Using Credit Cards: Watch the Fine Print
Wendy Fergerson, Owner and President, Integrated Printing Solutions
Instead of going to the bank in 2003 when my company needed working capital, I went to the mailbox. It started when I used a personal credit card to get though a tight month. I was careful to pick a card with a billing close date that assured that I would have the funds when it was due.
When I realized that I had just borrowed $10,000 in short term capital, it dawned on me that with more cards I could get more money. I began to open credit card applications and compare the introductory offers. I paid little attention to the long term interest rates since I did not plan to carry balances.
It was amazing to me that it was not uncommon to be offered free financing for up to a year for transferred balances. Once the accounts were open every few months I received convenience checks with special offers. Occasionally I had to pay a $50 transaction fee, but to be given up to $15,000 free for between three and twelve months, I thought $50 was more then reasonable.
For the first three years of business ownership, I was able to consistently borrow up to $60,000 per month without paying any interest-a staggering sum of free cash.
There is no magic here and no rocket science. There were, however, a number of things about my situation that made credit cards a viable option. The first is that my husband and I had always been good stewards of our credit rating. When I applied for credit cards I was granted a limit between $10,000 and $15,000. The second key piece of my success was a very predictable revenue stream. A large portion of our business is contractual with set billing dates and firm terms. Knowing when you can expect to receive funds makes it easy to manage your payment calendar.
I learned to evaluate the fine print of the ridiculous number of credit card solicitations that came each week. I was careful to watch out for footnotes on the free introductory offer letters. The tiny footnotes at the bottom of the page contained all the exceptions that turned a good deal into a bad one.
I kept a calendar of all my due dates and a running spreadsheet that included the limit, the terms, the close date, and every transaction. The Microsoft calendar allowed me to set reminders of due dates assuring that nothing slipped thought the cracks and assuring that I did not pay interest.
Sadly, In January of this year, two of the major cards I have been using have realized that I am freeloader and have changed my terms to start accruing interest on the day I make the purchase. Needless to say, I cancelled those cards and applied for replacements. I have noticed that the limits I am being given are a bit less since my level of available credit is sky high and the old cards have not been dormant long.
Thankfully, however, the new lower limits are not an issue as I have moved into a comfortable financial position that allows me to use credit card funds because I can-not because I need to.
I should add that this strategy is only for the entrepreneur who is both diligent and detail oriented. Although credit cards are an avenue to rather large sums of often untapped funds, no card should be accepted without reading all the fine print.
No transaction should be placed on a card without knowing exactly when the payment will come due and having a rock solid plan to meet the obligation. If you proceed to your mailbox with these things in mind, you too can experience the thrill of using someone else's cash to meet your company's financial obligations.
© 2007 Wendy Fergerson. All rights reserved.
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