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Compare readable, unreadable credit card agreement text

By CreditCards.com staff

Some credit card agreements are readable, and some are far more difficult – even when explaining the same thing.

As part of our Credit Card Readability Study, we gathered examples in which different banks explained the same concept in their contracts. Some used understandable plain language, and some ... well, judge for yourself.

The passages were all measured with the same yardstick, the Flesch-Kincaid score, a widely used formula used to assign a grade level to text. A Flesch-Kincaid score of 12, for example, means someone would need to read at a 12th grade level to understand the text.

READABLE AND UNREADABLE: A SIDE-BY-SIDE COMPARISON

Subject: Responsibility for charges

Example 1. Pinnacle Bank - Bank of Colorado Visa Credit Card Agreement Example 2. Palmetto Citizens Federal Credit Union Visa Credit Card Agreement _ Disclosure Statement
You agree to the terms of this Agreement. When you use your Account or let someone else use it, you promise to pay the total amount of the transaction as well as any interest or fees that may be due. All amounts owed must be paid in United States dollars. You promise to do everything this Agreement requires of you. You will be legally bound by this Agreement if you sign an application to obtain credit from us, or if you sign a sales draft, or if you use or permit someone else to use the card. If the Account is a joint Account, you and the joint Account holder each will be bound by this Agreement and each of you will be jointly and individually responsible for repaying all amounts due under this Agreement. Any authorized user of your Account will, by such use of the Account, be bound by the terms of this Agreement.
Flesch-Kincaid score: 9.7
You will be jointly and severally liable and agree to pay the Credit Union for all charges (purchases, cash advances, finance charges, and other charges added to your Account under the terms of this or any other agreements with us) extended to you or anyone else using a Card issued for your Account, unless the use of such Card is by a person other than you who does not have actual, implied or apparent authority for such use and from which you receive no benefit. Authority includes, but is not limited to, any authorized users permitting another person to use any Card(s). Further, all users are obligated to us for all charges they make, authorize or permit.
Flesch-Kincaid score: 18.3

Subject: Grace period on interest

Example 1. HSBC Bank Platinum Rewards Cardmember Agreement and Disclosure Statement Example 2. Financial Center Credit Union Visa Consumer Credit Card Agreement
Your Account has a grace period on purchases. Periodic Interest Charges begin accruing on purchases, balance transfers, cash advances, and credit card checks on the date of the transaction and continue to accrue until your balance is paid in full. However, no Interest will be charged on new purchases for any billing cycle when: • you paid your entire New Balance in the previous month on time; and • you pay your entire current month’s balance on time as well.
Flesch-Kincaid score: 10.1
New purchases posted to your account during a billing cycle will not incur a finance charge for that billing cycle if you had a zero or credit balance at the beginning of that billing cycle, or you paid the entire new balance on the previous cycle's billing statement by the payment due date of that statement; otherwise a finance charge will accrue from the date a purchase is posted to your account. To avoid an additional finance charge on the balance of purchases, you must pay the entire new balance on the billing statement by the payment due date of that statement. A finance charge begins to accrue on cash advances from the date you get the cash advance or from the first day of the billing cycle in which the cash advance is posted to your account, whichever is later.
Flesch-Kincaid score: 15.3

Subject: How interest is calculated

Example 1. Navy Federal Credit Union

Example 2. Synovus Bank Visa or MasterCard Cardholder Agreement
NFCU calculates interest charges on your account by applying the periodic rate to the “average daily balance” of your account, including current transactions. To calculate the “average daily balance,” we take the beginning balance of your account each day, add any new purchases and cash advances, and subtract any payments, credits, and unpaid interest charges. The resulting total is the daily balance. We then add together all the daily balances for the billing cycle and divide the total by the number of days in the billing cycle. This amount is your “average daily balance.” Flesch-Kincaid score: 11.4 Your Finance Charge for any Billing Cycle will include the following components, the total of which constitutes your total Finance Charge for the Billing Cycle: (1) a Cash Advance Transaction Fee Finance Charge, imposed (i) on each Cash Advance transaction posted during a Billing Cycle, in an amount determined as provided in the accompanying Summary of Terms, and (ii) on each Promotional Check Transaction posted during a Billing Cycle, in an amount determined as provided in the accompanying Summary of Terms, unless a different amount is specified in the disclosures accompanying the Promotional Check offer, and (iii) on each Overdraft Protection transaction (if applicable to your Account), in an amount determined as provided in the accompanying Summary of Terms; and (2) Interest Charge amounts computed by applying the applicable Monthly Periodic Rate or Rates, determined as provided below under “Computing the Monthly Periodic Rates and corresponding Annual Percentage Rate”, to (i) your Average Daily Balance of Cash Advances (including new Cash Advances), and (ii) your Average Daily Balance of Purchases (including new Purchases), and (iii) your Average Daily Balance of Balance Transfers (including new Balance Transfers), and (iv) each Average Daily Balance of Special Advances (including new Special Advances) and your Average Daily Balance of Overdraft Advances (including new Overdraft Advances); and (3) a Balance Transfer Transaction Fee Finance Charge (if applicable to your Account), imposed on each Balance Transfer posted during a Billing Cycle, in an amount determined as provided in the accompanying Summary of Terms. In addition, there will be a Foreign Transaction Fee Finance Charge of 3% of the total amount for all international and cross U.S. borders transactions (including transactions made in U.S. Dollars) posted during a Billing Cycle. Finance Charges, when calculated, will be rounded up to the next cent.
Flesch-Kincaid score: 28.5
Source: CreditCards.com research
READABLE AND UNREADABLE:
A COMPARISON

Subject: Responsibility for charges

Example 1. Pinnacle Bank - Bank of Colorado Visa Credit Card Agreement
You agree to the terms of this Agreement. When you use your Account or let someone else use it, you promise to pay the total amount of the transaction as well as any interest or fees that may be due. All amounts owed must be paid in United States dollars. You promise to do everything this Agreement requires of you. You will be legally bound by this Agreement if you sign an application to obtain credit from us, or if you sign a sales draft, or if you use or permit someone else to use the card. If the Account is a joint Account, you and the joint Account holder each will be bound by this Agreement and each of you will be jointly and individually responsible for repaying all amounts due under this Agreement. Any authorized user of your Account will, by such use of the Account, be bound by the terms of this Agreement.
Flesch-Kincaid score: 9.7
Example 2. Palmetto Citizens Federal Credit Union Visa Credit Card Agreement - Disclosure Statement
You will be jointly and severally liable and agree to pay the Credit Union for all charges (purchases, cash advances, finance charges, and other charges added to your Account under the terms of this or any other agreements with us) extended to you or anyone else using a Card issued for your Account, unless the use of such Card is by a person other than you who does not have actual, implied or apparent authority for such use and from which you receive no benefit. Authority includes, but is not limited to, any authorized users permitting another person to use any Card(s). Further, all users are obligated to us for all charges they make, authorize or permit.
Flesch-Kincaid score: 18.3

Subject: Grace period on interest

Example 1. HSBC Bank Platinum Rewards Cardmember Agreement and Disclosure Statement

Your Account has a grace period on purchases. Periodic Interest Charges begin accruing on purchases, balance transfers, cash advances, and credit card checks on the date of the transaction and continue to accrue until your balance is paid in full. However, no Interest will be charged on new purchases for any billing cycle when:
• you paid your entire New Balance in the previous month on time; and
• you pay your entire current month’s balance on time as well.
Flesch-Kincaid score: 10.1
Example 2. Financial Center Credit Union Visa Consumer Credit Card Agreement
New purchases posted to your account during a billing cycle will not incur a finance charge for that billing cycle if you had a zero or credit balance at the beginning of that billing cycle, or you paid the entire new balance on the previous cycle's billing statement by the payment due date of that statement; otherwise a finance charge will accrue from the date a purchase is posted to your account. To avoid an additional finance charge on the balance of purchases, you must pay the entire new balance on the billing statement by the payment due date of that statement. A finance charge begins to accrue on cash advances from the date you get the cash advance or from the first day of the billing cycle in which the cash advance is posted to your account, whichever is later.
Flesch-Kincaid score: 15.3

Subject: How interest is calculated

Example 1. Navy Federal Credit Union
NFCU calculates interest charges on your account by applying the periodic rate to the “average daily balance” of your account, including current transactions. To calculate the “average daily balance,” we take the beginning balance of your account each day, add any new purchases and cash advances, and subtract any payments, credits, and unpaid interest charges. The resulting total is the daily balance. We then add together all the daily balances for the billing cycle and divide the total by the number of days in the billing cycle. This amount is your “average daily balance.”
Flesch-Kincaid score: 11.4
Example 2. Synovus Bank Visa or MasterCard Cardholder Agreement
Your Finance Charge for any Billing Cycle will include the following components, the total of which constitutes your total Finance Charge for the Billing Cycle: (1) a Cash Advance Transaction Fee Finance Charge, imposed (i) on each Cash Advance transaction posted during a Billing Cycle, in an amount determined as provided in the accompanying Summary of Terms, and (ii) on each Promotional Check Transaction posted during a Billing Cycle, in an amount determined as provided in the accompanying Summary of Terms, unless a different amount is specified in the disclosures accompanying the Promotional Check offer, and (iii) on each Overdraft Protection transaction (if applicable to your Account), in an amount determined as provided in the accompanying Summary of Terms; and (2) Interest Charge amounts computed by applying the applicable Monthly Periodic Rate or Rates, determined as provided below under “Computing the Monthly Periodic Rates and corresponding Annual Percentage Rate”, to (i) your Average Daily Balance of Cash Advances (including new Cash Advances), and (ii) your Average Daily Balance of Purchases (including new Purchases), and (iii) your Average Daily Balance of Balance Transfers (including new Balance Transfers), and (iv) each Average Daily Balance of Special Advances (including new Special Advances) and your Average Daily Balance of Overdraft Advances (including new Overdraft Advances); and (3) a Balance Transfer Transaction Fee Finance Charge (if applicable to your Account), imposed on each Balance Transfer posted during a Billing Cycle, in an amount determined as provided in the accompanying Summary of Terms. In addition, there will be a Foreign Transaction Fee Finance Charge of 3% of the total amount for all international and cross U.S. borders transactions (including transactions made in U.S. Dollars) posted during a Billing Cycle. Finance Charges, when calculated, will be rounded up to the next cent.
Flesch-Kincaid score: 28.5
Source: CreditCards.com research

 

Published: September 7, 2016

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Updated: 01-23-2017

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