The problem with credit card agreements? Most Americans can't understand them

Do you find the legalese in your credit card agreements confusing, that you give up squinting at the fine print and throw the document into a drawer? Well, a new study shows that you're not alone. Even worse, some consumer advocates claim that the card companies make it deliberately tough for you to fully grasp what you're getting into until it's too late.

The site CreditCards.com conducted what it calls a "readability study" of more than 1,200 card agreements with the help of software created by Micro Power & Light Co. What they found is shocking: The average card agreement is written at a twelfth-grade level. This wouldn't be so bad, except the average American reads at a ninth-grade level, and only one in five reads above a twelfth-grade level. In other words, the card companies are churning out these documents it knows 80% of its customers won't understand any more than if they were written in Egyptian hieroglyphics.

Walletpop has long advised you to read the fine print whenever you're applying for credit, a sentiment echoed by Gail Cunningham, vice president of public relations for the National Foundation for Credit Counseling: "It remains the consumer's responsibility to read the contract, ask questions about areas they don't understand, and not sign the agreement until they are clear about the terms," she said in an email message. As CreditCards.com points out, though, sometimes even calling a card's customer service center might not be a perfect solution, since reps can sometimes give incorrect information.

If credit card terms make your head swim, your best bet might be to stick with one of the issuers that spells out their card agreements in plain English. CreditCards.com identified several institutions, including Wells Fargo Bank NA, U.S. Bancorp and Bank of America, all of which write their terms around a manageable ninth-grade reading level. A handful of other issuers offer even simpler terms: Barclays Bank Delaware, Citibank South Dakota, NA and American Express Bank, FSB all clocked in at around an eighth-grade reading level, while Capital One Bank, NA writes its terms at a consumer-friendly seventh-grade level. Whatever you do, though, don't try to tackle the agreement of GTE Federal Credit Union without some headache medication - and possibly a dictionary. The terms are written at greater than an eighteenth-grade reading level, which means they're meant to be decipherable only by someone who's spent six years in college.

Consumer advocates express hope that new laws will help pave the way for simpler card agreements. New rules implemented at the beginning of this month by the Federal Reserve update the Truth in Lending Act to require card issuers to offer users a one-page summary of their terms. Think of it as a "Cliff Notes" version of your card agreement. Some, however, add that more needs to be done when it comes to protecting consumers from lawyer'ed-up card companies.

"What we need is simpler credit card contracts, but we also need fairer credit card contracts," Ed Mierzwinski, consumer program director at watchdog group U.S. PIRG, tells Walletpop. "What good does it do to understand your agreement if it says, 'You have no rights'?" he says.

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