Credit card agreements are a contract. And like many contracts, they are written in “legalese” — language that is not understandable by most of us.
In 2011, the Consumer Financial Protection Bureau said that these contracts were written in language that was not understandable by the common borrower and urged companies to adopt short, easily understandable contracts. What kind of progress has been made over the last five years? Very little, it seems.
Researchers with CreditCards.com, a credit card comparison and information website, recently did a study of more than 2,000 different credit card agreements and found that more than half the agreements were written at a level that most Americans can’t understand. In a phone survey of 1,000 people, respondents described their agreements as complex, wordy and tedious. The bottom line is many of us simply find it too complex to try to figure it out.
The average credit card agreement is written at the 11th-grade reading level, according to the Flesch-Kincaid reading scale. Since most Americans have graduated from high school, these agreements should be completely understandable, correct? Not hardly. Most of us read at a level two to three grades below the last grade we completed. By this measure, agreements should be written at the eighth- or ninth-grade level.
Average reading level doesn’t tell the whole story and a deeper look tells more. Of the credit card agreements examined, only one was at an 8.2 grade level. They ranged from this level to a handful of agreements at a level above grade 16. So your average college graduate couldn’t understand them.
Besides the readability, length of the agreement also complicates the understanding by consumers. The Consumer Financial Protection Bureau urged that agreements be not much longer than 1,000 words. The average of those examined was 4,900 words, with some ranging as much as 15,000. Printed out, that translates to more than 30 pages of paper.
Though the agreements are complicated, you have to have a basic understanding of what you are agreeing to. Again, it is a contract, and you must live up to your side of the deal. Rules about fees, interest rates, timing of payments and the way your payments are credited all affect how much you pay and can even damage your credit for years. We must have a grasp of the terms and conditions related to our cards.
To protect yourself, know what is written on your agreement. Print it out and read it. If you are like me and have had the same card for many years, it’s time to review. These agreements change. They probably sent the changes to you, and you just might have not read them. Checking the current information will enlighten you or will refresh your memory of the terms.
One of my greatest complaints is the size of the print used in the contract. Enlarge it if needed either on your computer or by copier.
If you can’t understand the agreement, call the company to help you understand it. I can’t think of a better way for companies to take in how hard their agreements are than to be questioned. Allow lots of time and get yourself a cup of coffee first — you’ll be here a while. Be sure to take notes as they talk. Make sure you have a crystal clear understanding of exactly what the contract says.
Above all, don’t be afraid to walk away if the agreement doesn’t suit your buying habits. Tell the company that the terms don’t suit you. They may change the terms or you may need to shop for a more favorable agreement.
Make sure you know exactly what you are agreeing to. Your financial health depends on it.
Roxie Rodgers Dinstel is associate director of Cooperative Extension Service, a part of the University of Alaska Fairbanks, working in cooperation with the U.S. Department of Agriculture. Questions or column requests can be e-mailed to her at firstname.lastname@example.org or by calling 907-474-7201.