Recent changes to sales tax laws have opened the door to online retailers having to collect sales tax for out-of-state customers. B&H has just launched a product they say will instantly reduce the amount you owe on taxable purchases. Let’s take a look at how it may work and whether it is worth getting.
B&H, in partnership with Synchrony Bank, has launched a credit card called Payboo. When you use this card for your entire purchase with B&H, a reward is instantly issued to your account for the amount of tax owed, leaving the order at effectively the pre-tax amount. Essentially, this means a transaction with the Payboo card costs as much as the same product ordered without tax applied.
This initially seems like a great deal, since state sales taxes can range from 6% to 9%, representing hundreds of dollars in additional expense on items like bodies or lenses. Additionally, the sales tax collection, remission, and discount is all handled seamlessly by B&H, meaning no extra work for the savings.
Among the requirements are to pay the entire balance solely with the card and to apply as an individual with a United States billing address. Make sure to check the fine print to see if your state is eligible for savings.
How It May Work
I’m not privy to the arrangements B&H has made to get this product launched, so what follows is just speculation based on the general nature of credit card processing.
In general, credit card companies like Visa or Mastercard charge fees to the business for the service of processing their transactions. These fees, called interchange fees, vary based on a number of factors. Most crucial to B&H, given their significant online and mail order business, is the fact that fees are higher when the card isn’t physically present. Fees can range from 1.5% to 2.7%.
Along with a reduction in interchange fees, another source of revenue from the card comes from interest charged on purchases. For this card, the APR is currently shown as 29.99%.
Lastly, B&H stands to benefit from improved customer loyalty. If you have the card, you’re more likely to continue ordering with B&H.
Does It Make Sense to Apply?
Credit and financing decisions are highly individual and very important choices, so make sure to thoroughly consider the costs and benefits. Additionally, the rates mentioned in this article are generalizations, rounded, and may change at any time.
For perspective, travel credit cards can earn anywhere from 1.5% to 4% back in redeemed rewards, with cash-back cards earning about 2%. So, when compared to even low sales tax states at 6%, the savings with Payboo can be meaningful. Using it on a $5,000 purchase made in California, with its 8.5% sales tax, will save you about $275 over a competing rewards credit card.
I feel that this product makes sense if you are very financially secure, are planning on significant B&H purchases, and will be able to pay off the entire amount due on the card. Unfortunately, the APR is higher than most other cards, meaning that carrying a balance of even a small amount will wipe out any savings. Since the card is only for use at B&H, it’s another bill to pay and more work to manage compared to the credit card you already hold, but it can save you a couple hundred dollars on significant purchases.
If you live in a high sales tax state and hate to see your purchase price go up by 10% at checkout, B&H may have just given you quite the gift. I’m impressed by the size of the effort B&H made with this product, combined with its relatively straightforward policies.
Lead image provided by Ales Nesetril.