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If you haven’t read your credit card agreement in a while — or ever — you’re not alone.
Only 26 percent of cardholders regularly read these legal contracts that govern credit cards, with 46 percent of cardholders never or hardly ever reading them, according to a recent analysis by CreditCards.com.
Matt Schulz, CreditCards.com’s senior industry analyst, explains:
“These contracts are so daunting that many people never even try to read them. But the sad truth is that experts say the average American reads two or three grade levels below the highest grade they finished in school, so even if they did try to read their credit card agreement, a lot of it would simply go straight over their heads.”
Credit card agreements are written at an 11th-grade reading level on average, based on the analysis of every 2016 agreement on file at the U.S. Consumer Financial Protection Bureau (CFPB). Half of American adults, however, read at a ninth-grade level or lower.
In a poll of 1,000 Americans, CreditCards.com found that the most common single word used to describe credit card contracts is “lengthy,” or synonyms such as “long,” “wordy” and “verbose.”
Credit card agreements are 4,900 words long on average, a decrease of only 500 words since 2011, when the CFPB launched a campaign to help simplify agreements. The federal agency’s prototype agreement contained about 1,100 words.
Obtuse agreements can cause more than confusion. As we explain in “The 10 Deadliest Credit Card Mistakes,” when you apply for a credit card, you are agreeing to take full responsibility for any legitimate charges made with the card. So you can’t afford to ignore the disclosures.
Kathleen Engel is a research professor of law at Suffolk University in Boston who has studied subprime and predatory lending. She tells CreditCards.com that unreadable agreements help protect lenders from lawsuits and help keep cardholders ignorant of how loans work.
“People who understand what they’re getting pay less for credit than people who don’t.”
If you’re in the market for a new or better credit card, check out “Finding the Perfect Credit Card.”
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