My recent credit card statement came in the mail, as it always does, and I opened it, as I always do, but this time...well, if I were a cartoon character, my eyes would have bulged out, my jaw would have dropped to the floor, and then exploded into a million tiny fragments. That's because, just as the Credit CARD Act of 2009 promised, banks are now required to exactly spell out the terms of your agreement on your credit card statements.
As regular readers of WalletPop might know, after almost two decades of being mired in credit card debt, I finally had to wave the white flag and declare bankruptcy a few years ago. But last year, my wife had a lot of dental work that needed to be done, and we were approved for a card that's only used to pay for medical care. (I'd like to name the credit card that I use for this, just so people are aware of it, but there's that whole identity theft thing.)
The $3,000 or so it cost for my wife's dental surgery was put on this credit card, and we wound up getting deferred interest. So if we pay off the remaining $2,229 by October, we won't pay any interest. Thankfully, I have no serious concerns that this won't be paid off in time. Especially because of the information they've given me, I know that I will get this debt paid off before it's due.
But just for fun -- in the way that being run over by a car is fun -- I thought I'd go through my credit card statement and take a look at what's new on my bill. For those of you who haven't seen your credit card statement since the CARD Act went into effect on February 22, it might be interesting to take a closer look at it.
Late payment warning: My card statement reads, "If we do not receive your Total Minimum Payment Due by the Payment Due Date listed above, you may have to pay a late fee up to $39.99 and your APRs may be increased to the Penalty APR of up to 29.99%." (My deferred interest rate is currently 22.98%.) I appreciate that information. I didn't know how much the late fee was before. I'm sure it was buried somewhere in the previous statements, but it's front and center on the bill, and this is a nice change. These are all nice changes, actually, even if they aren't all pleasant to read.
I find the "may have to pay" language interesting. Does this mean I may have to pay a late fee higher than $39.99? I know they certainly won't lower it.
The time the payment is due: This is novel. They actually say on the statement that the payment is due by 5 p.m. EST on the due date. Before, the only way I found that out was when I was making a payment online, and then, only at the last minute, as I was actually typing in my bank information. It used to be as if, gee, (insert nervous laughter here), they wanted me to miss that 5 p.m. EST deadline.
Minimum payment warning: This is where my statement gets really interesting. The warning almost reminds me of the language you'd see on a pack of cigarettes. There's a little table that explains that if I make no additional charges using this card and each month I pay only the minimum payment of $67, I can pay off my $2,229 in 16 years. And once I have paid it all off, I will have paid the company $6,093.
Then it also notes that if I pay $95 a month, I can have it paid off in three years and will only pay $3,420, which, and they even do the math here for me, is a savings of $2,673.
But I keep looking at the 16 years part. If I paid the minimum monthly payments, it would take 16 years to get this debt paid off. I'd be 56 then. And now I'm wondering how I would have felt if I had had this sort of information back in my mid-30s when I was way in over my head, deep in debt. I'm sure I would have had quite a few panic attacks if my credit card statements had been so stark and transparent about how deep in debt I was. But I also suspect that if this information had been on credit cards for the past, say, 20 years, like the time I first started using credit cards, I might never would have gotten so far into debt.
I also suspect that a lot of people this month -- the folks who are where I was several years ago -- are looking at their statements and having some panic attacks of their own. That's one reason I thought it was kind of a nice touch -- though I don't know if this will be on all credit card statements -- to see a telephone number on my bill, right under the minimum payment warning, telling customers that they can call it to receive information about credit counseling services. I have a sinking feeling that an awful lot of people, after reading their statements, are going to be reaching for the phone.
Geoff Williams is a regular contributor at WalletPop. He is also the co-author of the new book Living Well with Bad Credit.
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