Borrowing against graded cards
 

Imagine that you could borrow against graded cards. The minimum loan would be $25,000. Loan-to-value would be 50%. Rates would be L+6% to L+8% (L is currently 2.5%).

What is your best guess as to how much would be borrowed in a year? Could you see borrowing against your graded cards under these terms (I recognize the minimum is prohibitive for some)?

Thanks for your help. I’m a memorabilia guy with very limited knowledge of cards, but I’m intrigued by the business opportunity. Any other thoughts would be appreciated. Thanks.

There are places that already do this. I can't remember their name but one of them has advertised/posted on here before.

Didn't PSA try this years ago too, or am I misremembering?

I personally would never do this.

isn't that pwcc's big pitch right now? they store your cards in their facility and will loan you money against the value?

I don't know, but my guess is that most people with 50K or more in graded cards are not going to be needing to borrow money, and if they needed money they would just sell for closer to 100 percent of value rather than borrow at 50.

Pwcc
 

Yes, it's called "The Vault" from PWCC and I am already signed up!

Peace, Mike

Pre-War Pawnbroker?

Thanks for pointing this out. It’s listed on the PWCC as “coming soon.” Rates are 1% per month, which is higher than I was thinking, but PWCC’s presence may be enough to kill the idea for me unless the volume is relatively high.

what could go wrong?

Pwcc
 

You can actually sign up and have cards that you win on Ebay or any major auction house sent to the Vault right now BUT you can't send them cards yet from your personal collection. I'm not sure why that is but that is the latest from them.
I think they will be accepting more in mid 2019 from personal collections.

My opinion is that it is a brand new concept and they want to test it out slowly rather than having collectors sending them hundreds of graded cards at once.

Just IMO, thanks.

Peace, Mike

So you buy a card for X, have it sent to PWCC, and they send you back half X which you now owe them on top of the X you just spent and you don't have possession of the card? What am I missing?

So let me get this straight: Someone is making essentially a risk free loan (unless the sportscard market absolutely craters) at LIBOR +6-8%. Sounds like a good business to me. You have storage and insurance expenses and have to make sure that the SMRs are not overstated. Other than that seems pretty lucrative.

Jay

Let's say you want to buy $1500 worth of cards(a $1000 card and a $500 card) but only have $1000 now (but will have more to spend next month). You buy the $1000 card, pawn it to PWCC and get $500 to buy your second card. Next month when the money comes in you repay PWCC and get your card back. The concept seems good, however, the interest rate seems excessive.

This is such a complicated topic in reality. I work in financial services and there are quite a few clients that borrow against their securities positions using them as collateral and not in the form of a margin account but an asset backed line that is LIBOR plus 0.50 up to 2.25%. There are different advance rates on different securities and some that don't qualify at all. The advance rates are driven by liquidity and by the implied volatility of the asset class. If this was to be successful you would need to limit it to the most liquid cards because trading cards can be inherently volatile and using a lower advance rate for loans lasting more than a few months. Imagine a one off sale of an auction going for much lower than the VCP average and triggering a margin call. Or worse yet using data from a few years ago where many cards collapsed from record selling prices and once more triggering a margin call. The interest rates you quoted are on the high side and obviously due to the risk associated with this scenario. I have over 50k in graded cards and If I needed to borrow 25k I would use other avenues. I really hope this doesn't become a popular form of lending for hobby participants because if there is a downturn this could exacerbate it significantly. The reason banks and broker dealers will lend against securities is the ones they choose are liquid and can be sold quickly. Just imagine if a margin clerk said we are calling this loan and then simply auctioned your cards off with limited notice and if there was a few hobbyist getting called at the same time the cards in question could sink significantly and cause a cascading event. Another big issue would be if these same collectors are using the funds to buy more cards their risk has increased significantly making it harder to pay back and potentially driving up card values in the short run and making their new entry points at higher levels and amplifying the risk in the card market. Where I do think this is reasonable is for very short term loans. For example if you are auctioning off cards in a month or two and want an advance to purchase something that comes up and the lender has your cards as collateral lined up for sale then it becomes more of a bridge loan and doesn't create the issues I mentioned above.

Pretty lucrative, I agree—even more lucrative at PWCC’s rates. As someone who understands financial turbulence for a living, I would argue there’s nothing risk-free about it.

At the risk of sounding very preachy, one should not make card purchases if one has to finance them, in my opinion. If things are that tight, suppose next month's money doesn't come in or you need it for something else? You're out big time in this scenario, you're out your $1000 card which was collateral. Or you borrow the $500 from someone else to repay PWCC and you're off to the familiar races.

Maybe PWCC can issue its own credit cards.

This is PWCC’s intended model, and personally, I think it’s brilliant theoretically but fails in reality. Some have expressed concern over licenses, interstate activity, usury laws, etc. Thats a huge deal. But assuming the legal stuff is worked out, I think it’s a great business at its core - you are fully secured (collateral will not likely drop 50% in value), you are physically holding the collateral, and you can liquidate with ease considering you have a large auction house. Borrow from investors at 5-6%, lend at 8%+ and keep the spread. The only question (aside from legal) is whether there is enough volume to make going into this lending business worthwhile - 200bps on $1mm is only $20k, and I would think one would have/want to clear $500k/year to make this business worthwhile, and the lender would need to generate $25mm of loans to gross $500k (of course, these economic terms are purely hypothetical). However, I do believe neither the investors nor the volume will be there.

First, Assuming we are using accredited investors (which we must), i doubt investors would be content with anything less than 6%, and many would require more, especially with no tax shelter on the income (e.g., depreciation, pass through expenses, etc). Second, I don’t know that you could drum up the lending volume to make it worthwhile, unless you are dealing in tons of lower-value cards, which is like death by paper cut. I imagine that (unless cards have been owned for many years), collectors owning high-value cards would not borrow at 8%; if borrowing was necessary, they would more likely resort to lower-interest, tax deductible HELOCs or business loans. Thus, I imagine most of your borrowers would be lower net worth individuals, borrowing against 3 and 4-figure cards; and remember that 50% on $1000 is only a $500 loan, at 8%, is only $40/year in interest, which means you need to make 12,500 of these loans to gross $500k in interest (you still owe your investors their 6%)- death by paper cut.

Great idea in theory. However, I have my doubts that it works in real life, due mostly to a lack of volume. If it did, I’d be an investor.

I’m with you.

Maybe not enough to change the math, but some percentage of borrowers are going to default, no?

Sure Peter, there will be defaults, but in PWCC’s case it’s no big deal and could actually be a windfall - they hold the collateral, which is only leveraged at 50%, and they have the vehicle to immediately monetize the collateral (their auction) and make up the debt l, plus costs. And here is the best part - they make 8%-12% of the sale at their auction (“cost”). So a default could actually be good for the “lender” not bad...

I really like the post by the guy in the securities market - I never considered the market effect of defaults, calling of loans, etc. It could rock the industry, but that’s a whole different matter (but one well worth considering as well)

You also have to figure that most "lenders" would charge whatever the max interest rate is in their state. Then the added fees associated with the "paper work" to make up for the low interest rates. I would think most places would operate like the pay day loan companies to maximize profits.

https://forums.collectors.com/discus.../psa-loan-dept

It failed 12 years ago. It would fail again today.

Also look at the potential added revenue from auction sales. What if only 500 borrowers were able to drive the monthly auction price they bid on, whether they win or not, by JUST $100 on the $1000 + $500. That would be approx $100 @ 8% profit from fees for $8 x 500 borrows x 12 auctions, that’s 48K just by encouraging a little extra bidding.

That was my point, albeit not stated very well, you are understating the math from PWCC's point of view a little. They don't have to do quite as much volume as you say because they profit on some collateral.

Good points......
 

"The Vault" is not just for leveraging capital. I have no intention of getting a loan off the value of my submissions.

My interest is solely a VERY secure Compound that is FULLY insured with instant access to my digital collection online 24/7. I will have the ability to click a button and list any of my items with PWCC or lets say I sell one of my cards to someone on here......I simply click a button, enter the address, and PWCC ships the card for me. Think COMC only HIGH end.

It is with a company that I have dealt with for 4 years now and NEVER had an issue. EVER!

My plan is to send them a sampling of cards to test the Vault out this summer and if I like the process then I will send more cards. I am embarrassed to tell you that my collection is NOT insured but it is in safety deposit boxes. Even these though are not infallible and I constantly worry about water breaks at the bank, theft, or fire. PWCC will FULLY insure my cards. Of course I will pay a fee for this but why not? it is a valuable service as far as I can tell. Only time will tell but I am excited to send them some goodies.

Just my humble opinion.

Peace, Mike

Man, why collect at all if you will never see the cards? Or are you a pure investor? Pre-War Safe Deposit Box, a division of PWCC. Whatever works, just hard for me to fathom.

Peter, gotcha. I dig. I still think the lending business, even with the chance to make money off sales of defaults, is too thin to be a succes as a stand-alone business.

Mike, I make no comment either way on the vault. Seems like a good enough place to store and display cards as any; although I like having mine close and taking them out and looking at them. Perhaps the lending is just a concomitant to the vault, and is all part of an integrated platform.

End of the day, Brent has done one heck of a job with pwcc. It’s hard to bet against that success (although I am dubious about the lending biz, as a stand-alone enterprise).

Not sure if this item will post with how much more complicated it has become to post EBAY links so the item number is 401648000866.


https://www.ebay.com/itm/1986-Fleer-...p2047675.l2557


This PSA 9 Jordan went for $6,800 with the PWCC PQ sticker on it. What makes this situation even more difficult is how do you determine the value of the card that is being used as collateral. The range on EBAY for the Jordan PSA 9 is $3,350 all the way up to the one I posted above at $6,800. From peak to trough that is a 50.7% decline and from the bottom to the top a 103% increase just in the same grade. With so much focus on eye appeal these days and cards selling for such a variance in the same grade and in some cases more in lower grades how do you reasonably value the collateral? A bank would probably use the low number as they would want the risk to be as little as possible. How do you tell the guy that just ponied up over two times the lowest price for the PWCC PQ that he can only get $1,675 of margin or 24.6% of his purchase price and keep him happy? There are so many fake sales on EBAY so how do you determine what is real or fake? Just the other day a card was posted on CU of an Aaron Judge Heritage red auto that sold for nearly three times the prior sale and from a very questionable dealer. There is so much room for fraud and mismanagement with this issue. Think back to when the Mantle 8 went for $660,000 and then a sale at the all star game went for $282,000. Does this trigger a margin call with a decline of 57.2%? This is a situation that really needs a lot of thought and caution.

Why is "the Vault" any more secure than a bank? Is it in some bunker ten feet deep under Oregon with ten levels of security clearance?

OMG it won't be safe in Oregon, what about the Cascadia earthquake that will cause a tsunami that will wipe out most of Oregon?

LOL, Sorry had to post that. We are going to move to the Oregon coast so I joined a forum on moving there. Had several nuts saying to stay away because of the impending earthquake that could happen tomorrow or in 500 years.

I didn’t say the vault is more (or less) secure than a bank. I said I suppose it’s as good a place as any to keep it, but that I like my cards close to me where I can touch and see.

Why????????
 

If you knew how many times I go to my local safety deposit boxes to look at my cards, I would blush. Are you serious? I have collected since 1976. It is in my blood. If I lost my cards in my home to theft, fire, water, I'd be devastated.

The fact that they are in safety deposit boxes is due to my fear of keeping them "viewable". It is unfortunate but when a card or collectible reaches a certain value then I think it needs some type of protection.

I have thousands of collectibles in my reach that are not considered valuable enough to lose.

We all collect because we LOVE it I hope. Once things get valuable there is an obvious choice we all need to make. Keep it under the bed or get it to a bank or get it to the Vault (in the future). I'm not happy that I can't view my cards every day but I am at peace knowing where they are for viewing once a week!

Peace, Mike

PS And in 6 months, I'll be at peace knowing that some of my cards will be in the Vault out west and INSURED and viewable 24/7 on my computer. I like to diversify. I will not send all mty cards there but I love the notion.

I trhink part of the reason folks will use the “vault” is due to the fact they can ship their winnings from pwcc or other auction houses there not pay the sales tax. On larger purchases that will save a lot. Those items will also be available for sale to those that want to. Also, safer than some folks homes. The lending does not need to be to just buy other cards but can be for college costs, mortgage, etc, and just not wanting to liquidate just yet. The shear volume will not be mandatory as it is ancillary business for pwcc. I think it will make sense for folks in certain situations and bother option is not bad.
Cory Weiser

I was addressing Mike P who doesn't seem to think a bank is safe enough.

"I constantly worry about water breaks at the bank, theft, or fire."

It's not......
 

Peter,

I did not say that the Vault is more secure than a bank. It's not to be frank but I'm sure according to those I've talked to at PWCC that it is state of the art AND every item is INSURED.

My collectibles are NOT insured at the moment so I see a VERY valuable option here. "The Vault" is closer to Russia than my bank is so an ICBM could easily take out my Wee Willie Keelers that will be stored there in the future and that frankly upsets me. Now if the Russian's take Willie's solid advice to "Hit 'em where they aint" then my collectibles will be safe in The Vault, but I digress. :)

Peace, Mike

If the bank is a good compromise, why send to a remote site where you presumably won't be able to view them at all?

Read the fine print is my advice.

Insurance!
 

The insurance angle is what interested me. I will read the fine print thank you. Yes, I could go out and buy insurance myself but I do not want the hassle. PWCC has been dealing in HIGH end cards for years, I trust them. Their client portal is above reproach. I LIKE them.

My bank is nearby, I visit it regularly but I like to diversify my collectibles and this is just another option. I will not send all of my cards to the Vault. I like having collectibles in different places. As someone who has experienced a robbery and theft of some of my collectibles in the past, I am very leary of all avenues of storage.

Diversification of where I store my stuff is key to keeping me sane and happy.

I may lose a portion of my collection, but I will never lose all of it.

Peace, Mike

That's the good thing about gold. At 46K (today) for a kilo bar, it's pretty efficient to store. :)

As was mentioned, things like this go on all the time in financial markets. So all details of pricing the collateral, custodial services, defaults etc can be solved here like it is there.

Where I see this breaking down is the “negative carry” is just too great.

If you buy a security that yields 5% and you use it as collateral to finance the purchase, of this financing rate is sufficiently low, you’re levered returns are higher. That’s the main reason why all institutional investors use leverage.

In the baseball card market, where cards don’t pay interest or a dividend or any cash flow of any kind, you’re buying for the sole purpose of capital appreciation. If you then layer on leverage at a very high rate, you’d better hope your cards appreciate dramatically and fast or you’d just be better off using cash.

At best, I see this as a method of achieving short term funding, but like others mentioned, of you have 50k in cads,, you can get much cheaper funding in other ways. At worst, it’s a way for auction houses to lure borrowers into cards they ordinarily couldn’t afford, knowing full well they’ll probably default on the loans, resulting in nice profit for auction house.

Lenders would have to do extreme due diligence before making these loans in order not to be predatory. All this resulting in no one using the program.

Cory, great point re sales tax. Hmmmm.....

I do not think one should look at the lending as a “margin” type of Vehicle. If one could use short to intermediate lending for other purposes that come up in life but may not want to sell a specific card or cards, this allows that to be facilitated. A typical bank will not lend based on baseball cards. Def not for the masses.

Thank you for alll the feedback.

That just seems odd to me. Why not just save the scans and sell them all? It would basically be the same.


And for the record, having a tight budget has at times made me do what I call "collecting vicariously" which consists mostly of saving scans from Ebay and auction houses. Especially for stuff I'll probably never own.

But that's not the same as actually owning cards.

Not really necessary as Paypal has a 6 month no interest deal they started that is part of your account - not a special... so buy an item for $1000 pay it off in 6 months and you are done...

As another guy on a tight collecting budget I sometimes make custom cards so I have a real card to fondle.:D

Question - Who will pay the sales tax? Someone will have to. I don't think PWCC is going to pick that up for you....

What about the fraud?
 

How will PWCC be able to stop the fraud???

Lets say person A sends the card to PWCC, gets a loan, keeps a scan and then puts scan on ebay.. Sells item off ebay, collect funds from Paypal or whoever, doesn't ship...and skips...

So they may lose the card if they don't pay (if not able to pay and call it back) but gets funds on loan and ebay sale.. Close shop and start again?

If I can drum that up off the cuff, what will the real scammers think of?

Probably nobody. They "ship" to themselves so did the transaction on eBay happen? Cards can be purchased on credit and you don't have to pay through eBay.

I've bought a Cobb six months ago and put 25% via PayPal FF. A month later I paid the remaining 75%, again PayPal FF. No credit card fees, no tax and as far as I know PWCC may have a contract with eBay far an allowance for non-paying buyers.

Why is that any of PWCC's problem? They have no potential liability to the buyer.

Well not sure it is their problem though they may be in possession of the card at the time of the fraud and be implicated.... In any case if a scammer times it right they can make out with loan, card and victim's money... So PWCC may get dragged into it somehow...

[QUOTE=PiratesWS1979;1850097]Probably nobody. They "ship" to themselves so did the transaction on eBay happen? Cards can be purchased on credit and you don't have to pay through eBay.

Wouldn't ebay have a record of the transaction then? If ebay is tracking the auction then someone will have to pay the taxes..not sure how that works these days...

Sell......
 

Steve,

You kind of answer your question to me in your last sentence. I LOVE my collectibles, but at the same time, I do not want them stolen, or burned or lost. I can hold them each week that I visit them at my bank. I also have cards at home that are not as valuable that I enjoy. I am a 24 year Army overseas combat Veteran and frankly they are therapeutic to me. If I do not NEED to sell then I do not. Sometimes like all of us, we get unexpected expenses that force us to sell. I do not like those times. Like I mentioned before, I will not send all of my cards to the Vault, just some of them. I need to see if its viable as well. Thanks!

Take care,

Peace, Mike

[QUOTE=chalupacollects;1850138]That wouldn't matter at all, it happens all the time. I've bought a few time and have even sold a few times on then off eBay. Just win the auction, pay with PayPal FF and cancel the eBay transaction, easy. I'm sure most members have contacted eBay sellers giving their net54 id to avoid fees

If you need to take out a loan on it, chances are you can't comfortably afford to own it in the first place.

IMO there just aren't that many people out there looking to steal money through the sale of cards they don't have.

Sadly, in this country of unbelievably massive credit card debt much of which probably was not for necessary purchases, people do it anyhow. I suppose one sort of harsh way to look at it is PWCC is looking to profit off people's fiscal irresponsibility. Then again, according to PWCC, they're "investments."

Ohh if you want to see how many scammers are out there check out the BO Members/Sales Trade feedback forum.. Not only highly entertaining but somewhat scary at times...

Leon if not appropriate mentioning the "other place" feel free to remove...no link though!

Hmmm ... did not know that. I read one thread there and it made my head spin it was so visually overwhelming, not to mention hard to follow.

They have a off topic section with a NSFW funny picture thread that is simply amazing. I highly recommend it to anyone with a sense of humor that is not easily offended.

I don't care if you (or anyone) mention other forums. I post on BO a little bit.

Hinky
 

This whole concept is hinky!!

Send my cards to someone? Borrow money off them and pay interest? The Vault?

Stick to pumping up your auction prices and leave my cards and finances to me! :)

As a banker speaking, plenty! Whoever enters into this endeavor better have an understanding of the Dodd Frank Act. Good luck!

Well, there is that. But my guess is someone (or business) can loan someone money if done the right way. I have to think there are some lawyers and/or financial fiduciary types looking at the business.
I don't do lending or intend to but for tax and accounting purposes I just give everything to my CPA. It's fairly easy. :)

Oregon does not have a state sales tax therefore when they receive a shipment there should be no state sales tax.

I'm pretty sure I remember reading they went through all the regulatory hurdles for securities.

I used to have L+ loans against company stock to buy more company stock. While it was ultimately a good deal and a vehicle to buy a lot more stock in an era when it was going up significantly faster value-wise than the L+ amount was, it was riskier than probably we all realized. Fortunately, those loans are all gone now. The L+ rates were typically L+1 or less depending on the amount borrowed so much better than L+6 or L+8. When L is steady or declining, it's a much more attractive proposition than when it's rising or fluctuating wildly. Borrowing against cards would have to be a much riskier proposition than against a stock obviously. Guessing that's why the number is so much higher. Good luck........

Mike, insure. It isn't expensive and the application is easy. It buys the peace of mind you want. Plus you get to have your cards. I personally do not want to own a card that I don't feel I can secure properly. But that's what a safe deposit box is for. Insure 'em, keep 'em in a safe deposit box, fugedaboutit.

Other factor to consider: if something 'bad' happens to PWCC and someone seizes their assets, the cards may go with them unless you have some sort of UCC filing in Oregon to establish your ownership of the cards. That was one of the problems that consignors to Mastro had when it went belly up: the cards became potential assets of the entity for bankruptcy purposes even though they were consigned.

I'm a big fan of "don't spend what you don't got", so I'm a big no. 8.5% to 10.5% seems an awfully high interest rate.

Not so sure that is a way to get around the sales taxes. The buyer's address is already listed in Ebay records, so I believe that is the address they would use for determining sales tax liability, not where PWCC has their "Vault". Simply telling PWCC to hold onto the cards in their "Vault" in Oregon may sound like a way to escape sales tax, but i doubt that would work. You would have the ability to ask for your cards to be sent to you at any time, so sticking them in PWCC's "Vault" for a while to escape sales tax from where the buyer really lives would eventually get picked up by those states getting cheated out of sales tax as well. And PWCC could get their neck in the wringer with those other states by helping to hide the true nature of the transaction and assist these buyers in not paying the proper sales tax.

The other states would argue that there is no real purpose for keeping the cards in Oregon, other than to get around the sales tax. And if you did argue that you keep them there to facilitate PWCC being able to resell them quickly and easily for you, then the states could argue that you are actually acting like a dealer in that case and should probably be registered and filing sales tax returns yourself. And that also likely means you should be giving sales tax exemption certificates out to sellers when you buy items to begin with so you wouldn't be paying sales tax on anything anyway, but now you're in a business that should be filing and reporting what you're doing, which could lead to more trouble and work than it is worth.

The courts would have a field day with this. Saying you don't owe the sales tax because you told someone to hold the items for you in a non sales tax state would hold water like a sieve. This would likely be viewed as a "step transaction" where the buyer gets the item, has it shipped to them and then turns around and sends it to PWCC in a non-sales tax state. The fact that you tell PWCC to hold on to the item for you doesn't mean the buyer still didn't go through technically receiving the item and then deciding to have PWCC holding it. Unless it was for a "business purpose", which I already noted earlier would mean you probably should be registered and filing sales sales taxes as a dealer, the other states would argue the idea of holding your cards in Oregon is a deceptive practice meant only to beat the states out of the sales tax they are due.. What you are proposing is an out and out scam to defraud states of sales taxes due them, and would likely get anyone involved in trouble if caught. And I'm talking possible criminal prosecution for the parties involved as that borders on tax evasion.

Think about it. If what you suggested would work to escape sales tax, why wouldn't someone set up a company in a non-sales tax state and instead of acting like a consignor and selling items for people, like PWCC does, this company instead buys items on behalf of their clients so they don't have to pay sales tax. The company charges a fee, say 1%-2% of the value of items they buy, and argue it is for their services in purchasing items for their clients and not a portion of the sales tax they saved them. The item goes to them at their address in a non-sales tax state, and they simply turn over the items to their clients once they receive them, sans any sales tax. Because of the shipping/postage costs involved it wouldn't make sense to do on small, nominal valued items, but for a big dollar item it could make a lost of sense.

The problem with this idea is that the company doing the purchasing would likely be determined to be acting as an agent for the real buyers, and doing so purposely to get around paying the sales tax. Or, the states would argue that the company doing the purchasing was in effect a dealer themselves ans that when they got reimbursed for their purchases on behalf of their clients that were effectively selling those to the clients and therefore they should be collecting and remitting sales tax to all these other states themselves.

Oh, someone doing this would likely get away with it for a while, but once a state got wise, I wouldn't want to be the parties involved in defrauding the states of their sales taxes.

As for the idea of getting a loan on ones cards, those are not cheap rates. If it truly is only for some temporary period of time, it isn't much different than going to a pawn shop, is it? However, having said that, they may actually be some tax advantages for such a loan.

If the cards are kept by you as a collector for investment purposes, the interest being paid could be deemed as "investment interest expense", which is allowable as an itemized deduction on Schedule A of your federal tax return, but only to the extent you have net investment income that same year. (Any excess, non-deductible investment interest expense in a given year can then be carried forward and deducted against net investment income in future years.) However, you would have to use the proceeds of any borrowing to purchase additional cards for investment purposes, as in the example of one poster who suggested buying a $1,000 card and then borrowing half that amount to go out and then buy a $500 card. You would also want to be sure to properly report the sales activity on your federal tax return for any such "collectibles" you had bought and sold then, and on which you claimed an investment interest deduction to purchase them with.

And if you're actually a dealer and in the business of selling cards, the interest expense in that case could be treated as a straight-up operating business deduction. Same thing as buying inventory on credit. You can write the interest expense off against you income from sales.

Sounds no different than writing off property taxes as an expense on a rental property. Thank God for CPA's :).