NDSU Extension Service - Ramsey County


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What Does That Mean?

What Does That Mean?


Have you ever tried reading your credit card agreement? Known for their fine print and formal style of writing, credit card agreements are not easy reading. And an analysis of their readability just proved it. CreditCards.com hired a team of researchers who, using computer software downloaded and analyzed every word of the majority of credit card agreements offered in America. More than 1,200 contracts were included in the analysis. Their comparisons found that the average U.S. credit card agreement is written on a 12th grade reading level - three grades above the average American's reading level. Only one in five adults reads above a 12th-grade level.


This situation makes for a Catch-22 for many credit cardholders. Financial advisers have long strong urged card users to read their credit card agreements carefully to understand the deal they have with their card issuer. It has become even more important since a 2009 federal credit card reform law led to multiple changes in terms. In the new world of credit card use, they say, an informed consumer is better protected against "gotcha" fine print and surprise penalties. However most adults are unlikely to comprehend what they are reading.


What to do? First, take your time reading the agreement with your credit card. This is not a quick, 5-minute read but one where it helps to take notes or make your own chart of the various features and restrictions. Yes, it does sound a lot like taking notes for a high school or college class but remember this is your money we are talking about so you have a vested interest in understanding the agreement.

Here is a quick checklist of the absolutely essential information you should look for on your credit card agreement –


    • The introductory and regular APRs for new purchases and balance transfers


    • Annual fee


    • Late fees and deadlines


    • Details on how to earn rewards and what your rewards points/miles are worth

Other alternatives include working with a financial counselor, your local banker or a loan officer. Legislation is being considered that would require credit card companies to provide a synopsis of their terms but for now being an alert consumer is our responsibility.

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