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Sen. Barack Obama has been lashing out at credit card companies of late, accusing them of “unfair and deceptive” practices, meeting publicly with citizens who had racked up big card debts and promising to enact a cardholders’ bill of rights.
If he’s elected and has his way, he may end up giving a break to Sen. John McCain, who has been paying an eye-popping credit card rate of 25.99 percent on his personal card.
We know this because, on Friday, the annual financial disclosure forms for U.S. senators became public for 2007, and news coverage has naturally focused on those filed by Obama and McCain, the presumptive presidential candidates of the Democratic and Republican parties.
Obama’s disclosure form is a straightforward eight-page document, according to the copy posted on the Web by OpenSecrets.org. He reported that he had no reportable liabilities. (They become reportable at $10,000, so we don’t know if he’s currently a credit-card-carrying Democrat.) He also reported book royalties of $4.1 million in 2007, and that he put a lot of money toward his own retirement and toward funding his daughters’ 529 savings plans for college.
McCain’s disclosure form, however, checked in at 51 pages, much of it because of the complex financial life of his wife, Cindy. She inherited a substantial sum from her father, an Arizona beer distributor, and has gone on to become a successful investor and businesswoman in her own right.
The forms show ranges of figures rather than exact amounts, but they show that she carries a pair of American Express cards, on each of which she owes $100,001 to $250,000 — meaning she owes a minimum of $200,002 and a maximum of $500,000 on her two AmEx cards. But the forms also show why she would feel comfortable with those loans: She’s paying zero percent interest. American Express also has given a “dependent child” of the McCains a charge card, on which $15,001 to $50,000 is owed. That card also carries a zero percent rate.
But on their joint credit card, from Chase, the McCains have not been so fortunate. McCain reported he was paying 25.99 percent on their joint credit card, on which they owed somewhere between $10,001 and $15,000. That’s at least 10 percentage points above the average credit card rates at the end of 2007.
That’s not the kind of interest rate that someone with good credit gets; it’s usually the rate of someone who has defaulted on credit card payments — either to Chase or someone else. Part way through 2007, under pressure from Congress and federal banking regulators, Chase and other banks gave up the practice of “universal default,” a policy that let card issuers raise rates if consumers were late on any payment to anyone.
Current Chase cardholder agreements have varied “default” or “penalty” rates — usually based on the prime rate plus an add-on rate. Their current card agreements show that rate in the mid- to high-20s.
Based on the common monthly minimum payment formula of interest plus fees plus 1 percent of the balance, McCain’s monthly minimum payment on a $10,001 debt at 25.99 percent would be $314.50. If he started making that payment in January 2008, and he kept making minimum payments, it would take him 406 months to pay it off, at which point he would have paid $21,670 in interest. He’d also be 104 years old.
McCain has taken no stand on credit card issues during the campaign. Obama, meanwhile has proposed a “Credit Card Bill of Rights” that, among other things, would bar card issuers from imposing punitive rates on old debts — the sort of thing that happens to people who have their card rates raised to 25.99 percent.
Though the men are vastly different as politicians, their experiences with credit cards may not be that different. Obama said, according to the Chicago Sun-Times, he knows how easy it is to get caught by deceptive credit card deals: “In the interest of full disclosure, I’ve gone through this. I’ve had credit cards,” he said.