Raising Your Disclosure Awareness
For years, credit card companies and banks would send out credit card offers with big, rosy promises attached to them, but you literally had to read the finest of print to discover what your real interest rate was and what the actual fees attached to the card would be. This all changed a few years ago when the American and Canadian government passed laws helping to protect consumers by requiring credit card companies to print disclosure graphs on all of their credit card offers. They aren’t easy to find on most offers, they are usually on the back and in the corner, but they are there. The disclosure box tells you what your intro interest rate will be, when it wears off and what the real interest rate will be. It must also tell you every fee attached to the card, like an annual fee, a membership fee or a fee for not carrying a balance. The smartest thing you can do when you get a credit card offer in the mail is to skip the bright colors and the free bonus offers and hunt down that signature disclosure box. It is the only place on your credit card offer that you won’t get any glitzy talk or fancy designs. Just the truth.
A recent study by the US Government, however, shows that disclosures aren’t doing a very good job of disclosing what is going on. They tend to be confusing, misleading and just plain hard to figure out. Let’s take a closer look at these important parts of credit card offers and see what we can decipher.
The single biggest problem facing the modern credit card disclosure is that they tend to use “lawyer-speak†to try to confuse and mislead customers. If it were up to credit card companies, the disclosure would be a thing of the past and they would be right back to lying to customers so they could hook you in. But disclosures require that the card company be honest about their business practices. Most card companies follow the law, but not the spirit of the law. They will use large words that the average person doesn’t know to try to confuse the average customer. If you have trouble understanding your disclosure, get out an old-fashioned dictionary and look it up, or, at the very least, Google it.
The next problem with disclosures is the use of creative wording to hide the real fees that a credit card charges. Again, the card company must follow the law with their disclosure, but they will try to use language to disguise how much a fee really costs. Instead of saying that an annual fee of $100.00 is attached to the card, they will say something to the effect that there is a daily fee of .27 cents attached to the card. When the average person reads that, they don’t do the math in their head to figure out the bigger picture. They see .27 cents and shrug it off since it is such a small amount. Technically, the card company is being honest, but they are doing everything they can to hide their true intent.
Finally, card companies have been twisting the words about particular clauses in the card contract. One of the most fiendish things card companies do is they raise your rates through the roof if you are late by one day on a payment. Since this technically doesn’t count as a fee, the card company doesn’t have to list it in the disclosure. The government is working on changing the disclosure laws to help out more folks, but until then, make sure you read your disclosure before you sign up for a credit card.