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How common is it for collectors and dealers to buy coins on credit?
bidask
Posts: 13,860 ✭✭✭✭✭
Personally I do not buy coins on credit........but possibly would be open to it if the right deal came along
which has never happened in my collecting career!
Here is a nice post by Jeff Garrett on the topic.
https://coinweek.com/opinion/expert-advice/jeff-garrett-million-dollar-handshakes/
I manage money. I earn money. I save money .
I give away money. I collect money.
I don’t love money . I do love the Lord God.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
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I have always paid cash,.... Of course I do not buy six figure coins....If I did, perhaps I would use another method. Cash works for me, fast and clean. Cheers, RickO
As Jeff explained, it's common.
As something of an aside, before we had slabs, I attended most major auctions, got 30 day terms to pay, and would typically have more than 80% of the coins sold before I had to pay for them. It was a great business model while it lasted. Today, I'm lucky to have 20% of my auction purchases paid before I have to pay for them, which takes a lot of the fun out of it. Interesting how times change.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
When I had the shop, I also had a pawn license.
I would regularly convert a purchase to a loan and then the buyer (pledgor) could stretch his eventual ...claim.. to whatever he wanted to.
Just a tweak to the operation.
My understanding is that the larger auction houses often function as de facto lending institutions to both dealers and collectors. It would be interesting to know what percentage of their profits come from this.
As collector I have used credit many times and never failed to fulfil my obligations and I have never paid 1 cent on interests. And love when PayPal offers 24 months with 0 interest... bought few expensive coins that way.
Hey I did not know that ! 😊
I give away money. I collect money.
I don’t love money . I do love the Lord God.
Really @bidask ? Maybe once every other month they do it on eBay. For expensive coins (expensive to me) it is easier to pay 200/month than 5k at once. And always end up paying in less than 2 years.
I've done it.
I have and will continue to buy coins with a handshake. If you trust the person selling and he/she trusts the person buying; it’s much less of a headache to buy the coins you really want
I really like your article bidask, in my day a handshake was all it took.
I have not done it in a while but if the time came and something came up that I really wanted, I would consider making a payment arrangement if need be. That sfor me personally.
Now as far as the shop, I have two customers(more friends than customers) that have unlimited liquid funds, and I mean unlimited, that if I ever needed to cover a large deal fast, I can call them. (I would have to shoot them a favor, but they would do it without question.
Credit as in layaway terms ?
I do put stuff on layaway once in a while. If I stop somewhere and they had something unexpected I might say here is money can you hold that for me? I know a lot of dealers that would do that , put the coin in an envelope and write what you owe on it. Win-win for a dealer they have some of your money and still have the coin
I've done it a couple of times using my personal card linked to PayPal. That's a rare move I save for pricey unexpected buys and then pay it all off in one shot.
Great transactions with oih82w8, JasonGaming, Moose1913.
America would simply not function without credit, and the coin market is no exception.
I myself didn't know about the PayPal Credit function until about one year ago.
Andy is correct about auction purchases. I very seldom have ANYTHING sold by the time the auction bill comes due. Your word is your bond, as they say. We typically give some terms (when needed) to good customers on certain purchases. We also buy more coins from both collectors and dealers because we PAY IMMEDIATELY. I can't begin to tell you about some of the biggest dealers out there who constantly ask for time or "hold" checks on their purchases.
My cousin rents a house from me , I get a post dated check every month on the 1st.
They do clear eventually , but some say the 7th and if it says the 7th don't deposit until the 10th is the rule.
My SIL took a personal check for her but it bounced a couple times. A teller told her when the checkwriter's deposit would hit the bank and she was Johnny on the Spot to present and collect. The checkwriter was mad as a hornet, but SOL. My credit purchases have been limited to using a CC thru PayPal. PIF by the due date.
MY COINS FOR SALE AT https://www.pcgs.com/setregistry/collectors-showcase/other/bajjerfans-coins-sale/3876
I can't imagine not knowing in advance how you are going to foot a million dollar purchase.
MY COINS FOR SALE AT https://www.pcgs.com/setregistry/collectors-showcase/other/bajjerfans-coins-sale/3876
I don’t know how common it is, but I’ve heard of other dealers talk about their ‘line”.
In the past, I’ve had a line of credit for a few partnered buys before. Get it set up at a bank ahead of time for a few hundred a year. Then, if you need it, it’s handy and when you pay it off there is just a little interest on top. It’s not that much money if you can pay it off in a few days or a week. Just long enough to button up and sell a deal and pay off the line. Factor the interest in your buy price.
Personally, to keep track, I would never enter into more than one deal between payoffs. I could see a tangled web starting and I like order and apply my entire concentration to each deal before moving on.
I imagine it’s similar in other business models. The quilt shop next to me said they get a loan to buy fabric at market and hope to have it sold and paid back before the year is over, and my buddy with a tire shop surly has some credit for buying inventory. I don’t fully get that because I’m in service and not in retail.
I think the goal is to maybe start with one, build up your bankroll until you become your own line and cut the bank loose. I wouldn’t personally buy a coin for my personal collection on a credit card I couldn’t pay off in the first statement. The interest paid is just a silly self inflicted wound to something already expensive I don’t need in the first place, or what I read today that I liked, throwing more dirt on the burial, lol
When used responsibly, credit can be instrumental to collectors and dealers alike.
Those with a good credit score will pay low or no interest rates and only a nominal transaction fee.
“I may not believe in myself but I believe in what I’m doing” ~Jimmy Page~
My Full Walker Registry Set (1916-1947)
https://www.ngccoin.com/registry/competitive-sets/16292/
EXACTLY!
I've always maintained that when a person has debt and decides to purchase anything at all that is not expected to appreciate in value at a rate higher than the rate being paid on their debt rather than using their funds to pay off debt, that they are in essence paying interest on said purchase because their debt remains and continues to accrue interest until paid off. So I believe a healthy balance between the optimism of future appreciation of some assets vs enjoyment of the continuing depreciation of other assets is the order of the day.
So when looked at with this perspective the purchasing of coins (or anything that is a depreciating asset) with credit is very COMMON indeed. That being said and realizing that of course there are times when it's convenient to have the ability to use short term credit to "move things around" can be very helpful. I didn't realize that the 1% for 45 day deal was common. Used to be that 1% per month was a common sellers carrying charge in the pr-credit card days. There is always something to be learned here and that's why I keep coming back. The bottom line being, and I quote Mr. Garret: "Knowing how credit works in the business is just one more bit of important numismatic knowledge that can help collectors and dealers alike."
I use a CC whenever possible for the cash back, never paid one cent in interest does that count?
Agreed. I think long and hard about anything over 800k.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
I have a mortgage so effectively all
my coin purchases are on credit given the alternative use of cash.
Latin American Collection
Strange but I don't think of using a CC as "buying on credit" any more. A CC has become an almost essential convenience, and then there is the recourse.
I do as well. That's like 30 days same as cash. Short term temporary credit. If the merchant accepts it I use it, tho I've been known to pay cash or check too. I would rarely if ever pay a surcharge in order to use a CC.
MY COINS FOR SALE AT https://www.pcgs.com/setregistry/collectors-showcase/other/bajjerfans-coins-sale/3876
Collector here, but cash or debit card only. Debt baaaad. Never for a hobby.
Have done it a few times. No regrets but it's not as fun when I do it for collectors who ask me to get them something , and then they are slow, or no pay. Consequently I do it a lot less nowadays. My circle of trust is about the size of a button hole.
True, but I would not pay an added charge. Some places have a cash price and a CC price. Usually a surcharge means an added charge. Can't ever recall using a CC for a face to face transaction. OTOH if I walked up to your table and asked for a discount for cash you'd probably tell me to pound sand or worse.
MY COINS FOR SALE AT https://www.pcgs.com/setregistry/collectors-showcase/other/bajjerfans-coins-sale/3876
Word of warning:
Ccedit is fine until TSHTF.
The bond market is usually the first to show cracks when yields significantly blowout/ widen especially on junk bonds.
Even investment grade yields rise when there are credit concerns in the market.
This has a nasty cascade effect on all equities especially those companies with weaker balance sheets.
Think 1990, 2008/9 and late 2011.
Prices fall dramatically.
Usually temporary because sentiment historically shifts again.
Rare coins easily will come same
pressure......again .
Bad time to sell. Good time to buy.
Edit to add : Offering unsecured credit on coin purchases during these times can be a risky for the lender.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
I know how I'm going to pay the million dollar bill - with 100 $10k credit cards. Duh!
"Credit" is not a thing. It's many things.
I can buy something - including coins - on 45 day (or 90 or 180) interest-free credit. I may even have the money in my pocket, but maybe I want to get the free float. Such "credit" is no riskier than paying cash, it's just a delayed cash payment.
From the dealer side of things, if I can get reasonable terms, why would I not buy $250k in saleable inventory with say <1% per month interest because I can sell the inventory and pay the loan and vig and make the profit. Not having the $250k inventory leaves me nothing to sell. Businesses do it all the time. It is a legitimate non-hobby use of credit.
Now, if you are talking about whipping out your regular old Visa and buying a $25k coin when you have $500 in the bank, then I agree with you. But that's really only one form of "credit"
It’s funny you brought this up.
I flew from California to Florida to the FUN show a month or so ago. Knowing I was going to probably the largest coin show around I figured I’ll just take my credit cards cause I didn’t want to pack a bunch of cash with me to the show. After all I was already packing my entire collection with me. I had planned on picking up a couple of coins while I was there but VERY few sellers would take or was even setup to take credit cards. Not having any options I was lucky enough to find a couple of sellers that would oblige me. Lucky for me my friend Andy was one of those sellers.
What you do is pay it off right away.
It’s a great ace in the hole if you need it.
No problems here😊
Except that I think the point of the OP assumes that you don't have the means to pay it off right away, but more likely that you EXPECT to have the means within a certain time period.
I have a $30K HELOC Home Equity Line Of Credit, but I wouldn't use it to purchase a $20k coin unless I knew how I was going to pay it back in 30 to 60 days.
MY COINS FOR SALE AT https://www.pcgs.com/setregistry/collectors-showcase/other/bajjerfans-coins-sale/3876
TRUE STORY
About a month ago someone called me asking if I do terms on coins. I answered yes I do terms depending on the coin and the price. The person mentions the particular coin- one that was worth about $900. I said sure- what type of terms do you need?
$75 a month for 12 months.
I have a customer that's 3 payments away from finishing a $100 per month arrangement on a $1200 coin. I have several others that I allow unspecified layaway to and they usually have it paid in under 6 months.
If you have a mortgage or any other loans, then coins are being financed with debt. Mortgages may be "good debt" but is still money borrowed. I would expected the majority of collectors have some debt.
Someone with a limited budget wanted one of your coins as his "prize" coin out of his typical budget. You should have done it. I've seen your inventory ( and maybe only a partial inventory you've listed on the BST), it would have been no big deal. Not like he wanted you to front him the coin.
This is an excellent point that no one else has made yet.
In that case, so is every meal you eat and the clothes you wear, but that's not really the spirit of the question. The closest I've come to borrowing money to buy a coin was putting an auction purchase on a credit card to be paid at the end of the cycle. Borrowing to finance a hobby is a very slippery slope, especially if that hobby becomes an addiction.
Keeper of the VAM Catalog • Professional Coin Imaging • Prime Number Set • World Coins in Early America • British Trade Dollars
Interesting......what do you feel accounts for this change the most MrEureka? Is it the liquidity that certified coins bring or something else?
Your hobby is supposed to be your therapy, not the reason you need it.
I have the cash, but I will use Paypal credit. No interest if paid off within the term. While I don't pay interest, it does tend to encourage me to overspend on shiney coins that i later regret buying.
As Mr O Connor said: And yes, there are a few big dealers who habitually ask for credit, but the business we do makes it all OK.
I can tell you I use credit a lot when buying. I have too. Some my AR is through the roof! May sound strange, but show me a deal or collection and I can write a check. There is nothing dangerous (although every so often I get caught in a slow cycle), its a form of business.
However for collectors, they should never over stretch their budgets unless its a once in a lifetime coin.
In the past, I have bought coins on credit, all worked out just fine.
Nowadays I run with a cash reserve to buy coins.
I am way more aggressive with my buying having cash on hand. Decisions are much easier.
Cash Is King.
Mortgage is interest on everything. I had my house paid off. When interest got so low I couldn't resist a 30 year loan at less than 4% to boost my inventory. If I can't make money on 4% money I need to retire. Also did away with a nice nest egg I had in the bank making less than 1%!
True, but most people feel that paying the monthly payment on a loan is ok and adequate and feel free to use leftover cash for other things. Sort of like all work and no play makes Jack a dull boy.
MY COINS FOR SALE AT https://www.pcgs.com/setregistry/collectors-showcase/other/bajjerfans-coins-sale/3876
Lots of good points being made here. The responsible use of credit looks quite a bit different depending on which side of the table you’re on.
A collector wanting to buy a coin on credit would do well to be brutally honest with themselves. Shopping addictions are quite real. Unfortunately the collecting gene and responsible spending gene don’t always exist on the same chromosome. I’d guess in most cases a person’s credit score accurately reflects this.