Credit Cards from Both Sides of the Counter – DBA Small Business Show 5

Greetings, folks, and welcome to the DBA podcast, episode five, giving you the business every week. This is Wednesday, March 11, 2015, and here in Durham, New Hampshire, I'm Dave Hamilton.

And in the San Francisco Bay area, I'm Shannon. Gene. Happy to report we got some rain today. Crazy occurrence, so I have to mention it.

Yeah, no, hey, look, we got sunshine today, which is good. Yeah, it was a little. On the. It was a little warmer than we expected and a lot more sunshine. So there's a lot of melting happening, which, you know, which kind of makes things a little interesting.

Interesting, yeah.

Yeah. We worry about flooding after all the snow we had, but that's crazy. Be worse if it rained. So.

That's right.

You get the rain. That's where we want it.

That's what we want it. To ship things around. So, yeah. Needed to happen. Yeah, for sure. For sure. So cool. So, hey, last week we kind of ran out of time because whether everybody will realize sooner than later. I like to talk a lot, and we did not get to talk about one of my favorite subjects, which is credit cards. And so I thought we would lead off today and talk about credit cards and specifically affinity cards like mileage cards and different program cards. And I know you have some experience with that and so do I. So I thought we'd jump in and chat about that.

Yeah, it's. It's. It's. It's a topic you and I have spoken about, you know, one on one in the past, but it's been a while since we've talked about it, and so I'm. I'm curious to hear. I want you to start. I'm curious to hear where you are with, you know, how. What you. I guess we should start with using a card for your own. I'm not going to say as a consumer, not for you, not necessarily for your own personal stuff, but, you know, also for your business. Right. I mean, these things are interchangeable. But then once we go through the consumer side, I want to switch to the other side and talk about using cards, accepting cards as a merchant.

Right, yeah, so we'll do that. Yeah, we'll swing back around because there's some. As we talk about all these great benefits at the end, we want to make sure we mention the cost. Who's paying for all this?

Yes, sir.

And unfortunately, it's.

It's us.

You might be surprised. It's us. That's right. So, yeah. So anyway, one of the things, you know, when you get your business going and it doesn't matter what kind of business you run, you're going to have all kinds of bills to pay. And I got some advice years and years ago when I was out looking for capital to run my business and buy inventory. And at the time I was chasing auctions around the country, buying Apple gear and met a great guy that had a lot of experience dealing with credit cards and using them to get financing, but as well using mileage cards and affinity and points and programs like that to enrich his life. And this fellow named Jay Kimmy, who I was former business partner with, really taught me the ropes and we ran with it and it really took off when I got my lovely wife involved who quickly realized the benefits of paying tens of thousands of dollars worth of bills each month with these cards. And you know, tens of thousand dollars worth of bills equals tens of thousands of points and frequent flyer miles and that kind of thing. And it doesn't take long to really add up. And when you start paying things like your UPS bill, your electricity bill, your gas bill, your, anything you can possibly imagine should go on an affinity card. And you there's lots of them to pick and choose. Today I'm going to mention two of my favorites and a story about a third one that I don't currently have, but I think is a great example of how to really use the system. Whatever card you get. There's one aspect that's very important that you should just avoid if they don't offer that, and that is interstatement bill paying. I'll say that again. Interstatement bills paying allows you to make payments to the card in between your billing statements. Because more than likely, especially if you're just getting started or even later on you're gonna get a card that has a limit of. Let's say it's, let's just say it's $10,000.

Sure.

Well, you're gonna quickly max that out when you're paying all your bills with that card. And what you wanna use is your cash flow from your business to pay and kind of re up it as many times as you can each month.

Until you can get them to raise your limit, right?

Absolutely. And different cards have different ways to handle that. Some cards you can call them every 30 days and ask for a limit increase. Some cards you have to wait 12 months. So you know, key to finding that out. And there's a great website that tracks a lot of these cards. It's actually called FlyerTalk.com and there's a whole section up there about affinity cards and what people think are the best. And it kind of depends on what you're going to do. For me, when I was looking for cards, what I wanted first and foremost was a card that did not have a set spending limit, but rather was based on my ability to pay it back. That's very important because.

Interesting.

Yeah, yeah. Traditional card is. Okay, I'm going to give you this $10,000 limit. Well, on an AMEX card specifically, my favorite card is a Starwood preferred guest card, SPG. And you can get it@spg.com it's American Express card. And they really don't have a set limit but they need to get to know you and by starting off small and building up your credit and you can call them every 30 days, you can have a conversation with them about increasing what they are comfortable with allowing you to spend. And that card is, is the best used for travel. If you like to travel. This is in my opinion the number one card you can get. And there's a couple of reasons. One, excuse me, Starwood Properties have hotels all over the world in some awesome places and in, in my case, typically hotels that I am not going to go spend four or five hundred dollars a night to stay at just not going to be in my wheelhouse of hotels that I'm going to pick when I'm paying for them myself. But when I'm using my points. Well, of course you want to stay there and it allows you a way to enrich your life and not be taxed on it. So you're not taking extra income out of your business and then paying for a vacation with your family, but rather you're getting, it's almost like you're using pre tax money, you know, quote money to enrich your life and get to travel with your, your wife and family as well as using it for your business. So if you need to jump on a plane quickly the same day, next day, you know you're going to pay a premium. But if you're going to use your points, you're not going to pay anything.

As long as there's a point seat available and, and actually point seats jumping to airline cards.

Yep.

You know, usually there's a limited amount of point seats that any airline will have. You know, I fly American Airlines a lot and there's a fixed number of point seats available on any plane, but about three days before that plane takes off, that number opens up often. Not always, but, but often. So yeah, you're right. It can, it can work out quite well.

Yeah. And I think you're one of the things you're, you're hitting on there is being flexible.

Right.

And if you can be flexible with those points, I mean it can open up the world to you, literally and where you can go. And the SPG card, one of the benefits of it, in addition to being used for hotels, is they are partnered with airline programs all over the world. American happens to be one of their partners. And one of the not very well known features of the SPG program is that for every 20,000 points that you transfer out of the SPG program to a, an airline partner, SPG is going to give you a $5,000 bonus. 5,000 points.

Yep.

And so what that means is if you need 25,000 points, you only need to transfer 20 and you're going to get that extra 5,000.

So yeah, typically you're earning those points because I used to be an American Airlines card hold holder, actually I still am and to a degree I still use it. But my main one is the same as yours, the SPG one and, and which is an Amex as you pointed out. But, but you know, you typically are earning those points the same way you get one point per dollar spent. So it's, it pays off to earn those points on the Starwood card because like you said, you get the 5,000 point bonus even when you're transferring them back to your, to your Airlines card account or to your Airlines points account, I should say.

You got it.

Yeah, no, it works out really well.

Yeah. And the thing is, like all credit cards, if you know, you listen to any financial planner, these are payments that you're going to make anyway. You're going to pay your UPS bill, you're going to pay if you're buying inventory, which is what we buy a lot of with Tech Restore and our other businesses. So the first thing we ask is, will you take our Amex? And you know, a significant amount of time suppliers will say yes because they're happy to get the money quickly and we use that. And you can also, if they don't take credit cards directly or Amex directly, you can link those cards to your PayPal account and you can pay them with PayPal and wind up getting them the funds the same way, but using your Amex. So there's a few different ways to get it done.

So you're funding a PayPal transaction directly from your credit card and not by your PayPal balance.

You got it. And the only kind of thing that I can't stand about, I love PayPal. And we're going to talk A lot about them in later shows. But in order to use your card, you have to drain the balance in that account. Okay.

So there's no way to tell it. Bypass my balance other than saying I have no balance.

No, that's right. So what we do is we have a separate PayPal account.

Sure.

That always stays at zero. And the rest of the accounts that are all taking in funding from our different channels of sales and things, you know, they have balances in them in and out. We do in and out, but we always have one that's we've had forever and we have our, our credit cards linked to it. And whenever we buy something, anything on ebay or, you know, Amazon, you know, you can use those directly. But eBay, using PayPal, you want to fund it with that credit card. And not only does do you get those points, but you also, and my PayPal rep will not be happy when I tell you this. But it does allow you a second level of protection as a buyer if you're worried about your, your, your supplier, your vendor. So if you're buying something in China, say for example, and ordering, we order everything from parts to tiny little plastic ninjas that we include inside every box that we ship out.

Sure.

So you got a, you got a new ninja vendor and you're not quite sure who they are. You pay them with PayPal. You fund it via your Amex. If there's a problem, you now have two companies standing behind you to help you. Your first step is to go to PayPal and open a case and they'll help you get things resolved. But if some reason things don't go quite your way or you don't get the attention you want, you've got American Express also willing to help you out. They're very powerful.

You got to be careful with that, though, because I've been through that and, and contested a PayPal charge, or, you know, it was a PayPal pass through charge, we'll call it. Right.

Okay.

Right. You know, is exactly the scenario you're talking about. And PayPal, for whatever reason, said, no, you know, we're, we're going to allow this. And so it's like, fine, you know, we'll just nixit on the Amex. And then that PayPal account and everything associated with it was blackballed, I believe, forever with PayPal. They had no interest in ever, ever doing business with us again on that particular channel.

Yeah. And you're right, you, this is something that you can't do all the time. I've done it A few times when we've been in a real pickle.

Sure.

And more so. And way I usually respond to PayPal when they call you immediately when it happens is you say, hey, I'm just trying to get your attention, guys, we need to take another step. And I wasn't getting it with the canned email responses and those kinds of things, but that's a real valid point.

So you're still, in the end, I guess, your dispute. You're either using PayPal to dispute with the vendor or you're using your credit card to dispute with PayPal. But there's no way to have PayPal out of it, right?

No, there isn't. Because it goes through them.

Because it goes through them. Yeah.

Yeah. And they don't like it, of course, because it's a transaction they're really not making any money on. They're paying fees to amex and those kinds of things. So you definitely want to use it sparingly. But it is nice to have it in your back pocket, you know?

Sure.

Back there. So.

So. Okay, I want to ask a question. You. You. How. How many of your bills, business and personal, are you able to funnel through your. Your credit card, like your utility company? I mean, groceries is easy, right? I mean, and again, that's a personal thing, right? Groceries is easy. Payroll you probably can't put on your credit card, although we all would love to.

Yeah, you can't do payroll. No, there's. And I'd love to as well. Y. You know, if I had to pick a percentage, I could probably stab it at about 80%. You can't pay your rent, typically, unless you. You're, you know, if you're paying rent, you can't pay a mortgage. You can pay your taxes, but you're going to pay a fee.

You're eating the fee. That's right.

You're gonna need. You're gonna eat the fee. But sometimes, like, you look at the numbers and sometimes that fee might make sense, especially if you're dealing with a new supplier. You don't know. And I will tell you, I just went through this with a supplier. We just boug a large quantity of defective iPhones. And it was a new supplier, seemed okay. And they said, hey, it's wire transfer before we ship or we'll take your, you know, I said, we take our corporate Amex. Yes, but it's 3%. Well, in this case, I kind of feel like I'm buying protection, you know, and in addition, I'm going to get a significant amount of points. But that 3% really gives me a much more confidence in the deal in case the deal goes sideways, the product doesn't show up. So those are just business decisions you need to make on whether that cost, paying that 3% or whatever it is is worth it for you. Sometimes it is.

And if you do the math Right, at 3%, let's say I'm going to use a $12,000 transaction because. Well, because looking at 3% on a $12,000 transaction, which will now earn you 12,000 points. Right. With most of the time you're going to wind up getting a room that's probably about 400 bucks for 12,000 points.

That's correct.

So, you know, you're even if it's a $300 room. Okay, well now your cost on that insurance, if you will, is either 60 bucks or negative 40.

Yeah. So it's, it's, it's often, it's a good deal when you think about it. And you know, it's important to point out that that 12,000 point that, you know, that's a per night stay. But you know, as you're quickly building up these, these points, and you mentioned it earlier too about using your personal card, so when you get an SPG card, you can get one for yourself and you can get one for your wife and those accounts can feed into the same points account.

Right?

And so, you know, we use it for, you know, every single thing we can. But as I started the, this thread on, if you will, is we already know those invoices are coming, those bills are coming, the cash is sitting there ready to pay them. And, and thinking again, back to these inter statement payments, if you don't have, you know, a big limit on that account, you, you need to be making those payments. I mean, you can make one payment every 24 hours on that SPG card, right. Which is incredibly powerful. And you link it right to your bank account. So you could, you know, let's say they've given you, you got your account approved and they, they're comfortable with you spending, you know, $10,000 again. Well, you could drop that and fill it up, you know, play it again or, you know, fill it up again over and over again and just keep paying it down. And that's the important, what you don't want to do if you absolutely can avoid it, you don't want to carry a balance on this thing over the, you know, because that's another discussion altogether. Then if, if using the card to stretch, you know, because you, you don't have the Cash flow. There's a better card for that.

Yeah, because the interest rate on these affinity cards is super high.

It's very high, and it's not worth it. And if you need that. So American Express also has a card called the plum card, and it's a business card. And in a nutshell, the beauty of the plum card is they will give you either if you're grandfathered in like we are, you get 2% cash back. I think right now they're offering 1 1/2% on balance, you pay within 30 days. So you will build this cash back up, and it could be significant when you're paying it off. But let's say you run into a problem and your cash flow, you know, cash is king in your business, and you've got payroll and this and that, and you need to float a little bit longer. So the plum card, it'll give you 1 1/2 to 2% cash back for 30 days. But if you paid within 30 days, if you don't pay it, you get 60 days interest free to pay off whatever you, whatever you owe on it. And as in the inventory business, which I've always been in, buying product, you know, I. Once I got that card, I think I've, you know, eight or nine, 10, maybe 10 years ago, my thought process was, okay, what can I buy and, you know, sell it and get paid off within 60 days? I mean, it's. It's really free capital for 60 days. And it's a card without a limit. And maybe also critically important, it's a card with a sales rep. Once you spend a certain dollar amount, they'll assign a rep to your account so you can send them your financials, you can, you know, talk to them. It's like having a banker. But they work for American Express and they have local reps all over the country, and they'll help you get that your dollar amount up to incredible amounts of money that you could charge on that plum card. And, you know, I have a buddy of mine in Texas that I do a lot of stuff with and we talk, you know, every couple of days. And this guy uses the plum like far more than I do, and he scrambles to get those things paid in that 30 days because he hunts that 2% and it's significant. And this guy buys if Your margins.

Are 10%, which in some businesses is still really good, right?

Really good.

Really good. Right. But, you know, if, even if your margin's 10%, 2%, you just put 20% more in your pocket, that's Right.

There were times when, and I won't mention any names, but this buddy of mine who's in the new computer business, which is extremely low margins. We're talking.

Yeah.

You know, 5% single digit, low single digit, where the profit that he made on his business was basically the 2% he was getting back from the plum card.

It's not surprising.

Yeah, not at all. Yeah, yeah. So, yeah, so that's a great card. And, and I'll, we'll link to both, both of them on the website. And the last example I'll give you is there's a, there's a card that is. Sam's Club issues a card and it's a 2% cash back. And I have a good friend of mine, it happened to be this fellow Jay that turned me on to all these cards. And, and this guy, he made a game, you know, he gamified everything and he made a game out of these cards. And he happened to know the, the manager at this local Sam's Club. And so he calls me, says, hey, I got this new card, you should go check it out. It's 2% and there's a cap at a million dollars annually. So you could charge up to a million dollars. But you know, a small, again, interstatement payments, you know, they're not going to give you a million dollar credit limit. And so this guy. Yeah, you would like to have that. But. Yeah, so, so he would, you know, over and over finding things to put on that card over and over and over. So he called me one day and he says, hey, I'm headed down to the Sam's Club. I've had that car about a year. I'm gonna go down and get my $20,000. I said, what do you mean? He says, well, I talked to manager and I said, you know, they said, it's $20,000 cash back. Can I come down and pick up cash? And sure enough, and it gets again free. You probably need to know the, maybe you need to know the manager at the Sam's Club, but it really is income. It is really not income. It's money you've, you've spent and theoretically you've been taxed on it before as income or whatever it may be. And of course you need to talk to your accountant because we're not accountants.

No, we're not. But you know, chances are, and I'm no accountant. So really, I encourage you to talk to your accountant. But if you've spent the million dollars, you've probably written off every one of those Charges, Right.

I would think, yes.

So if 20,000 is coming back, that kind of is income. If you've written off the million.

It depends. Yeah, right.

It depends on how you've managed it through it. And listen, you know, there's. There, there are a lot of gray areas in the tax code. Listen, there's a lot of ways you can cheat at your taxes, and that's. That's not a good idea.

No. You gotta sleep at night.

Well, right. Yeah, yeah. You're always gonna be looking over your shoulder at the very least. Right. You know, let alone the ethical part of it. But.

Yeah, sure.

But there are gray areas in the tax code. And as long as you are on the correct side of the gray area, you know, the way I look at that stuff is their rules, not mine. Right. I didn't write them. This path through them is legal. It might not be the path well trodden. But listen that. I've always said that those paths through the tax code are where the margins live for small business owners.

Of course.

And you have to take advantage of them.

Yeah. And my rule of thumb is if my accountant is comfortable with it because he's far more conservative than I am.

Yep.

I'm going to be comfortable with it.

Totally.

You know.

Yeah. And you need to find the right accountant, too.

Yeah, of course.

Yeah.

You got somebody that's. Yeah, yeah. They really need to kind of. And again, there's another great show topic. You know, accountants are great advisors, but you need to think about, you know, are they recommending you do things you're not comfortable with or are you always trying to pull them into areas that you think, you know? So. So it's. It's a balance there.

Yeah, yeah.

No question about it. So it's a great story. And the guy, you know, call walking out to his truck and calls me up, says, I just picked up my 20,000 cash from Sam's club. I said, man, that's brilliant. Yeah.

I wonder if they 1099 him for that. Hopefully not.

I don't think so, man.

Right.

Because they kind of considered it a rebate of purchases that you had made, you know, on the car.

Yeah. From their standpoint, they had already accounted for that because they have to. Right. It's a rebate that they're accruing, and so it's already. It's a done deal.

Yeah, yeah, exactly. Exactly. So the coming back around to where we started at the beginning, you know, all these, as you can imagine, these cards, these affinity cards, they. Someone is paying for those points for those miles.

Hang on. Before we get there. Oh, yeah, I just want to. There's a couple of things you. You basically covered all of it. I don't have a whole lot to add to this tell me side discussion, but, you know, there was a day, and this was probably eight, nine years ago. I was here in New Hampshire, but I don't think we'd been here that long. I got an email and I hit. Like I said, I had been using my Citibank, American, American Airlines MasterCard. Right. My city bank advantage MasterCard for years that I was using to earn points. This is right about the time you were telling me, hey, man, you know, this Starwood thing might be a better deal for you. I remember that. Yeah. And. And I got an email. It was actually my spam folder that said, hey, you're a member of the Million Miler club. Ah. And I thought, awesome. What? And I. Then I kind of looked at it and I realized, oh, this isn't. This isn't B.S. this is real.

Yeah.

And I looked on my account and sure enough, in my Advantage account, it says, you're a million mile club. And I'm like, I haven't flown a million miles, but I've sure spent a million dollars.

Yes. You know. Yes, exactly.

And. And so at. At that time, this has since gone away. I think it was about three years after that that the, the points you earned with your credit card counted toward your million miler status. Now, this was at a time where million miler status was not a published thing. They wouldn't even acknowledge that it existed.

Oh, that's interesting.

Nowadays they do. It's like a. It's a common thing. And so it gives me lifetime gold on, on American Airlines and all that stuff. And that was really handy. Honestly, these days, everybody's got some level of status, so it affords me far less than it used to, to have.

That's interesting.

Gold. But it did work, you know.

That's awesome.

It gets you there. So. So there's even more benefits.

Well, and it's, it's similar to the, like the United has their 1k thing fly, you know, but. And they change that as well. And I think they're kind of squeezing these, tightening these things up a little bit. They are, yeah. They want. They wanted people that are actually going to write checks or, you know, pay for the tickets to get another benefit versus the points. Guys.

Yeah, they're. They're. They have. They had to, because they started giving these things out too easily. Yeah, that's right.

That's an awesome story.

I have noticed with Amex because we have several different businesses here. Right. I've got, you know, Backbeat Media and Mac observer. And then I have my Dave the Nerd consulting business. And then of course there's me personally.

Yep.

AMex has a four card account maximum per person. So I wanted to add another Amex account to my thing. There was, there was some other affinity deal that made sense. It might have been an airline thing. I forget what it was. And you know, I went through the online thing and they're like, you've got a call, like, what?

Interesting.

So I called. Yeah, I called up and. Because I. My credit limit or my credit rating is, is over 800 still. And so.

Sure.

Like, you know, I'm like, I know they're not. They know me as a customer. They know me forever.

Yeah, right, right.

And they're like, oh yeah. Which of your accounts do you want to close before you open this one? It's like, well, you know. And yeah, I said, well, we just. Company policy. I said, well, these other ones are through businesses. They're like, yeah, but your businesses aren't big enough for the business itself to have its own credit account. Right. So it's, yeah, it still comes back to you. You've got your 4 max and, and that's fine. But that doesn't mean you can have four cards maximum. It's four different card accounts. Right.

Counts. Yeah.

So I mean, on, on like the, you know, the Mac observer one we have. I, for honestly, I forget. I think it's three or four, you know, different, different people, myself included, but. And the same with Backbeat and obviously my personal one. I think my kids actually have personal cards. You know, that's, that's something I stumbled onto about a year ago. Not necessarily for the points, but my kids are like your kids age, they're in their early teens. They're going on field trips and stuff with school, like overnight field trips. And the first one my daughter went on, she, you know, I went to the. I don't know why I didn't think right. But anyway, I went down to the pharmacy and I got her one of these, you know, hundred dollar prepaid Visa things and. Okay, yeah, and you Pay, you pay 3, 350 or whatever on top of the 100 bucks. I was like, that's fine. But then she gets back and there's $6.42 left. That's impossible to spend.

Yeah.

What you need to do is you gotta buy an, you gotta buy an Amazon gift card with that $6.42, and then you can spend it as part of a larger purchase.

That makes sense.

Yep.

That's awesome.

You're gonna have to do some Googling, though, to figure out what zip code is associated with that particular vendor's card, because amex, or, Sorry, Amazon, needs the zip code in order to charge that card, so. Yeah, but, yeah, but after that, I realized, wait a minute, I called up my bank and I said, can I just get cards for my kids based on my personal account? And they're like, of course.

Yeah.

And so my, yeah, my, my, well under 18 children now have credit cards. Actually, they have cards with $45,000 limits or something on it because. Yeah. Which is more than they.

Careful. Yeah, yeah. I have the PayPal debit cards for my kids, which work out really well because you can, yeah, you can. And we can, we can chat about that. You can funnel, you know, funds into them and, and manage it, and they can hand you, you know, here, dad, here's $50 cash. I want to go buy this, and I just dump, you know, an extra 50. I keep to 50 and move 50 into their account or whatever it is that they need. And it's good. I'm trying to, you know, trying to teach them to manage their cash.

Well. That's it.

Yeah, Same kind of thing.

Yeah, it's the same kind of. Yeah, but you can, you can earn, you can earn points. Kids purchases, too. Is, is, yeah.

That's killer.

Yeah. Yeah, yeah. Have you, have you ever again, before we jump to the, the merchant side, have you ever considered or used the cashback cards? I mean, I know you, you sort of mentioned the Sam's Club one versus points cards.

You know, I, I, we really haven't. We really, we, I mean, I've used them and we've done some things, and we have a, we have a couple of them that have, like, merchandise or cash back. And, and, but it always seems we really only use them when we can't use the amex.

Yep.

And there are some suppliers just, they don't take Amex, that kind of thing. Sure. And so we'll wind up you know, either getting, you know, some merchandise thing or gift cards or just getting, getting the cash back, and that works pretty well. We probably don't use it enough to. Where it has a big impact, you know, on, on what we do on a monthly basis.

Yeah, yeah. Right. Well. And it does make sense to standardize and prioritize one card and earn as many points as possible there. The only time I have a couple of different cars and this, I, this was actually why I wanted the, the extra MX card is I wanted to have status to fly on an airline that I didn't have that I don't just have status on. Right. And sometimes if you have their card, you have status and so you get it free for a year and it, you know, it gets you your faster boarding or whatever it was. So that. Yeah, that's. Yeah, but otherwise it does. You're right. It makes sense to.

Yeah, and it works, you know, works out pretty good. But the thing with the, the SPG is to me, it really hit home when we took my parents and my brother's family and I think there was maybe 14 of us all flew to Florida and stayed at Disney World for, I think it was, it was either eight or 10 days, all on those points. And, you know, there you feel like a rock star when you can take everybody on those things and everybody's, you know, super appreciative and it allows you to do a trip like that that you probably. It's difficult as, you know, logistically and financially to get everybody on the same board or on board the same hotel. We want to stay at this, we want to do this. But when you can say, look, we're going to burn 400, 500, yeah, it's on me because we're going to burn 4 or 500,000 points or whatever it is, and it's, it's going to be awesome. We're going to have a great time. And my, you know, experiencing that and feeling so, you know, it makes you feel successful and you go, wow, man, I have been able, you know, to do this, this is great. And to have a great time with your family and, and friends. We do the same thing. We go to New York for Thanksgiving many, many times. We go for the, for the parade and we always take at least one group of friends and that have kids and that kind of thing so the kids can have a great time. And, you know, we stay at the Weston Times Square and we always get two or three rooms and it's just become a normal thing because it doesn't come out of pocket.

Right.

And so the travel things for us because we love to travel. If you don't like to travel, you know, you got to look at maybe some other cards, right? You know, maybe.

Yeah, you gotta have something where you're gonna use the points that you got it. Absolutely, yeah.

You know, I know a guy that just does Home Depot gift cards and he loves it, you know, sure.

No, and it's way easier. You know, the American, American Airlines card was good, but I never could use it for personal travel. I wound up burning all my miles to upgrade myself to, you know, first class when I flew around for business, which was fine, but it was like, like you, it's like, wait, I feel like I'm missing something here. You know, I'm paying for everything when I travel personally. This is stupid.

Yeah.

And, and so switching to the Starwood, I mean, I can, I could burn down my balance as fast as I wanted to. Yep.

Yeah, yeah, it's great. And like you said, being able to sit in first class or business class, I mean, it just changes your attitude and your ability to hit the ground running if you have, you know, early morning meetings and you can, you know, you can stay in the club at the, at the airport, there's a lot of benefits and it comes back to, it really offers you an upgrade for your life that does not cost you anything. And I love it. I think it's great. I'm a huge proponent of it and I, you know, I'm a sneezer. You know, I tell everybody about anything that works good for me. I'm always talking about it and I, I think I've referred more people to that SBG card.

Yeah.

You know, than I can count. And I think, I think it's all. I love it.

That's great. But now let's, let's talk about who pays for this. Right. Because you and I both know as, as business owners that not only spend on credit cards as much as we can, but also have customers that pay on credit cards. It's very interesting. Right. You know, it's, it, you have your discount rate that you negotiate with your merchant provider, whatever that is. Right. And you pay a per transaction fee or not again, depending on how your negotiation goes with your merchant provider. But what you always will see, and it's never part of the negotiation, at least it's never been part of mine. I'd be curious.

Not.

Okay, it's not, is that those points get charged to you as a line item on your merchant statement separate from your, your merchant, you know, discount rate. And those point, those points, are you just paying a cash dollar amount to buy those points from whomever the point provider is. So if it's, you know, if it's an airline, you're paying. Now the one thing though, and I honestly haven't checked recently, but it seems like Visa and MasterCard typically have a lower discount rate for us as a Merchant than Amex does, but they typically charge us more. Amex charges us very little, if not nothing for those points. They're paying for them out of the discount rate.

Yeah. And I think that, that it's because of that higher rate.

Right, right. But it actually, for us, I've done the math. Now we're a mostly and I, when I say we, I'm talking here about our backbeat media business, which is a B2B play. You know, we sell advertising on behalf of websites. So it's other businesses paying us. 100% of our customers are using points cards.

Yeah. Are.

It's actually cheaper for me, for us to take Amex than it is to take MasterCard or Visa. Because the MasterCard and Visa, even though it's a lower discount rate, it comes loaded with all of that extra fees and it comes, it comes out higher.

Yeah, I could see that. And I think the thing that blows my mind is there are still a large part of the population that especially consumers, when you tell them, oh, you know, we pay the fees that, you know, to take cards just in general, not let alone affinity cards.

Right.

People look at you like, what, what do you mean? You pay, you know that they, they don't have any. Exactly, exactly. And then the, the other thing I, I, I love is, and you're right, it's called the discount rate. But yeah, you know, what a great term to use for a fee that they're charging you. Oh, this is the discount rate. And it's like, wait a minute, I'm.

Offering you a discount.

Yes, it's, how are we, you know, how, how does that come about? But you know, if you're using, using a traditional merchant processor, you know, a bank, Citibank, Wells Fargo or, you know, that's going through first Data or whatever, you're paying a higher discount rate, a higher percentage. So let's say you've negotiated 2% or 1 1/2% for Visa, MasterCard. Yep. Well, when somebody comes in and uses a United Airlines or American Airlines, you're not going to pay 2%. You may pay 2 point something, some basis, additional basis points because they're going to get at those extra points, the cost out of that, out of you, out of you, out as the merchant.

Now he's got to pay for it.

Somebody's got to pay for it. Now with, you know, we do a ton of business with PayPal and one of the reasons I do, I love PayPal is because they do give you a flat rate, they do sim, they do similar To Amex, they give you a flat rate and they eat whatever the, you know, the delta is higher or lower. They'll, you know, if it's over, let's say you negotiate 2.25 with PayPal. Anything over that, they eat it. But, but anything below that, they keep. And I think they figured out that, hey, we're better at negotiating it than these, you know, little guys.

Well, because they have more leverage, of course.

Yeah, yeah.

I mean, they pass a ton of. Yeah. We've tried to actually move to PayPal would be the best decision for us. So it's probably the best decision for any business that takes credit cards, except that we're doing the processing internally for a lot of our folks. You know, we take an auto renew payment and stuff and, and we could make all that work through PayPal, but it would not be as smooth a process for our customers.

Yeah, yeah, it's gotta, it's gotta work, work for your customers.

And, but if you're selling something where somebody's just putting their credit card in on the web every time. Absolutely. PayPal is probably the best way to go.

Yeah, yeah. And they'll even, I mean, they'll provide you a terminal that you can put in your office or shop. I mean, they want your business as a, a merchant processor much more now than they ever have. In addition to just selling online and PayPal Express and that, that kind of thing where you could check.

That's true. I wonder, you know, it's been, it's probably been 18 months since we've talked to them. It's probably worth us talking to them again because they might have. Yeah, they're hungry. Exactly.

They're splitting off, you know, the environment. In May, they split from their, you know, from ebay. So they're really looking towards new business and they have a new merchant loan program for small businesses that I want to talk about sometime in the future. And so they're an interesting partner, but, you know, they're also polarizing. Some people love them and there's a lot of people that have had issues with them. But I've found that if you communicate well with them and you build up a very strong history, they're a great partner. Yeah. Really.

Well, yeah, that's right. Yeah. And that's true of, of even your bank. Right. It's. Yeah, you're gonna. If you've got a history with them. You know, we get. Every year, and maybe sometimes more often than every year, we will get the letter from our, our, the automated letter from the bank that says, oh, we're raising your, it's not that we're raising your discount rate. It's that there's, we are incurring additional fees that are forcing us. Right. You know, it's like, yeah. You know, and we always call them and say, okay, cool, that's great. We just wanted to make sure that this was correct before we go and shop around and make sure that, you know, this is still our best rate every time. It's like, oh, no, no, no, no, not for. This isn't for you. Ignore that. Right. But you've got to make the phone call, otherwise it is for you. Right.

Yeah, I agree. I agree.

It's going to, the letter says it's going to happen automatically in 30 days or 60 days or, or whatever it is.

Call them up.

There's nothing you'll, you know, if you're running a business, you've already learned this lesson, but if you haven't, just in case, you'll never get anything without asking.

No. And, and you need to revisit those vendors, like you said, every 12 to 18 months. You need to be having discussions with them, you know, either to the, what's the competitive landscape look like? Has some new thing come up to where you could be saving money? Or are, are, are they offering new programs that they need to be offering to you?

Right.

And, and you need to keep them just like your customers. Keep you on, you know, us on.

Our toes 100% of the time.

You got to do the same thing. I mean, you know, I'm, we're heavily into UPS right now, and it's been a couple of years, and I have a 3 o' clock meeting with FedEx that are trying to get our business back. So, you know, you got to make these guys jump through some hoops just like, just like your customers, you know, ask us to do the same thing.

Yeah. Don't feel bad about it just because you know how bad it feels to go through it.

Yeah, that's it. That's a really good thing to try to remember. But it's, it's difficult.

It's difficult. No, because you know, know that if you put the screws to these guys this after, or, you know, you get off your call with FedEx and you call UPS and put the screws to them, you know exactly how that feels to them. Because you've been there. You were probably there earlier today, right?

Yeah. I mean, you're. That's right, that's right. And you're, you know, you can push and push and, you know, I've, I've got a great story of FedEx flying my wife and I out to the Orange bowl and for almost a week, you know, trip out in Florida and, and why, schmoozing, you know, trying to get our business and. Sure, it was awesome. I loved it. And did we wind up going with him? No.

It sounds like you didn't. That's right.

Did I feel bad? A little bit. But, you know, it's like, yeah, guys, I appreciate the trip. It was a great football game. Yeah.

Yeah. Fun game.

Woo. Yeah.

Go team.

Yeah, that's right. That's awesome. Yeah. Yeah. So that's good. So there's a lot to do by credit cards. I mean, we're going to dip back into it from time to time as we talk about new things and, and revisit programs and what works and different ways to do things, but definitely something that needs to be in your toolbox as a consumer and using it to pay for everything that you're doing through your business. And also as a merchant, you've got to be looking for, you know, new things. Whether you use Square or Stripe or PayPal or your, you know, traditional merchant services, you. You need to keep on their toes on both sides of it.

Yeah, absolutely. All right, well, that's, that's, that's a wrap for this week, my friend. And we'll be back next week to.

Yeah.

Go through whatever it is that we go through.

You got it.

Feedbackbapodcast.com is the way that you can get in touch with us, obviously. DbaPodcast.com is where you'll find all the shows and the links and everything that we put together for you during the week. And find us. Tell us what you want to hear about. Tell us if there's anybody, even if it's you, that, that you think we should have on the show. We would love to talk to more people about all of this stuff, so.

Absolutely.

Thanks for a great show, Shannon. This is good.

Yeah, you bet. Have a great week and hopefully things don't melt too quickly out there for you.

Yeah, well, and I hope exactly the opposite for you.

That's right. Right on. All right, thanks, Dave.

Thanks, Shannon. Bye, everybody.