opinion

Jared, Ivanka aren't high-rollers; they're under a mountain of debt

You may be worth more than Jared Kushner: now there is an interesting thought as we enter tax season. He has that white elephant of a building at 666 Fifth Avenue in New York. He paid $1.8 billion for it, and it is a sinkhole of debt. (There are people who seem to be very rich, but it they owe more than they own, they are not rich. They are just in debt.)

People in the know are focused on Kushner debt because of the potential for all sorts of corruption to get him out from under this burden. He needs investors badly, and thus far no one is interested. Unless someone comes along who needs something from the Trump administration. The intrigue of high finance mixed with possible Russian government involvement is certainly a big story, but I don't know much about real estate and business at that level. I was fascinated by a more pedestrian angle that tagged along in articles about Kushner debt: credit card debt.

I may not know about how to finance a Fifth Avenue building worth more than a billion dollars, but I know a thing or two about credit cards. Ivanka Trump has a Visa card. She not only has a Visa card, she has an outstanding balance of $50,000 to $100,000. That is down from a previously reported balance of between $100,001 to $250,000. There are two weird things about this.

First, people like Jared and Ivanka cannot go out with their rich friends and lay down a Visa card at the end of an evening of fine dining. This is the equivalent of wearing plastic shoes and a dress from Walmart. You have to put down your American Express Gold or Platinum card. You cannot carry a balance on those cards. You have to pay them off every month. And you pay an annual fee to get one. In exchange you have a lot of perks like air miles so you can fly for less. They are not called credit cards because there is no credit. They are called charge cards. They are status items that are more or less required in the circles in which they travel.

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American Express does issue credit cards, but they look different and would never be mistaken for a Gold or Platinum card. A lot of people like Jared and Ivanka don't even have credit cards, but a Visa or MasterCard can come in handy with vendors who do not accept AmEx because of the higher fees they charge. Ordinarily people in the Kushner's situation do not run up huge balances on regular credit cards with sky-high interest rates.

Smart people have said Jared paid way too much for 666 Fifth Avenue. I have no way to judge. It certainly looks as if he did. But every kid who takes a personal finance course in high school knows you do not run up big credit card bills except in emergencies. Some people have started businesses using their credit cards, but that is a last resort and generally a bad idea.

In my last years of teaching I began to talk to students about credit cards. I told them that the cute shirt you found on sale is not really cheap if you are paying 18 percent on the money you are borrowing to buy it. And it hasn't been so long ago that you could not get a bank loan to buy a pizza, which is exactly what you are doing when you put it on your credit card and don't pay your credit card bill off every month. All those stores who want you to get their credit card are doing so because lending you money at high rates of interest is more profitable than selling you pizza or shoes.

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Which leads me to Ivanka. Why on earth would she have a credit card balance that high? A person with good credit could go to a bank, get a loan using their real estate as collateral, pay off the credit card and then pay off the bank loan at lower rate of interest.

I am sure I must be missing something here, but the Visa card balance looks very, very strange.

If it is any consolation, a lot of us can go to bed tonight with reasonable confidence that we are in better financial shape than Jared and Ivanka.

Write to Staunton columnist Patricia Hunt at phunt@marybaldwin.edu.