Credit Card for the HOA?

Started by RobertH25 • 15 replies • 5934 views

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RobertH25 (Oregon)
Posts: 2

Posted:

Our new HOA is up and running well and very strong financially. We consist of 15 single family homes and I am the president. We currently us a debit card to pay most the bills.

So rather than pay with debit card I would like the HOA to pay with a cash back card like one for Capital One where you get 2% cash back on everything.

Issue is they want a personal guarantor. My thoughts are if we only get 1 credit card in my name that helps reduce the risk some - but they also report it on my personal credit report so not so great as I personally go after the top credit scores and I'm not sure how this would change my personal credit score, I can't imagine it would help it to say I am personally guaranteeing this for the HOA

Any feedback / experiences ? Good idea? Bad? Any banks or credit card companies others recommend for an HOA?

-Rob

JimR24 (Texas)
Posts: 399

Posted:

Yep, i have run into this too. When i found out what the credit card company required, i backed off and decided not to do it.

Just my $.02 worth.. :-)

oljim, in texas

Lovin' life with my honey!
and, President of HOA in Texas

LarryB13 (Arizona)
Posts: 4,099

Posted:

Robert,

I have never once received something of value from a bank that did not ultimately cost me more than I received.

Keep your life simple. Forget the cash-back card that you will be responsible for paying personally and keep paying the association bills with the association's debit card.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Robert,

I don't like Associations having a credit card or to use a debit card. It simply may be too much temptation if someone is having financial difficulties.

I prefer that Associations write checks for everything and, when necessary, reimburse others who may have purchased goods with their credit card/debit card.

Tim

AnnH5 (Florida)
Posts: 304

Posted:

Would this additional "line of credit" affect your personal finances? If I were to run a credit check on you, is this going to look like a potential liability?

When you are no longer on the Board, and someone else has the credit card, how will you handle that? Will they also be able to open a credit card account so as to pay the bills for the Association?

Are there any tax implications for the Association with this plan? I understand that the Association can earn interest on a bank account but not sure how a 2% credit card bonus works out.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Robert

Never, ever, ever link your credit with anyone you are not married to and/or sleeping with and even then, never, never do it.

NpS (Pennsylvania)
Posts: 4,216

Posted:

We got debit cards for Pres and VP and put a limit of a few hundred dollars per purchase. Debit cards were attached to HOA bank account. No personal guarantee. No effect on personal credit.

Problem was - I do a lot of buying online. By mistake, I put stuff on the HOA debit card that was personal. Made a mess.

Outcome - We cut up the cards. If we need to buy something, we use our own credit/debit cards and get reimbursed - Just like the typical business operates.

Sikubali jukumu. Read all posts at your own risk.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

I have never once received something of value from a bank that did not ultimately cost me more than I received.

Keep your life simple. Forget the cash-back card that you will be responsible for paying personally and keep paying the association bills with the association's debit card.

Seriously, listen to this guy, your chasing pennies. Forget it. An HOA is a business, not personal finance.

BillH10 (Texas)
Posts: 1,217

Posted:

In a similar vein, when I was elected Treasurer of an association in California some years ago, my first act was to collect the petty cash fund from whomever had it and put it back in the bank.

Petty cash funds are an accounting headache and completely unnecessary. I told everyone to use their own credit cards or checking account and they would be reimbursed within 48 hours of submitting a receipt. Too much opportunity for misuse and sloppy accounting.

LarryB13 (Arizona)
Posts: 4,099

Posted:

My association also issued a debit card to one board member/officer (VP of Roads) and this has worked out well for us.

Our association is made up of large rural parcels and we have about 300 miles of dirt roads to maintain with an ever-growing fleet of earth-moving equipment and support vehicles. Our ability to work on the roads is dictated by the weather. When the conditions are favorable we have to get the work done. Our bookkeeper, treasurer, and VP of Roads reside hundreds of miles apart. If we had to pay for repairs, fuel, or parts using a check it would take days to get one delivered to the vendor. The debit card allows us to pay immediately and keep on working.

What we did was to open a separate checking account for the debit card and deposited $10,000. The VP of Roads has to turn in receipts for his expenditures before the treasurer will authorize depositing more money into the account. If someone went on a spending spree with our card our loss would be limited to the amount of money in the debit card account; the rest of our funds are secure in other accounts. We have been doing this now for about four years and there have been no problems with improper use of the card.

Any association considering issuing debit cards should give some thought to opening up separate accounts for the cards to keep the primary association funds safe and to limit losses.

We also have a secured account at our local Caterpillar dealer. They would not open a credit account for us because of our non-profit status, so we have another $10,0000 in that account. (There is no such thing as a $10 purchase at Caterpillar; everything is priced in multiples of $1000.) Since most of us have no personal need for Cat parts there has been no abuse of this account, either.

With both the debit card and the Cat account, our objective has been to balance the need to act quickly with need to prevent loss of funds.

GeorgeR8 (Arizona)
Posts: 182

Posted:

I don't like the credit card, debit card, or the check ideas.

We pay $99 a month and everything goes to the management company. Once a month I get an envelope with receipts and a list of what we spent. If I get a bill from a one time service I take it to the MC. Every month I get a budget in the envelope and it is updated by expenses per category.

Petty cash is used. Not often. Stamps and light bulbs mostly. Maybe a dozen entries a year.

TimB4 (Tennessee)
Posts: 21,059

Posted:

George,

Is that the way you do your personal finances?

In my opinion, to have someone other then the Association have full control of Association finances is a breach in fiduciary duty.

It's like you giving me full access to your personal finances and trust that I will pay your bills. There is nothing preventing me from taking all of your money and having a grand vacation in Vegas. Yes, there may be consequences to me for taking such action (if I'm caught). However, you would still be missing your money and it might never be recovered.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Quote:

Posted By RobertH25 on 09/09/2014 10:36 AM
Our new HOA is up and running well and very strong financially. We consist of 15 single family homes and I am the president. We currently us a debit card to pay most the bills.

So rather than pay with debit card I would like the HOA to pay with a cash back card like one for Capital One where you get 2% cash back on everything.

Issue is they want a personal guarantor. My thoughts are if we only get 1 credit card in my name that helps reduce the risk some - but they also report it on my personal credit report so not so great as I personally go after the top credit scores and I'm not sure how this would change my personal credit score, I can't imagine it would help it to say I am personally guaranteeing this for the HOA

Any feedback / experiences ? Good idea? Bad? Any banks or credit card companies others recommend for an HOA?

-Rob

Our HOA maintains a credit card (no rewards or frills) for the purpose of buying supplies on demand but few other things. I'd not mix my personal business with the HOA's affairs, no matter how convenient. Essentially, it's your credit card and you are using it on behalf of the HOA.

If you have local bank, discuss options with them before going to Capital One.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

We pay $99 a month and everything goes to the management company. Once a month I get an envelope with receipts and a list of what we spent.

And what if that company is cooking the books Bernie Madoff style and all those reports are fake? Property management companies are in the news for stealing funds daily. They have no assets and usually rented office space. There is nothing to sue for. And they can open up under another name tomorrow.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Never, never mix personal and business finances. It can create a nightmare. I've done income taxes for individuals that have done this and it can sometime create a horrible mess.

Many years ago I was the president of an organization where collected funds were routinely turned over to the treasurer, some funds were in checks, some in cash. The treasurer would hold on to the checks until he could go to the organization's bank to deposit them. The cash he deposited in his personal account, which was at a bank that was closer to him, for safekeeping until he could get to the organization's bank. When he did go to the organization's bank to deposit the checks he would write a personal check for the amount of cash he had put in his personal account and include that check in with the other checks he deposited.

He kept careful records, so we did learn that he never actually stole any money. However, the auditor picked up on the practice. Needless to say, the person's poor judgement cost him his job.

JC7
Posts: 31

Posted:

Hi Robert,

I don't think having a credit card is good for an HOA. Just my opinion

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