Newt's interesting no-interest Tiffany's loan

I rise, not to throw glitter on him, or to excoriate him for ill-chosen words, but to defend Newt.

Newt Gingrich's campaign for the Republican presidential nomination has gotten off to a stumble-footed start, with the aforementioned glitter-dump by a gay activist and a chewing out by an Iowa conservative over unflattering comments about the budget plan of a fellow Republican, Rep. Paul Ryan.

Then, this past Sunday, Bob Schieffer, host of CBS's "Face the Nation" program, grilled Gingrich over disclosures he had owed a "revolving charge" account with Tiffany & Co. somewhere between $250,001 and $500,000. (On federal public disclosure forms, public officials need only disclose the range of amounts owned or owed.)

"Who buys a half-million dollars worth of jewelry on credit?" Schieffer demanded.

Gingrich downplayed it, saying that he and his wife, Callista, are relatively debt free and have a good income. "We don't do elaborate things."

When Schieffer drilled in, Gingrich described the account as a "revolving account." Credit cards are the most widely known kind of revolving account, with charges drawn from a line of credit.

But then he added this: "It's a standard, no-interest account."

That "no-interest" claim raised the eyebrow of the Washington Post's "Fact-checker" blogger, Glenn Kessler. He asked some credit experts, including our own director of marketing and consumer research, Ben Woolsey, whether no-interest borrowing is plausible.

Well, no, they answered. The norm is that retailers' credit cards charge interest -- higher interest than regular, use-'em-anywhere credit cards. Kessler gave Gingrich's statement to Schieffer a "three-Pinocchio" rating, meaning it contained "significant factual error and/or obvious contradictions."

Tiffany's own current terms and conditions document for its revolving credit customers does, indeed, lay out its normal interest charges. They vary by state, with residents of Virginia, where the Gingriches live, paying a whopping 21 percent APR. By contrast, the May 18 CreditCards.com weekly national survey places the average credit card rate at 14.85 percent.

At the low end of the range of what the Gingriches owed, $250,001, our credit card minimum payment calculator shows that with Tiffany's standard 4 percent minimum payment, the initial minimum would have been $1,000 a month, and it would have required 297 payments -- almost 25 years -- to pay it off. And it would have cost $194,163 in interest.

But hidden in the fine print, there's another possibility.

Deep in Tiffany's terms and conditions document is something you don't see in many retailers' card agreements -- the option, at the store's discretion, to make an item no-interest.

It states:

"No Interest Charge Option: If any item is designated as 'Interest Free' on the sales invoice or otherwise at the point of sale, you will only be required to pay a fixed percentage of the amount of said item at the time of sale, with the remaining balance to be paid in equal monthly installments, the number of which shall be set forth in the sales invoice. The amount of each such installment will be included in the Minimum Payment Due figure on each statement. No Interest Charge will be imposed on the balance attributable to that purchase as long as the Minimum Payment Due shown on your monthly billing statement is paid in full by the Payment Due Date shown on that statement. If, in any billing cycle, the Minimum Payment Due is not paid in full and when due, a Interest Charge will begin to accrue and will be imposed."

In essence, the store may decide to convert a revolving charge into an installment loan, with no interest charged. It may be an option they grant to VIPs and high-rollers. (I'm not a Tiffany's guy, so I don't know for sure.)

Gingrich may have earned plenty of Pinocchio noses in the past, but for this? I don't think so. Tiffany's loan documents say it's entirely possible.