Business charging and taking 2% net
 

Hi all, am new to this forum, but have been lurking for a long time. One of my ways of earning lots of points is by charging our two major vendors bills to either AX (mostly) or American Airlines/MC. A few years ago when I first started the points game, I asked them if I could pay with a credit card and would it be possible to take the 2% discount if paid by the 10th. Both agreed and on average I earn between 90,000 points per month. I have also used the AX Plum card in this way when I needed a little "breathing room" financially.

This has earned me a lot of points and my vendors are happy to be getting paid. FYI they still give us Red Sox tickets and vacations!

This is how I get my miles, too, only I get only about half as much as you do. I also admit that I was a bit late getting on board the points game. I haven't been doing this for very long so I don't have as many points earned yet.

I could probably pay more vendors this way, but then I'd need more credit, and that seems to be getting a little tight lately.

If you're spending that much of your own money with a vendor, it is probably better for you to negotiate a discount with the vendor for paying in cash. The vendor should be amenable to discounting a cash payment by whatever merchant fees he pays to process the Amex payment. (N.B.: this is not against the merchant agreement with Amex. Charging a surcharge for accepting Amex is.) I'm guessing his rate with Amex is at least 2%. So you're effectively paying at least 2c per SPG, which is pretty bad.

All in all, this is a rather silly thing to do with your own money.

As a larger merchant I can tell you that the Amex rate is more likely 2.75%.

However just because the poster tries to negotiate an extra 2.75% for paying in cash (cash meaning wire transfer or bank draft etc..), doesn't mean that he will get this discount.

Some of my competitors are notoriously bad with math and have given people discounts for paying via CC. After years they usually end up with financial problems. The only exceptions are for merchants who have a very high margin (high prices). The poster would be better served by shopping around if that is the case.

Man if these are the lurkers, no wonder I can't get any seats on the planes with my miles!
90k points = 1M points a year! At that rate your entire family should be 1MM on AA. Tell us how to do it too.

There are several unrelated issues here.

1. Generating a lot of miles by putting business purchases on a mileage-earning affinity card. As suggested by the second post, this is not an unusual tactic. It has come up in many other threads. I've done it myself on a smaller scale. (A $4,000+ charge for photocopies in London got me a quick call from the issuing bank's fraud alert folks.)

2. Taking a 2 percent prompt payment discount. This is common practice in many industries. (My home fuel oil supplier offers 10¢ per gallon for payment within the same 10-day period.) The only possible unusual aspect here is combining it with use of a credit card. However, if a merchant takes credit cards at all, and thinks prompt payment is worth 2 percent, there's no reason the two couldn't be combined even if that's unusual.

3. Whether or not the OP could do better by negotiating a cash discount (and perhaps using the savings to buy airline tickets). That depends on the OP's negotiating skills, the seller's negotiating skills and their understanding of their true cost structure, standard practices in that industry, and what s/he expects to use the miles for. It's really hard to generalize. I happen to agree that the merchant's credit card costs are higher than the miles are worth, so it ought to be possible to negotiate a win-win here, but in business things don't always work out the way logic suggests they should.

The OP actually has a pretty sweet deal if they are letting him pay with AX or MC at 10 days with a 2% prompt pay. He essentially gets the 2% discount with approx. 45 day terms and the points to boot.

If he uses the AX plum and the 2% prompt pay feature with it vs. the 60 day terms he can get a 4% discount at 25 day terms and the points.

Unless he can negotiate a 5-6% cost reduction I'd say he should keep on doing what he's doing.

Also AX large ticket charges (>$10K) called HROC (High Record of Charge) qualify for 50 basis point discount. So if the vendors AX rate is 2.25% these charges are costing them 1.75%

We offer a 2% pre-payment discount for customers who are willing to provide a CC to be charged at time of shipment. This way we have our money before the product is shipped. It has more than made up for itself in saving collection costs and bad debt.

We need a public option
 

President Obama campaigned for a public option for health care. America needs a public option for credit cards.

Credit card companies are evil. They charge merchants a whole lot for cards. On top of that, all of the cash back and miles comes off the skin of the small business. Visa tells them "you must take all rewards cards and you will pay the rewards or we will refuse to let you accept credit cards". It's so evil. It would be like the airline alliances all saying "you don't have to fly Star Alliance or Skyteam but if you do, you also have to pay for us a seat belt fee of $25" If you want to fly, you would be forced to do so, like companies are practically forced to accept credit cards.

Enjoy Your Miles!
 

I used to do this with one local supply house till the owner complained so much that I finally stopped paying with the SPG Amex in ten days and waited 45 days to pay with the Southwest Visa. He was happy and so was I. Negotiating a cash versus credit price was out of the question for this guy.
At another vendor <big national co.>, the local folks are evaluated on volume. We provide trouble free business and they are happy to provide me with lots of Starpoints and good pricing and great service. Win, win, win!
To Witch, make online payments when you hit your limit and the credit lines and points will follow.
As to the last poster, the last benefit of the small biz guy is the ability to take business expenses and convert to personal travel. Reform that and you'll find out what real unemployment is.
As a long time lurker, I can only say thank you to Efrem and all the "evangalistas" for their postings that have allowed me and my family travel experiences we could never afford without "the miles."

Naturally that's the answer, since government intervention always works.

Last time I checked, small businesses were welcome to be cash-only. The taco guy near my office seems to handle it fine.

As another point of reference, my merchant fee on most Amex transactions is about 3.3%. So clearly Amex is winning the game here, and the OP and the vendor are the losers.

I see the logic of prompt payment, but is it secure? A chargeback can always happen when payment is via cc also.

Any business, of any size, is welcome to be cash-only (or checks-only, barter-only, wampum beads-only, or any other form of payment it likes). The problem is that, as a practical matter, for anything much bigger than a taco stand accepting credit cards is a requirement for getting customers. It's not just for the affinity card rewards, which FTers are more hung up on than the general public. Fewer and fewer people carry significant amounts of cash, or checkbooks, any more. Saying "Cash only" is a nice concept in theory but the credit card people know full well that it won't work. If you want to start just about any kind of serious business, they have you over the proverbial barrel.

Businesses likewise find it hard to attract customers unless they keep their floors clean. When is the government going to do something about it and insist that business owners get the right to have messy floors if they want to?

100% of businesses of all sizes in the U.S. have the option of charging for the privilege of using a credit card, as long as they call it a cash discount instead of a credit card fee, and that has been the case for decades.

Thank you. I've recently applied for some new cards through recommendations here, and I'm hoping those credit lines will increase eventually. Banks are pretty tight with the limits right now.

I don't think it's silly at all. Silly is paying them with cash and not getting anything in return for it.

Most vendors are pretty tight with their discount rates, and it's just not possible to negotiate beyond what I've already done with the exception of "specials" on occasion. THIS is my way of getting something extra from them, and it's been rather "rewarding."

You imagine that if I brought it to their attention that they are paying at least 2 percent for letting me charge my invoices that they would be more than happy to give me that 2 percent if I pay cash, but the reality is that they would just no longer allow me to charge my invoices.