Forums: Discussions for entrepreneurs and small business.

I`ve found that to be very true - especially when traveling.  I have a personal Discover card and originally got it due to the great rewards program (as mentioned by Rich).  Unfortunately, there has not been the mass acceptance of the card and I seldom use it.  The vendor/retailer acceptance of the Discover card would need to greatly increase for me to consider it as a business resource.

- J.




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Jeff Fisher | Jeff Fisher LogoMotives | Tweet! Tweet!

(i`ll make sure i carry this torch with our contacts at Discover)

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Rich Sloan , Co-Founder, Chief Startupologist, StartupNation

The problem with the Discover card and to a lesser extent AMEX is the sign-up process and fees that they charge the merchants.  Anyone opening up a merchant account can tell you that Visa/MC is a simple one step process for the pair, while Discover and AMEX both require seperate accounts and seperate sign-ups (and much higher fees), so the merchant ends up carrying 3 different accounts to process 4 different credit cards, you have 3 different merchant agreements, 3 or more different sets of fee structures (swiped vs non-swiped, validated vs non-validated, govt corporate cards or any other bulk corporate account) for each brand you carry.  Some of the merchant processing companies out there do a pretty good job of integrating it all into one BIG statement every month, but its far far easier to simply not accept the discover card and force the customer to use a Visa/MC (If they have a Discover, guaranteed they have Visa/MC).  AMEX works a little better because they tend to cater to the B2B crowd (though their fees are still higher than Visa/MC).

If you do any regular amount of business with a small group of vendors, you can often coerce them into accepting the credit card you want to use (if they dont take it currently) by showing them how much of your buiness they are losing to X other company because they do take the card of your choice (worked for me anyway).

 

Branching off topic just a bit... if Discover wants to make headway into the B2B market, their fees need to be lower than Visa/MC and they need to have better reporting and customer service than AMEX.

That`s not a problem for me since I never have and never will borrow money for my business.  I prefer to do it the `old fassioned` way.  You know, like your grandparents would have done it.  If I don`t have cash, I don`t buy.  Sounds pretty simple, huh?

Did you know that most small businesses will fail in the first 5 years?  Did you also know that those who make it those first 5 years will most likely fail in the second 5 years?  Do you also know that most of them had a lot of business debt?  It`s a lot easier to make it through the lean months if you`re not paying on loans and credit cards.

Who cares about points?  Accoriding to recent studies, you`ll spend 12-18% more if you buy with credit than with cash.  So you`re spending 18% more just to get 1.5% back in cash or airline miles.  That math just doesn`t seem right to me.  I have a cheap calculator though, so maybe I`m not doing it right. 


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www.LukasCoaching.com

Low-cost website design, payroll processing, bill payment, bookkeeping and financial coaching for the distressed or well-off consumer or business.

Full service coaching firm offering, career, financial, health & nutrition and business coaching.

You still establish business credit even if you pay- off the card every month.
I think its important to have the ability to use a card sometimes.

Usage of credit card to pay for your bills can be a GREAT way to manage your business in many aspects of it. What you need to be is a good business manager, and you wont find yourself in trouble with credit cards. I have been paying all of my bills with cc and I take great advantage of the program. I never overspend, cause I know what my business need, and I make the purchase not based on credit, but need, and I never pay the bill a day late. I may just be their worst customers cause I never pay any interest.

As for the numbers of new business failure, I`d like to challenge it. Read the Startup Nation book, the numbers are not the ones presented here. This seems more like the numbers shown in the E-Myth book, which was just taken out of old poorly done research.

As far as doing business with Discover and Amex, I agree. They suck! You will accept them in your business only if you are forced to do it. I have been able to manage w/out them and I dont accept them in my place. People give us an Amex/Discover and politely we ask the customers for Mastercard/Visa. It works every time.

I do love the idea of paying for your bills with cash, but you will never build credit for your business. So, the decision is, is credit important for your business? I havent seen a business that does not benefit from it.

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jump! jump! jump!...didn`t it feel good!!!

I have benefited plenty without the use of credit.  I`m prospering in fact, and have not ever borrowed a dime.  I have no need.  So now you know one company who has prospered without business credit.  I don`t make payments, and you know what I have??? MONEY!

Even if you pay your bills on time, you are no where close to a credit card company`s worst customer.  Their worst customers are the ones who don`t pay at all.  If you pay your bills on time the CC company still loves you because they still make money off of every purchase you make with your card.  They charge the vendor a small percentage.

About the statistics... the National Federation of Independent Business` Education Foundation says this:

"The NFIB estimates that over the lifetime of a business, 39% are profitable, 30% break even, and 30% lose money, with 1% falling in the "unable to determine" category."

To me that sounds an awful lot like only 30% of small business ever make money.  I`d say that statistic is pretty reliable.  www.nfibonline.com

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www.LukasCoaching.com

Low-cost website design, payroll processing, bill payment, bookkeeping and financial coaching for the distressed or well-off consumer or business.

Full service coaching firm offering, career, financial, health & nutrition and business coaching.

Thanks for the feedback, jlukasavige, and congrats on being so prosperous on your business, that is why we are in business.

I am bit confused, if you could help me:

1- 69% (Profitable + Breakeven) - This is higher than 30% making money. I am sure you understand breakeven means making money, due to investment strategies.

2- How does that relate to CC usage?

3- These are the numbers I refered to as well, the same one used here. I was confused by "most business fail in 5 years," given that 69% are profitable + Breakeven. Most means more than 50%.

Again, thanks for the discussion, I find it very healthy to exchange ideas.

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jump! jump! jump!...didn`t it feel good!!!

The thing I like about the Discover Biz Card is that they give you business
checks you can use anyplace you can`t use the credit card. Like the smaller
mom and pop places, my contractors, suppliers, utilitiees, gas company, etc.
and the checks give you the same grace period, so you get the 25 or 28 day
float. If I need to pay someone I hire out to, like a freelance writer or
computer geek or a photographer who works out of their home, they sure
aren`t going to take a credit card and I don`t want to pay them cash or write
a personal check.

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"Whatever you can do or dream you can--begin it." Goethe

I have learned that, in order to run a business you have to be prudent and use every tool available to you out there. anika143 has given here a great example on how to be resourceful and engaging.

Citi has a promotion where you get 20,000 miles on your first purchase over $250. A domestic ticket can be purchased for 25,000 to certain places at certain dates. Now, if you are going to a convention and buy your ticket with the miles, that is a saving, not an expense.

Have a credit card, be smart about using it and you will be fine. I dont think the Sloans would be cutting a deal with Discover if they thought this kind of tool is out there with the solo purpose of hurting your business. 

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jump! jump! jump!...didn`t it feel good!!!