Living with credit

Pence, Cohen and credit card questions

John Egan

Two key figures in President Donald Trump’s orbit aren’t setting great examples for other credit card holders around the planet.

In the case of Vice President Mike Pence, it’s running up a hefty amount of debt on one credit card.

In the case of Trump’s controversial personal attorney, Michael Cohen, it’s apparently dipping into business funds to make payments for a personal credit card.

Both cases demonstrate that even people in high places can slip to lower levels regarding their credit card behavior.

Pence’s credit card predicament

Pence’s credit card activity isn’t nearly as questionable as Cohen’s, but it’s still eyebrow-raising.

A financial disclosure report filed May 15, 2018, with the U.S. Office of Government Ethics shows Pence had $15,001 to $50,000 in debt on a single Chase credit card last year.

In terms of monetary details, all we know is the range of Pence’s credit card debt. We don’t, for instance, know what the annual percentage rate (APR) is.

On its own, the amount of Pence’s credit card debt isn’t a terrible thing.

However, Pence isn’t a member of the millionaire club like Trump is; the vice president’s annual government salary is $243,500, and he’s not independently wealthy.

So, compared with his boss, the vice president is a man of relatively modest means.

Getting schooled on debt

This means Pence presumably would find it harder to pay off his credit card debt than Trump would. Making that task more difficult is that Pence is weighed down by as much as $250,000 in student loan debt.

Through Great Lakes Higher Education Corp., a student loan provider, Pence has eight Parent PLUS loans with interest rates ranging from 6.06 to 6.96 percent, the financial disclosure report shows. The payoffs of those loans are scheduled for 2023 through 2026.

Pence and his wife, Karen, have three children: Michael, a graduate of Purdue University; Charlotte, a graduate of DePaul University; and Audrey, a graduate of Northeastern University who’s now studying law at Yale University.

The Parent PLUS loans probably were taken out to cover tuition and other college expenses for all three Pence children.

Financial imbalance

If you consider the pile of student loan debt, it’s understandable that the vice president has amassed as much as $50,000 in debt on his Chase credit card.

But you’ve still got to wonder how Mike and Karen Pence managed to get into that situation. If you’re earning $243,500 a year and coping with up to $250,000 in student loan debt, credit card debt of up to $50,000 would be difficult to handle.

A collision of business and personal finances

Pence isn’t the only Trump associate who’s finding credit tough to manage.

The New Yorker magazine reported that Cohen, Trump’s personal attorney, appears to have relied on his Essential Consultants LLC business bank account — the same one he tapped to pay $130,000 in “hush money” to porn star Stormy Daniels — to cover personal expenses: his American Express bill as well as bills from AT&T and Mercedes-Benz.

The numbers for those three accounts were marked on the memo lines of Essential Consultants checks, the magazine says.

It’s unclear what the totals for the American Express, AT&T and Mercedes-Benz bills were, but writing business checks to pay personal bills isn’t a sign of financial stability.

Lessons we can learn from Pence and Cohen

So, now that I’ve laid out the credit challenges for Pence and Cohen, what does it all mean for you? Here are three takeaways:

Refinance student loans

If you’re paying off a number of student loans with interest rates of at least 6 percent (like Pence is), you should look into refinancing the loans at lower interest rates. Some lenders offer refinancing rates of less than 3 percent for student loans.

Reduce your credit card debt

If your debt on one credit card is as much as one-fifth of your annual income (as is the case with Pence), it’s time to cut expenses and put those savings toward reducing the debt as soon as possible.

Don’t mix business and personal expenses

If you’re earmarking money from a business bank account to pay off a personal credit card (as Cohen seems to have done), stop doing it. Now. You should never mix business and personal expenses. It makes accounting and tax filing even messier.

The financial state of affairs for Pence and Cohen just goes to show that fame and fortune aren’t always in sync with each other.

See related: Presidential candidates (mostly) avoid credit card debt

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