I got my credit-card bill the other day. This is the first bill since the new credit-card reform legislation took effect. This was the bill that was supposed to protect consumers from all kinds of nefarious practices by the banks. Of course, the bill was enacted on terms that gave the banks nearly a year to raise our interest rates and otherwise change the terms on credit cards in advance of any sense of fairness taking hold. Congress was fully prepared to protect consumers, just as long as it protected the banks first.
So while it was really no reform at all, and the banks will continue to screw their customers at every possible opportunity, we’re all supposed to feel good about it. There was actually one change that was kind of an eye opener. There is a new box on the bill that shows the impact of making only the minimum payment required, and the difference that results from making a payment that is only slightly higher. My bill this month was bigger than usual because it had a set of tires for the truck and a couple of other big items (not to mention a lot of lunches at Deer Valley) on it.
According to the new information box on the bill, if I made only the minimum payment, and never charged another dime on the card, it would take me 23 years to pay off the tires. The interest paid would actually exceed the principal, and of course the tires (and the truck) would be long gone. But if I paid something close to double the minimum required, I could pay off the bill in three years and save about half the interest. Wow.
The interest rate is 13.24 percent, unless the payment is received late, in which case it bumps up to 29.99 percent. Then, instead of paying off the tires in 23 years, the amortization term at the 29.99 percent interest rate would be something like eternity.
I put everything on the credit card. It’s unusual for me to have more than about $50 in cash. But I also pay the credit card off in full every month. I’ve never paid a dime in credit-card interest. So I really don’t care much if the interest rate is 13 percent or 30 percent — I’m not paying anything. In fact, the bank gives me a rebate on credit-card purchases every now and then. With any luck, people who never gave any thought to the reality of paying for a set of tires — that last three years — over 23 years will figure out that they are getting screwed and will actually pay down their debt.
In other financial news, I was looking at the annual report for a mutual fund I’ve got some shares in. They are very proud of the fact that they were up 84 percent for the year. Of course they were down about 95 percent the year before, and about 90 percent the year before that. So while it’s nice to have it turn around a little, the nickel-a-share increase leaves me a little less than euphoric. I probably won’t live long enough to get back to even on it. But what caught my attention was their economic forecast.
The wise managers of the mutual fund made this prediction: “We expect 2010 to be a year of better-than-expected economic growth.” For that they are compensated well into the mid-seven figures. We expect things will be better than we expect. And we’ll be surprised if our expectations are wrong.
But the best news story of the week has to be the resignation of Kevin Garn from the state legislature. In a tearful speech on the floor of the House, Rep. Garn explained that he had been involved a “non-sexual” naked hot tub incident many years ago. He was 28 and the girl he was with was an underage 15-year-old employee under his direct supervision. Years later, when he made an unsuccessful run for Congress, the girl, now grown up, contacted him and threatened to go public. Garn did the “honorable thing” and paid her $150,000 in hush money. (I’m not sure what kind of “non-sexual” naked hot tub incident requires $150,000 in hush money, but it sounds like a whole lot of non-sex going on.) But she didn’t stay bought, and was now threatening to go public with the story again.
What’s the world coming to when you pay good money to buy off a scandal and it just won’t stay bought? There ought to be a law. Just imagine if Garn had put the hush money on his credit card instead of using campaign contributions to pay her off.
His colleagues in the Utah Legislature responded by giving Garn a standing ovation. And I believe that says about all we need to know about the members of the state legislature.
Tom Clyde served as Park City attorney in the 1980s and is the author of “More Dogs on Main Street.” He has been a columnist at The Park Record for more than 20 years.