U.S. credit card agreements unreadable to 4 out of 5 adults

If you’ve ever thought that credit card agreements are difficult to read, then you’re not alone. 

A recent study conducted by Credit.com confirms what we’ve all suspected: Credit card agreements are not written in the simplest language. In fact, evidence from the study supports the idea that agreements may be written to utterly confuse us all.

Read the interesting details of Credit.com’s detailed study, which concludes that the average credit card agreement is written at a 12^th grade reading level, “making them not understandable to four out of five adults.”

How credit cards with no spending limits can hurt your credit score

A great article recently published by The New York Times investigates how credit cards with no limits can hurt your credit score.  I highly recommend that you read it.

Also, be sure to read this article: “There is no such thing as a credit card with no limit”. It will help you better understand how some of these cards actually work.

The shocking stats of credit card debt in America

Instead of reading the esoteric reports provided by the Federal Reserve or financial analysts, check out this user-friendly chart which is an excellent overview of credit card debt in America.  View the entire chart at CreditSesame.com.

 

Fact #1: There is no such thing as a credit card with no limit

One of the main goals of this blog is to provide sound advice and to countervail misinformation spread in large part by an industry that thrives and profits from customer confusion.  Therefore, I have decided to begin an enumerated series of posts, explaining and dispelling some of the most common misunderstandings that customers have. (They are in no particular order.)

Fact #1: There is no such thing as a credit card with no limit. 

Credit card companies are masters of marketing ploys—or what some consumer advocates simply would call outright lies. Ranging from the 0% introductory rate to the no annual fee, all of these shrewd tactics are part of a strategy to make the sale. 

One of the most appealing credit card tricks is the credit card with no limit.  It’s brilliant; it appeals to the big and glaring egos of primarily the upper middle class which loves the idea of having no restriction on its consumption. Customers who fall for this trick often have a high sense of entitlement and seek self-validation and public admiration through exclusive privileges. American Express, which understands its market well, has used the no limit lure for years.

Here is how it really works and what it really means: A customer does not have a set credit limit because it is dynamic.  In other words, it is always changing.  A rather complex algorithm takes into account a customer’s real-time spending habits, income, credit history, and other factors to determine a credit limit at a particular time. Many customers misinterpret this feature, thinking that they can buy whatever they want and at whatever price.