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Copyright © 2007 Ed Bagley

Two seemingly unrelated stories caught my attention yesterday. One was about corporations stockpiling cash and the other was about consumer savings rates.

Some American corporations really know how to sock it away.

ExxonMobil ended its 2006 first quarter with $36.5 billion (not million, but billion) cash in hand, according to USA Today, giving the world’s No. 1 oil company more cash than any company in the USA.

Could you even imagine having $36.5 billion in your savings or retirement account? That is a lot of moolah, or serious money for people in the know.

Microsoft was close behind with $34.8 billion in cash. Microsoft’s savings were even more significant when you remember that Microsoft paid a $32 billion one-time dividend in 2004 after starting an annual dividend program in 2003.

Johnson & Johnson was a distant third with $17.2 billion, but even $17.2 billion is a staggering figure.

Industrial companies in the Standard & Poor’s 500 had stuffed their corporate piggy banks with $642.7 billion by June of 2006. Imagine just the interest a company generates on its retained earnings. ExxonMobil earned $946 million in 2005.

The savings rates of consumers are just the opposite.

In 2005 personal savings rates of consumers moved into negative territory for the first time according to the U. S. Commerce Department.

That means consumers not only spent all of their after-tax income but dipped into existing savings or borrowed money, often with credit cards (the scourge of modern American finance) to cover their spending.

This is a fact that I learned from QSR, which is a trade magazine that covers the restaurant and fast food industry. QRS follows consumer spendable income.

By law other monies evaporate from retirement savings accounts through forced distributions. Your government loves to keep consumers spending so the economy grows, and it could care less whether retirees actually need to withdraw their retirement funds early.

Your government cannot keep its nose out of your business, or its hand out of your pocket.

Credit card companies did very well during this period. CBS reported that in 2004 credit card companies collected $14 billion in penalty charges and other fees, accounting for nearly half of the industry’s $33 billion in profits.

You remember credit card companies. They are the leeches who loan you money when you do not deserve it and then bleed you dry until you cannot stand up straight or pay your monthly bill on time.

Then comes the over limit fee, the late fee and the interest on the remaining balance, all of which is calculated to send you to the poor house faster than a merchant can swipe your credit card for a purchase.

I call credit card companies leeches not to be clever but to be accurate.

A leech is really a worm, many of which are bloodsucking parasites, especially of vertebrates, which include mammals, which include humans. And if you think credit card companies do not suck the lifeblood out of you financially, then you will be forever enshrined as their friend in need of being snookered.

You have no need to go looking for leeches at your local pond, most Americans are carrying eight credit cards around with them every day. The average American family has 8 credit cards according to a 2004 report by FRONTLINE (a PBS-funded web site) and the New York Times newspaper.

Here are a few facts you should know about credit cards:

1) Nearly 144 million Americans have a Visa, MasterCard, American Express or Discover credit card.

2) 38% of those credit card users pay their bill in full monthly.

3) 24% pay only the minimum payment monthly. Do you understand that only one credit card with an outstanding balance of $10,000 at 18% interest takes 40 years (yes, 40 years) to pay off if you make only the minimum payment of 2% per month? And that is even if you charged nothing else on the card for 40 years.

4) The average American family carries a credit card debt of roughly $8,000.

5) Did you know that a credit card issuer (generally banks) can raise your APR (annual percentage rate) automatically for any of the following reasons: You went over your credit limit on another card, you failed to make a payment to another creditor, or you applied for and received a loan, including a mortgage loan for a house, a car loan or a student loan. I am not making this up and some of you readers know this.

6) Did you know that there are no legal limits on the amount of interest and fees that banks can charge for a credit card because two U. S. Supreme Court decisions permit banks to charge what the market will bear.

This means a credit card issuer could charge you 100% interest, I,000% interest or 100,000% interest. Wipe that mocking smile off of your face and smarten up.

Your U. S. Supreme Court was not thinking of you when they allowed banks no legal limits on the amount of interest and fees they could charge. I suspect some of those highly educated justices own stock in credit card companies, and even if they do not, they should be ashamed to call themselves justices at any level.

That is why Citibank, the issuer of MasterCard and one of America’s banking giants with its tentacles reaching into every financial area, moved to South Dakota which has no cap on interest rates.

Usually credit card issuers move to South Dakota or Delaware because they are states with weak or no “usury laws” which regulate interest rates.

So what does all of this have to do with the price of tea in China? Let us draw a picture for those who cannot connect the dots.

American corporations are doing well at the moment and stockpiling money while the consumers that feed them profits are saving zero dollars and paying high interest rates.

These high rates are charged not only by credit card issuers but by predatory lenders who prey on those most in need who have not done a good job of handling their finances.

To think that your U. S. Supreme Court allows these kinds of practices to continue is pathetic. It is neither just nor reasonable. It is downright cruel and unnecessary and should stop.

I know this article is not flashy and will probably get little attention from consumers who continue to act as if banks are their best friends.

H. L. Mencken figured it out a long time ago when he said “You can never underestimate the stupidity of the American people.” He said it, not me, but I agree with him in regard to the 24% of credit card users who pay only the minimum monthly payment.