Friday, October 26, 2007

To delay payment or not

Today, on MyLot, I responded to a discussion about whether or not, someone should raise their payout from the standard ten dollars to a higher amount (ex. twenty-five).

Now, due to my experience running a business (a restraurant in a chain), I approach it from the viewpoint of a business owner. Being in a second economics class this semester just amplifies that tendency.

Personally, I set all of my payouts (the amount that one must earn before a company mails you a check or paypals you) to the lowest possible amount whenever I have a chance. It is my money, and I want it in my grubby hands as soon as possible.

And not just because I am a straving college student either.

If one has earned enourgh to make payout, and rises the amount of their payout threshold, what happens? The company that owes you the money holds it in their bank account. Standard business practice is for this account to be an interest bearing account. I watched my bosses depositing money into their bank as quick as they could, and then take as long as possible to pay their expenses (labor, rent, suppliers, etc.). This practice earned them a lot of interest income off of money that rightfully belonged to other people.

Paid to post sites, and other online work sites, want you to raise your payout amount. They give you the option because it benefits them. It is not for your convenience; it is for theirs. They hope that you set your payout thresholds to a higher amount, so that they can hold your money longer and earn interest off of it. Essentially by setting your payout threshold to anything above the minimum, you are giving them a free loan.

(The other type of free loan that people are fond of doing is to have more money withhold from their paychecks than necessary--yes, a big income tax return is nice, but why give the government an interest free loan. If you want to loan the government money, invest in government bonds instead.)

The only time when rising your payout threshold makes sense is when it is close to the end of the business year and you are trying to avoid slipping over into a higher tax bracket. And that is a very rare situation for most of us--so do yourself a favor, collect your money as soon as you can and deposit it in your own saving account.

After all, the money is going to be earning interest anyways, so why shouldn't it be you that collects it?

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