They want to cap interest rates at 10 percent, but most major unions’ member benefits include credit cards that charge well in excess of that.
S enator Bernie Sanders (I., Vt.) has long been one of organized labor’s top allies in Congress. Senator Josh Hawley (R., Mo.) desires to join him as a friend of the politician’s idea of the working man, which is what unions represent — only 9.9 percent of American workers are union members, and the rates are similarly low in “working class” occupations.
Their latest idea, one shared with Donald Trump, is to cap credit card interest rates at 10 percent. “When large financial institutions charge over 25 percent interest on credit cards, they are not engaged in the business of making credit available. They are engaged in extortion and loan sharking,” Sanders said in a statement.
They should have checked with their union boss pals before taking such a position. Many major labor unions have deals with banks to offer branded credit cards as a member benefit. Some of them can charge interest rates in excess of the 25 percent rate Sanders finds extortionate, and nearly all of them charge higher than 10 percent.
One of the most common credit card partnerships for unions is with Capital One, which offers a Union Plus Mastercard. It is marketed as “Built for Union Members. Backed by Union Members,” and accounts are limited to active or retired union members or their families.
It has no annual fee and an introductory 0 percent APR, but after the promotional period has elapsed, the lowest APR offered is 15.15 percent for the most creditworthy cardholders. Less creditworthy applicants can expect an APR as high as 25.15 percent.
The 15.15 percent APR isn’t bad on a credit card these days, but it’s still a full five points higher than what Sanders and Hawley believe should be legal. And the top of the range of APRs is at a level Sanders considers extortionate.
Unions who participate in the Union Plus program with Capital One include the American Federation of Teachers, AFSCME, the United Food and Commercial Workers, the United Auto Workers, the United Steelworkers, the International Brotherhood of Electrical Workers, the International Association of Machinists and Aerospace Workers, the Teamsters, the Communication Workers of America, and the American Postal Workers Union.
Other major unions have different credit card programs. The National Education Association has a partnership with Bank of America for a cash rewards card that charges an APR between 18.24 and 28.24 percent. The SEIU has a partnership with First National Bank of Omaha for three different credit cards, with APRs that can range between 15.99 and 28.99 percent.
Unions frame these cards, all charging interest rates well in excess of 10 percent, as benefits for members. Some of them are decent cards, offering benefits such as 3 percent cash back or hardship grants for job loss or injury administered by the AFL-CIO. According to Capital One, 92 percent of Union Plus cardholders who answered a survey said they’d recommend the card to others.
Most unions have not said anything about Sanders and Hawley’s bill, but the Teamsters have at least spoken positively of Hawley’s crusade against credit card companies. Union president Sean O’Brien had Hawley on his podcast and said, “You’ve got a lot of our members, our constituents, who are paying 28, 29 percent on credit cards that they’ll never be able to pay off.”
The Teamsters credit card charges a top rate of 27.49 percent for its lowest creditworthiness card. While that isn’t 28 percent, it’s hard to see how the Teamsters card is fine but an extra 0.51 percentage points means O’Brien’s members will “never” be able to pay the interest.
Capital One issues the card, sets the interest rate, and collects the interest payments, not the Teamsters. But Capital One does pay the Teamsters to promote the card, and it’s not chump change. Department of Labor disclosure forms show that Capital One sent the Teamsters a total of $4.31 million in royalty payments between 2021 and 2023.
AFT president Randi Weingarten hasn’t said anything about Sanders and Hawley’s bill, but she has said, “Credit card companies should do their part to reduce gun violence.”
If unions want to make these cards available to their members, and their members want to use them, that’s perfectly fine with free-market proponents. But Sanders and Hawley, by their standard, must be alarmed that their buddies in organized labor are supporting loan sharks extorting their members. Or perhaps they could consider that credit card companies aren’t loan sharks and that banning cards currently offered as a membership benefit would encourage more people to turn to real loan sharks.