Credit card agreements cannot be easily understood claims most of credit card holders. The agreements are said to be on the 12th grade reading level and most Americans are on the ninth. Creditcard.com has conducted a study on how Americans see credit card agreements as unreadable.
Lauren Z. Bowne, Consumers Union staff attorney and Consumer Reports magazine owner, admits that the study shows that there is a big need for something to be done. Roy Peter Clark, a writing expert at Poynter Institute in Florida, says that credit card contract and other relevant documents are written in a hard way so customers won`t be able to understand it. He added further that the writers of the contracts know what they are doing and the writing strategies are not accidental.
With the new federal credit card reform law, it has become more important for customers to read their credit card agreements. Financial advisers would repeatedly advise this but the problems about unreadability and jargon of words can`t make the customers understand what they are dealing with their credit card companies. The need to understand the contract will enable the customers to catch the "gotcha" phrases used by the credit companies that may bring them to pay more fees. Andrew Bernstein, a certified credit counselor for DebtHelper.com, states that telling people to read the contract can be easily done but reading the statements isn`t. Even credit counselors have a hard time reading them, too, added Bernstein.
CreditCards.com conducted a study by analyzing more than 1,200 contracts and hiring researchers to do the research work. The study became possible when credit card issuers are required by the Fed to post their card agreements online as stated in the Credit CARD Act of 2009. CreditCards.com analyzed each statement and graded them by using a common standard in the teaching industry called the FOG Index. FOG which, stands for Frequency of Gobbledygook gives a grade in numeric form for any document. As the grade becomes higher, the document is more difficult to read.
CreditCards.com found out that the average U.S. card agreement is written with a 12.37 grade. Furthermore, they stated that the GTE Federal Credit Union`s agreement requires a 18.5 reading level which is equal to a person who spent at least six years in college. The most wordy agreement from MasterCard and Visa which are both issued by Fifth Third Bancorp contains about 20,800 words and are given a 14.5 reading level. It was compared to the original U.S. Constitution which consists of only 4,018 words. The average agreement for credit is 3,771 words. The contracts that are easiest to read, which needs only a sixth grade reading level, include agreements from the University of Illinois Employees Credit Union, Affinity Federal Credit Union and ESL Federal Credit Union.
With this, consumers find that banks and credit card companies write wordy agreements on purpose just to confuse credit cardholders. Bankers on the other hand deny the accusation. They in turn blame the federal laws and state laws that have required them to disclose terms.