7 Keys to Smart Bartering

As the economy continues to slump, the swap business booms

Watches, baseball cards, cupcakes and cookies, artwork, a journal entry, a bike, and even a dog all found new homes last month at Main Street Family Dentistry in Tupelo, Miss. Dentist Harry Rayburn and his staff accepted the tokens as a barter from 60 patients on a single day in May in exchange for fillings, extractions, and cleanings, mainly from uninsured patients. "A lot of them were extractions that had been hurting for two or three months and they hadn't been able to get to a dentist because of the cost," Rayburn says.

As spare cash becomes harder to come by for many families, bartering is an increasingly attractive alternative to putting expenses on a credit card. Here's a guide to the low-cost world of bartering.

Save money. "Instead of buying your kid that new video game, you can trade for a new one," says Jessica Hardwick, cofounder of the Cupertino, Calif., bartering website SwapThing, which charges $1 per swap to its 130,000 active members. As of last check, the website had 1,721,179 things listed as available, including antiques, comic books, and electronics. "Our growth is inverse to the economy," Hardwick says. "As people start to spend more money to put food on the table and gas in the tank, they find other ways to save money."

Be specific. A New York attorney offering to prepare a simple will and healthcare proxy in exchange for the services of an experienced floor sander or painter. A San Francisco parent interested in trading two sets of luggage for beer or wine for her son's baptism party. A painter in San Francisco willing to proffer his services for a Harley. These are just a few of the recent offerings on Craigslist, which reported 130,243 barter posts in May. That's twice as many as last year. "Some people will give a laundry list of items they are willing to trade or services they know how to provide and ask people to send them similar lists they are able to trade," says Craigslist CEO Jim Buckmaster. " Others list a single thing they are able to provide or a single item they are looking for. A key is to always be specific so that people know what you have and what you want."

List details. "The more information you can put in the ad, it cuts down on phone tag," says Debbie DeSousa, the CEO of Barter Bucks in Concord, Calif., which boasts 50,000 business owner and manufacturer members and charges a 10 percent fee. "Because we are international, you need to say what distance you are willing to travel." DeSousa herself has bartered for eyeglasses, dinners out, dental work, and auto repairs. If you're mailing a package, you must also decide who will pay for shipping. And consider posting a picture. Ads with photographs tend to get more responses.

Assign value. Americans are used to giving merchandise a dollar value, so determining exactly how many DVDs a dental filling is worth can be tricky. "The newer the content in terms of popularity, like the latest movie or CD, the faster it moves. And classics will go, too," says Robert Alvin, president of the CD-, DVD-, and game-trading website BarterBee. On some barter websites, including BarterBee, you assign your merchandise or service a point or credit value. Once you accrue points by selling something into the system, you can buy other items with them. In most cases, one point is roughly equivalent to $1. Like with online auction giant eBay, the comments left about an account can also help you avoid the possibility of other people not delivering on their end of the bargain. "You have to list the condition [of your merchandise] appropriately," Alvin says. "If it's reasonably listed and you don't overprice it, stuff goes fast."

Consider taxes. Income from bartering is taxable, and bartering exchanges are required to report transactions to the Internal Revenue Service. Businesses or trades people can deduct costs incurred to perform the work that was bartered. But small, informal, and noncommercial arrangements generally slide under the radar of the IRS. "The consumer end of it has always been a very gray area because there is no reporting that takes place, so the IRS has no way of tracking those transactions and the people themselves probably don't have a receipt," says Tom McDowell, executive director of the National Association of Trade Exchanges. "If you make a profit, then it would be a taxable event. If you sell it for less than you paid for it, then it would not be a taxable event because you are not making money."

Get creative. "This summer people are doing a lot of house swaps just to be able to afford to go on vacation," says Hardwick of SwapThing, although she'll stick to swapping books this year. Furniture, computer services, hypnosis, cabinetry, hair cutting and color services, and riding lessons have all been bartered online, in addition to the more typical movies and CDs, without the need to put expenses on your credit card. "The barter category is sort of adventuresome. People like to think outside the box more than in other categories," says Buckmaster of Craigslist. "It is a little more creative than cash transactions, and people do let their imagination run wild."
- U.S News & World Report, June 10, 2008