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Presidential candidates (mostly) avoid credit card debt

Fred Williams
With a couple exceptions, the presidential candidates eschew credit card debt

Scott Walker notwithstanding, credit card debt is a rarity among the 2016 presidential candidates, who tend to go in for more exotic financial instruments — if they have debt at all.

Only a few of 14 announced candidates who have filed financial disclosures for the 2016 presidential race have card debts large enough to report, a review of the filings shows.

The Wisconsin governor raised eyebrows when he revealed having between $20,000 and $30,000 on two charge cards in his July 31 financial disclosure statement. The cards, from Bank of America and Barclays, carry rates of 11.99 percent and — ouch — 27.24 percent. Some reports called the card debt a disconnect with Walker’s emphasis on running a tight fiscal ship in Madison. The U.S. average card debt per person is about $4,410, according to 2014 credit report data from Experian.

Both the size of the debt and the rate he is paying are extraordinarily high. The U.S. average card debt per person is about $4,410, according to 2014 credit report data from Experian. And the average interest rate on cards is 13.5 percent for people who carry a balance, according to the Federal Reserve.

Another politician carrying card debt on the campaign trail is Vermont liberal Bernie Sanders, who owned up to balances between $25,000 and $65,000 on two Visa cards. No fan of Wall Street, Sanders doesn’t touch plastic from a big bank — his cards come from the Congressional Federal Credit Union and the U.S. Senate Federal Credit Union. The interest rates on the cards, at 8.5 percent and 10.25 percent, look downright frugal.

For people who carry a balance, the average interest rate on cards is 13.5 percent, according to the Federal Reserve.

Texas Republican Ted Cruz reported two “lines of credit” owed to American Express and Citi totaling between $25,000 and $65,000. The accounts carry rates of 15.24 percent and 17.99 percent. With no set term for repayment, the credit lines appear to be either revolving credit card debt or a close substitute.

Looming larger on Cruz’s form was a floating-rate margin loan of $50,001 to $100,000 from Goldman Sachs. A margin loan is issued by a brokerage for the purpose of buying securities, secured by the securities you already own. The debt on candidates’ disclosures can include those of their spouses, who in Cruz’s case is a Goldman employee. Heidi Cruz is on leave from the investment bank while her husband campaigns, Bloomberg News reported. Cruz’s financial disclosure includes assets between $177,009 and $480,000 in Goldman mutual funds, among other holdings, putting his debt load in perspective.

While credit cards are a staple of mainstream economic life, it’s not surprising that people with upper-middle class incomes and above — a group that includes the field of announced candidates from both parties — has little to do with plastic, wealth managers say.

“It doesn’t make any sense for these folks to have credit card debt,” says Jon R. King, a certified financial planner at Pegasus Financial Solutions in Austin, Texas. People of means have other, less expensive options in their financial toolbox.

A good example is Martin O’Malley, the Democratic candidate who served as mayor of Baltimore, governor of Maryland, and as the basis for a hyper-ambitious fictional politician on HBO’s series The Wire. His disclosure lists a line of credit from PNC Bank of between $100,001 to $250,000. The obligation has a three year term and an interest rate of just 6 percent, putting credit card interest rates to shame.

Six of the fourteen candidates reported zero debts of any kind: Hillary Clinton, Lincoln Chafee, Rand Paul, John Kasich, Jeb Bush and Chris Christie. Card debts below $10,000 are exempt from disclosure, as are mortgages for homes that aren’t rented out to others.

On the other hand, Florida Republican Marco Rubio, whose personal spending was the subject of a critical article in the New York Times, reported two 30-year mortgages totaling between $350,002 and $750,000, plus a 10-year home equity line of $100,001 to $250,000. The mortgages, incurred in 2005 and 2006, carry rates of 4.25 percent and 6.5 percent, while the line of credit costs 7.25 percent.

Far and away the debt leader of the pack, of either party, is Donald Trump. His 15 listed liabilities — mostly mortgages, as befits a real estate mogul — include four obligations of over $50 million apiece. But for all that debt, the highest fixed interest rate listed is 7.125 percent — about a quarter the rate Walker pays.

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