Financial Perspectives

This is probably the worst time of the year in terms of bills with all the cost of Christmas just coming up and it’s not too long since vacation time either.

Add that all up and many people are finding that they’re short of money at the moment and looking around for a quick and easy way to raise some additional cash to tide them over until they get paid at the end of the month.

Therefore payday loans seem a very attractive option. They’re one of the easiest and quickest loans that you can get with the money deposited in your account within a few hours. Not only that but the lack of a credit check means that any credit problems that you may have aren’t an issue.

The requirements are really very basic:

1. You need income of at least $1000 per month.
2. You have been employed at your current job for at least 3 months.
3. You have had an active checking account for at least 3 months.
4. Your paycheck must be direct deposited into your checking account.
5. You are at least 18 years old.
6. You�aren’t delinquent on a previous payday loan.

Beyond that the only limitation is that the loan is intended to be repaid with your next paycheck (though it can be rolled over) and that the amounts are from $100 to $1500.

So that’s how they work, but is it worth getting one? If you can get the money somewhere else then no, they aren’t, because the costs are astronomical since all the administrative costs are being carried by what is a small short-term lone (hence the APRs of 300% and more). However, if you have no other option you need to weigh the cost of getting hit by late penalties on other finance that you have against what the payday loan will cost you and in such circumstances it may well be your cheapest option.

With the credit squeeze still upon us, it shouldn’t be a great surprise to learn that many parents are still tapping the Bank of Mum & Dad even as adults.

The research commissioned by Scottish Widows indicates that over a third of parents have had to tap into their retirement savings to fund these requests from their children. That’s a scary thought as it implies that those parents may well need to call in that loan at some point if/when they run out of money for their own retirement and I’m sure it’s not something that the “kids” have considered.

It’s not peanuts either as the research indicates that the amount involved is well over £60 BILLION.

Now, it’s probably fine for the 30% who were asking for money to fund the deposit on a house in that they’ve actually got something “in the bank” so to speak but over 40% were asking for the money to repay debt and that’s money that’s quite simply gone. Quite what those “children” are going to do when their parents come to them asking for the money back so that they can retire in the manner in which they’d planned to is a very good question. One suspects that they’ll end up needing to consider secured loans on the parental home at some point.

Amazingly many B&Bs still don’t accept credit cards and thereby end up losing business as many people prefer to pay directly with a card than to have to pay extra charges to lift cash abroad.

But, how do you do it?

Well, there are basically two ways that a B&B or self-catering complex can operate with a credit card.

1. Accept cards solely for deposits; and
2. Accept cards for all payments.

Naturally, it’s possible to start off just taking card payments for deposits and move onto accepting them for all payments. In fact, it’s useful to do exactly this to try out card payments for your business.

If you’re only taking card payments for deposits then you don’t need to sign up with a bank. The simplest way is to sign up with paypal for a business account. Payments received will cost you 3.4% plus 20p so if you take £10 will cost you about 54p (5.4%), £100 will cost £3.60 (3.6%) and £1000 will cost £34.20 (3.42%). These charges are similar to those that a small business would pay were they to do credit card processing via their bank in the UK but somewhat higher than the typical 0.75% for banks in France.

From these figures you’ll see that it’s best to use paypal for deposits. That way a typical 25% deposit will effectively cost you under 1% of the total bill for paypal processing.

You could use paypal to accept all payments this way but you would need your bookings to be paid 100% in advance to do that as you can’t easily use the paypal system to make on the spot payments (if you really have to you can do it by having the guest logging in using your Internet access and making the payment). So, if you want to accept all payments by card, then you need to get the little credit card machine although, in principle, you can run with PayPals virtual terminal option (£20/month) which gives you the equivalent of the little machine but using your computer to process the cards.

To get a credit card machine setup you need to have a business bank account and, in most cases, have had it for six months although for B&B and self-catering properties the bank will normally waive the six months requirement. In France, you’ll need to be registered and provide your KBIS.

Costs for this vary a lot. You can buy your own machine but they’re rather expensive (typically £300/£500) and therefore most people rent them from the bank (around £20/£30 per month). In most cases you’re better to opt for a fixed installation as the portable terminals can cost 50% more. Other things to consider are which cards you’ll accept. Normally Visa/Mastercard are sufficient (and will include Visa Electron and Maestro). American Express is becoming more popular but is usually more expensive than other cards. If you get a lot of Japanese then it’s probably worthwhile taking JCB. You can even accept various storecards but unless you’re in a shopping centre it’s probably not going to be worth the extra expense.

How do you do it? Open a business bank account then apply for the credit card facility at your bank.

One thing to watch is that you will need Customer Not Present enabled. This lets you charge cards without having the credit card in your hand. You’ll need this to take deposits.

Is it worthwhile doing though? Yes, it is. Sure it will cost you more but you can take that into account in your pricing. If you assume that a credit card payment will cost you 4% then adding as little as 2% to your prices will pay for it all in that not everyone will pay by card and many of those that do will use a debit card which’ll cost you less. So, if you’re charging £50/night that equates to adding £1 to your charges. Incidently, don’t try adding that £1 only to credit card customers as you’ll just end up driving them away.