.

Buy, hey, if you are happy, don't bother. A wise person would perhaps look into accepting cards for a bit, and then seeing if they are happy with the result.

Your call.

[RBean]

Originally Posted by Cashflowfmp

I pay 33% tax bracket.

Okay, let's say you have an expense (like credit card processing) and the total for the year is $100. If you didn't have that expense, you would have $100 more wealth. But, you spent it. So your taxable income is $100 less. So the tax is $33 (rounded down) less. You traded $100 for $33. That means you are out $67 according to my math. You'd be better off not spending the $100 if you can avoid it. You'd be $67 better off. The only reason to lose that $67 is that you NEEDED to spend the $100 for something that you absolutely had to have to run your business. Never spend money on something just because it's deductible. Most of the "noise" people make about "deductions" are things they already intend to spend money on (trips or cars or whatever) and they justify it by saying "it's deductible." Another reason to brag about "getting a tax deduction out of it" is when an asset becomes worthless (for some reason). If you can "write it off" it actually makes you money--assuming you don't have to buy another one to replace it. Unfortunately, a lot of nonsense gets spread around that makes "a tax deduction" sound like a good thing. Actually, in general, a "tax deduction" is a BAD thing. It's an expense. You want your expenses to be as small as possible (with the few exceptions I just mentioned).