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Obtaining a Credit Card for our Finances

Started by VinceS1 • 14 replies • 1428 views

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VinceS1 (Arizona)
Posts: 12
Posted:
Living in a 16 Unit complex, and it being self governed. We have several projects
upcoming that need to be taken care of. It had been mentioned that two of our board members are contemplating a "credit card" for upcoming finances. Our little haven was born in 1985 and there are some things (roofing, walkways, painting etc)
that need to be attended to. I reallize that these endeavors need to be taken care of and I am all for an assessment to help eleviate such debt. What are the pro's and con's of having a credit card? We are talking $1000.00's of dollars here and
what are my recourses besides telling these people I will take legal action! Only
strong and non bias replys are requested, for this is the second time I have tried
this web site. What are the peoples rights, (obligations) when they decide to move
out? Are we liable? Before I leave here yes there has to be a majority vote, and I
am a Board director. (member) Thx.
PaulM (Pennsylvania)
Posts: 1,347
Posted:
VinceS1: IMO, a credit card is not the ideal option for an Assn. to pay for a project for many reasons--high interest rate, too convenient, business ethics of its use, etc.

The projects you mention, I assume, are those the Assn. is responsible to repair and maintain to keep the integrity of the community. That being said, they are also projects which should be funded through the Capital Reserve Fund,
established for this purpose, with a portion of the assessment fees "growing it up" over the years.

Since you are a Board member, I strongly encourage you to investigate other
finance options before you decide on a credit card. What do your documents state regarding obtaining member vote to levy a special assessment?

SusanW1 (Michigan)
Posts: 5,202
Posted:
If you do, you will need anyone handling that card to be bonded and the Board would have to be sure its insurance covers liability.

IMHO you association is too small to have a credit card. Perhasp bills aren't being paid on time or reimbursements take too long.

Why the urge to get a credit card?
MicheleD (Kentucky)
Posts: 4,491
Posted:
If there is nothing in your governing documents that preclude the association getting a "credit card," then I, personally, wouldn't have a problem with it.

I know that many big box hardware stores (lowes, home depot, etc) have special deals on purchasing materials over certain amounts on "credit" (which means they issue a revolving credit card at the time of purchase.) Sometimes that means that there is no interest for 12 months on purchases over $300, for example.

But if our HOA decided to go down that road (revolving credit), then I would be sure that there were the same level of safeguards in place as there are on who can write checks, and that process, before just running out and getting one.

RogerB (Colorado)
Posts: 5,067
Posted:
Vince, you might want to consider a small petty cash advance for minor out-of-pocket expenses. I looked into a credit card at home depot to help out a townhome handyman. It required someone being personalby responsible in case the HOA did not pay their bill. I definitely would have the vendor bill the HOA for major expenses such as roofing, walkways, painting, etc.
GeraldT4
Posts: 1,022
Posted:
VinceS1 - Is there money set aside in reserve, and maintenance accounts to cover some of these expenses contemplated to be initially paid for by credit card? Is there adequate money set aside to be applied towards these expenses once the credit card bill is due? A business credit card with a limit held by the Treasurer and or Secretary for minor purchases would probably be fine in theory. However for any other purposes such as paying for roofs, or walkways, would in my opinion not be wise. Pro's of using a credit card are the float you may get by delaying a payment until the balance is due. Con is the exorbitant interest that may accrue if you don't have the funds set aside to pay for the credit card balance.
HaroldS (Arizona)
Posts: 906
Posted:
Yes, of courses. My first thought was: Where are your reserves to pay for these known and expected expenses? Then: How are you going to pay off the credit card? If you are using it as a loan vehicle, there are certainly way less expensive interest rates available rather than using a credit card. Who would control the credit card? Who would determine when and what to charge? I have to assume your present budget does not cover these expenses, so a special assessment and/or dues increase will be necessary.
VinceS1 (Arizona)
Posts: 12
Posted:
Although our complex is still quite attractive: We do have expenditures that need to be taken care of. Examples (estimates only) Spa = $16,000.00, brick walk-way =
$27,000.00, Roofs (when needed), new paint on buildings etc.,The 2 women on our board insists that a credit card would be beneficial. My concerns since getting to know them I do not have any "trust".
GeraldT4
Posts: 1,022
Posted:
VinceS1 - Hopefully your Board consists of two or more other members that agree with you. Unless the funds are set aside to pay off the credit card, I'd venture a guess the accrued interest rate on a $43,000 purchase would be crippling. Better to take out a low interest loan for the amount you don't have set aside.
VinceS1 (Arizona)
Posts: 12
Posted:
Although our complex is still quite attractive: We do have expenditures that need to be taken care of. Examples (estimates only) Spa = $16,000.00, brick walk-way =
$27,000.00, Roofs (when needed), new paint on buildings etc.,The 2 women on our board insists that a credit card would be beneficial. My concerns since getting to know them I do not have any "trust".
VinceS1 (Arizona)
Posts: 12
Posted:
Although our complex is still quite attractive: We do have expenditures that need to be taken care of. Examples (estimates only) Spa = $16,000.00, brick walk-way =
$27,000.00, Roofs (when needed), new paint on buildings etc.,The 2 women on our board insists that a credit card would be beneficial. My concerns since getting to know them I do not have any "trust".
TimH1 (Alabama)
Posts: 17
Posted:
A $16,000 spa? A $27,000 walkway? A new roof? These aren't minor expenditures (especially for a small 16 unit condo assn.) that even need to be charged to a credit card. A/C filters, light bulbs, cleaning materials, etc.- sure, but major expenses like those above should be budgeted for the fiscal year, bid out and paid in CASH when the work is performed. I see no issue with a credit card per se, but, keeping up with the inventory of stuff purchased, unless you have a utility closet where it will all be kept and logged, only invites fraud and questions from members. Where did that fan ya'll bought go?
TimH1 (Alabama)
Posts: 17
Posted:
A $16,000 spa? A $27,000 walkway? A new roof? These aren't minor expenditures (especially for a small 16 unit condo assn.) that even need to be charged to a credit card. A/C filters, light bulbs, cleaning materials, etc.- sure, but major expenses like those above should be budgeted for the fiscal year, bid out and paid in CASH when the work is performed. I see no issue with a credit card per se, but, keeping up with the inventory of stuff purchased, unless you have a utility closet where it will all be kept and logged, only invites fraud and questions from members. Where did that fan ya'll bought go?
RogerB (Colorado)
Posts: 5,067
Posted:
Quote:
Posted By VinceS1 on 03/24/2008 2:23 PM
Although our complex is still quite attractive: We do have expenditures that need to be taken care of. Examples (estimates only) Spa = $16,000.00, brick walk-way =
$27,000.00, Roofs (when needed), new paint on buildings etc.,The 2 women on our board insists that a credit card would be beneficial. My concerns since getting to know them I do not have any "trust".

Vince, IMPO it would be totally inappropriate to use a credit card for these expenses. For minor expenses (less than $1,000) get a debit card for those signees who are on the checking account. But first make sure the HOA has fidelity (theft) insurance.
VinceS1 (Arizona)
Posts: 12
Posted:
We are in the mist of having an annual HOA meeting, in which I am very positive
maybe 6 Homeowners out of 16 Units will attend! We have 5 board members and I am
concerned because of favoritism, there may be the chance of having a $35,000.00
"credit card". O'kay I'll bend a little bit! First off starting at $10,000.00 and than increasing the credit limit. I do not trust the treasurer with our funds in the first place, and what are my recourses? When we first moved in a few years back, no one ever told us there was a "lawsuit" against our small community for the constructions (roofs) of our units. We were than told boldly we had to pay $1500.00! It was than said we won the "CASE" and the roofing company went bancrupt
. WE lost thousands of dollars. Getting back to retrospect thank-you HOA TALK.com
I have been an active Board member, and yes I am ready to retire (even though young)! from all of this garbage volunteer HOA. 2 stories in 1. Good day and T-
YOU!

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