Bartering Clubs

QuestionHi Gary,

I just read an article on joining a bartering club in order to barter for bargains. The fee to join the club is $350. Is it worth it and are there other clubs available with lower membership fees?

— Donna

AnswerEven though we might not think of it, almost everyone is part of the barter economy because bartering is simply trading one thing for something else you want. Your car pool, kids trading Pokemon cards at recess or parents swapping babysitting are all part of the barter economy.

And barter isn’t just for individuals. It’s estimated that 60% of NYSE companies use barter. But in recent years you may have heard less about barter. That’s because it becomes less popular in prosperous times. Recessions and periods of high interest rates make barter more appealing.

You can barter almost anything. New or used items, homemade crafts, your time or the skills you’ve acquired. Finding people to barter with can be as simple as telling your family, friends and neighbors. And asking them to tell people they know. If you find that you like bartering you might even want to join a barter club.

And that’s where Donna’s question comes in. Some barter clubs are very informal. Almost like a social club. Others are geared for business to business barter and are much more organized. Many keep track of credits and debits. Almost like having their own money.

Most barter clubs will charge you a membership fee. The amount will vary. There’s really no ‘fair’ price. But, as the membership fee increases so should the number questions you ask about the club. It’s one thing to risk $25 and something quite different if it’s $350. Clubs will also usually have an annual dues fee and many will charge a fee on each transaction.

A good way to evaluate a club is to contact some current members and ask them whether they’re glad they joined. Also ask them what things the club could do better. That’s a good way to hear their complaints.

Before you join a club you should consider a number of things. First, do they have members who are offering what you want? How stable is the club? Will it be there for years or could it disappear overnight?

Although it’s tempting, don’t dream of becoming some world class trader. You’re not going to trade a few hours of babysitting for an exotic vacation. And anyone who says you can is probably only interested in collecting your membership fee.

Begin by thinking of what you have to offer and what it might be worth. Then consider what you’d like to get in return. Be creative in what you have to offer but realistic in how many people could be interested in your product or service. If there are 100 members in the club you probably can find enough babysitting assignments to keep you busy. But if you hope to trade hand-crafted birdhouses you might need a bigger club.

There’s no easy way to find whether there is a club in your area. You can check your local yellow pages and watch ads, but usually you’ll need to ask around to see if anyone knows of a local club.

And just because you’re using barter that doesn’t mean that you shouldn’t check out the person you’re trading with. A painter may be part of your club, but that doesn’t make him a good painter. If you would ask for references in a cash transaction, ask for them in a barter deal. On some deals you’ll want a contract.

Whether you’re dealing with a club or your neighbor, don’t let them owe you too much. Remember, this isn’t money in the bank that earns interest. It’s possible that your neighbor could move out of state or that the club could cease operations.

But don’t let the possibility of some troubles keep you from exploring bartering. Any 8 year old who trades baseball cards will tell you that it can be fun.

Bartering has a way of helping us identify what things are important to us. When we trade our time, talents or goods it gives us a chance to think of their value in a new light. We also get an opportunity to look at our own skills more closely.

Bartering can save money by eliminating mark-ups. When you buy in a store they have to include enough profit to pay for their rent, insurance, etc. A barter deal tends to cut out much of the extra costs.

If you’re short on cash, bartering can provide a way to help make the most of your money. Today’s two income family is chronically short on time. You might find a neighbor that would be willing to buy the ingredients for two meatloaves. You could prepare both and keep one for your efforts. Your neighbor gets a home cooked meal. You get a meal without spending any cash.

If you have a hobby or craft, bartering is a good way to get some value from your talents without starting a formal business. Trading crafts built in your workshop is much less intimidating than offering them for sale. One warning. If you’ll be doing more than a few trades you should check with local authorities to see if a business license is required.

You also need to be aware of how bartering effects your taxes. Beginning in 1982 the IRS recognized bartering as a legitimate method of trade for businesses. The value of any goods or services delivered by barter must be reported as income. But, as a practical matter, the IRS isn’t going to tax you if you trade a few tomatoes for a pot of spaghetti sauce. If you begin to barter your services on a regular basis it would be a good idea to talk to competent tax counsel.

Should Donna part with the $350 and join the club? Hard to say. She’d need to do a fair amount of bartering the cover that membership fee. It could be that she’d do better by asking around and trying to make a few trades first just to get her feet wet. Then if she found that it was something that worked for her she could join the club to have access to a greater number of potential traders. In any case, we hope Donna has fun exploring the world of bartering.

Gary Foreman is the publisher of The Dollar

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