Forgetting to read the fine print: Ouch.
Posted by: Amy S. Choi on November 12, 2008
Or maybe the print, period. I’m generally a pretty astute — some might say obsessive — bookkeeper of my personal finances. I manage mine, and my hubby-to-be’s, cashflow carefully. I don’t use automated bill pay, because, well, I like to know exactly when bills get paid. Over the past few years, I’ve diligently cleaned up the poor financial decisions I made in my early 20s, enthralled with New York and the plastic in my wallet.
I thought I was pretty clever, transferring a small credit card balance to a new card with an introductory deal of 0% APR and no payments for 12 months. I was feeling even cleverer for having sealed the deal in late summer, before the whole credit world collapsed.
Then this morning, I got a call from the creditor. I had missed my scheduled payment, tripped my covenant, and, as a result, my interest rate shot up to 18.99%. Whoops.
How I managed to miss the fact that indeed, I do have a 0% APR but still owe monthly minimums, is beyond me. Those pesky details, I guess. Luckily, with some groveling and an immediate payment, my good standing was restored and I was able to get back to my 0% rate - at least, as long as I don’t screw up again. But it did make me wonder: With so many entrepreneurs turning to credit cards, how often do simple misunderstandings like this balloon into major financial mishaps? This isn’t exclusive to credit cards, of course. Tripping a covenant on a traditional bank loan, like, say, exceeding your debt to equity ratio, could force you to pay your entire balance immediately. While lenders may have forgiven some sins in the past, it’s unlikely they will today. So learn from my lesson and do yourself a favor: pour yourself a drink, pull out the magnifying lens and get ready for a night of reading. You don’t want the fine print to get in between your business and necessary financing.