Bartering is basically a trade between two people involving the exchange of goods or services. It usually does not involve any money being exchanged between the two parties. Instead, the parties use the values of the goods or services in order to arrive at the bargained-for exchange.
Bartered goods and services usually fall within the scope of contract laws, and therefore each party is obligated to perform their part of the exchange. Also, items and services that are obtained through bartering must be reported in one’s income tax returns.
A barter exchange network, or simply, “barter exchange”, is an organization whose purpose is to facilitate bartering between several different parties. It can be aimed at the exchange of a specific item of personal property, such as a furniture barter exchange. Alternatively, the barter exchange can consist of many different types of products being exchanged. A barter network can also focus on the exchange of corporate resources or other complex, high-level assets.
Membership in a barter exchange usually requires registration and a fee. Sometimes brokers and appraisers are hired by the exchange overseers in order to determine the value of the goods or services being traded. Instead of trading for money, members of a barter exchange will trade goods and/or services with one another.
Sometimes a barter exchange will assign their members “trading credits” depending on the value of their goods and services. These trading credits are similar to store credit in a retail store, and function as if they were money. The members can exchange goods for credits, and then use the credits for future transaction. The barter exchange makes a profit by charging a transaction fee (usually 10-15% of the value of the exchange).
Bartering exchanges are becoming more popular, especially when market conditions make traditional money currencies unstable. There are several advantages and drawbacks to working with a barter exchange. Some of the advantages include:
- Increased networking and product exposure: Bartering exchanges effectively create new markets for persons who are to trading a specific good or service
- Freedom of negotiation: Members of bartering exchange networks can adjust the price or value of their assets in order to obtain more favorable exchanges
- New clients: Bartering networks often create new clients- the exchanges are typically not “one-time deals” and can involve repeat exchanges with interested parties
- Novelty: Many people find bartering to be an enjoyable and profitable activity; some consider it a return to “more simple economic roots”
Some of the disadvantages of working with a barter exchange include:
- Sizeable membership fees: Membership fees can range anywhere from $200 to over $1,000, depending on the nature of the goods or services
- Transaction fees: Most barter exchanges will charge their members a transaction fee of 10-15% of the value of the exchange
- Difficulties in determining value: In any trade situation, determining the exact value of a good or a service can be difficult.
- Monitoring and supervising issues: Many barter exchanges can be difficult to supervise, especially when it comes to setting price rates
- Use of trading credits: If the barter exchange uses trading credits, then the credits can only be used with that particular exchange organization
Finally, internet barter exchanges are also becoming increasingly popular. These are exchanges that are conducted through the use of the internet. These are generally popular due to low membership fee rates and the availability of difficult-to-find products.
Bartering can be an advantageous alternative for persons who are looking to engage in trading. However, if you will be joining a barter exchange, you may wish to contact an attorney for advice. If you will be drafting any type of barter agreement, a contracts lawyer can help you finalize the terms in a legal contract. Also, disputes over bartered-for items can require the attention of a lawyer.