Barter: Swap and Trade for What You Need

March 20, 2009— -- Meg Madison, a mother of three who lives in a suburb outside Indianapolis, can't get much done without her van. She needs it, she says, to shuttle her children around and run her day care center. Short on cash and faced with having to spend $1,000 to fix the van's engine, she came up with an idea: bartering.

"Financially, we're trying to find every possible way, every possible angle and that's what led us into this bartering," Madison says. "It's about getting the things you need without spending the money that you don't have."

Madison offered to watch the three children of her neighbor, Dana Woods, in exchange for fixing her van. Woods, a single father, is trying to get his own auto equipment sales business off the ground after losing his job as a sales manager.

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"It is kind of like going back to the core of what our country was founded on," he says, "neighbors helping neighbors."

Rising unemployment and financial setbacks are pushing more Americans to get creative. They're increasingly turning to bartering, the most ancient form of commerce and the new currency of these tough economic times.

Most of the exchanges are made via the Internet. Postings on the bartering section of the Web site Craig's List have doubled in the past year. Another Web site, U-Exchange.com, which connects people who want to barter, says traffic is up nearly 200 percent.

These days a lot of people have time and skills but no money.

"We come across people every day who know something that we do not know and have a certain skill or trade that we can certainly capitalize on," Woods says.

Ads include everything from an attorney offering legal help for landscaping to an English teacher who will tutor for a carpet installation. Among the most unusual is a funeral director in Brooklyn, N.Y., offering free service for a new addition on his apartment. Think of it as posthumous payment.

In downtown Manhattan, a store opened up based entirely on the concept of bartering. Called "The Free Store," the basic concept is that you can take anything you want as long as you give something back in return. Merchandise ranges from jewelry to clothing to CDs.

Bartering Booms Among Businesses

"It's a good time to do a project like this, especially near Wall Street," says Athena Robles, who opened the Free Store as a temporary art project with fellow artist Anna Stein. "Everyone's thinking about money and no one has any right now."

The store was funded by a grant from Grants for Arts in Public Spaces. "Everyone in here has a story about how they want to start this in their own community," Stein says. "Bartering is making a comeback."

Bartering is also gaining popularity among businesses. A company called International Monetary Systems acts as a kind of bank broker between small businesses, allowing them to offer their services and acquire barter points that they can then exchange for other services.

Client Kevin Walters, who owns the Creole Restaurant and Music Supper Club in Manhattan, used bartering to get a new sign to put outside his restaurant.

"Particularly in a down economy you have fewer and fewer people coming out to spend cash with us," Walters says. "So, I need an alternative method to be able to generate business and to be able to buy goods and services that I would need to run the business. A sign is critical to what we do."

Walters also used International Monetary Systems barter points to get expensive dental work from another IMS client, his dentist.

For all the enthusiasm, however, here's one important thing to keep in mind at tax time: Federal law requires people who barter to report the fair market value of goods and services received in exchange for goods or services provided.