The length and readability of credit card agreements, in which issuers disclose their fees, penalties and rewards restrictions, have long been the subject of criticism by consumer advocates. Some are printed in fonts small enough for newspapers to consider off-limits. Others have the type squeezed together so tightly that the low-hanging letters of one line bleed into the one beneath it. The complexity of the language, albeit more subjective, has also drawn plenty of fire.
Two recent studies shed some light on the dangers of putting such critical information in such densely packed documents. Together they suggest consumers could miss key points when skipping ahead to the signature lines, but that the act of reading and understanding such a document in its entirety is beyond the ability of the average applicant.
In a study of online card applications from the 10 largest issuers, card comparison site Card Hub found that many applications buried important information about balance transfer fees and the redemption value of rewards points deep in text-heavy paragraphs where it could easily be missed.
A separate study suggests even a thorough reading of a credit card agreement is no guarantee of understanding it. The average credit card agreement is written on a 12th-grade reading level, three grades above the average American's reading level, according to the study by CreditCards.com. The findings suggest four out of five adults wouldn't be able to understand the documents if they tried.
A spokesman for the American Bankers Association says disclosures have been substantially improved as a result of the Credit Card Accountability, Responsibility and Disclosure Act of 2009, with key points about interest rates and fees summarized in two tables included in all solicitations, card agreements and monthly statements. Now, "your ability to understand what your credit is going to cost you is much better than it was a year ago," since that disclosure requirement recently took effect, the spokesman says.
Of course, the legal onus is on the consumer to read any credit card offer thoroughly and carefully before applying for a card, and industry analysts and lawyers say there's no shortcut for combing through these materials.
A confused customer should call the issuer and ask for an explanation of any unclear points, the association spokesman says.
When evaluating a credit card offer for themselves, consumers can start with a basic common-sense test: If it sounds too good to be true, it probably is.
"If you see some very attractive-sounding teaser deal, just know for sure there's a trap somewhere," says Tim Chen, the CEO of NerdWallet, a credit card comparison site.
