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The Readability of Credit Card Contracts-Just How Complicated Are They?

A recent study by analyzed the readability of over 2,000 current credit card contracts banks offered and concluded that the majority of contracts are written at a reading level beyond the reading capability of the average American consumer. The study used the Flesch-Kincaid formula (commonly used to evaluate educational texts), which examines the number of syllables, words, and sentences in credit card contracts in order to determine the reading grade level necessary to comprehend the text. Through this method, the study found on average that the contracts are written at an 11th grade reading level which is far too complicated for the majority of American consumers who have a 9th grade or below reading comprehension level.

An earlier scientific telephone poll conducted in August reflects this conclusion and asked Americans, who have actually read their credit card agreement, to describe their experience using one word. The responses overwhelmingly indicated a negative experience with 71 percent of respondents using unfavorable words such as “lengthy,” “wordy,” “confusing,” or “boring,” and only nine percent of respondents using a positive word such as, “informative” to describe their experience.

Although one would assume that the nearly 88 percent of Americans over the age of 25, who have completed high school, should have no problem understanding a contract written at the 11th grade reading level but readability experts claim that most adults read at a level below the highest grade they finished in school. This creates an exacerbated problem for persons of color who according to the Department of Education have significantly higher dropout rates and lower graduation rates when compared to white students, which makes them much more susceptible to the risks associated with not fully understanding the terms and conditions of their credit card. These risks include not understanding the rights of the consumer, such as the right to dispute charges, protections against the card issuer’s right to collect from you, confusion over fees, interest rates, and payment obligations, which can ultimately cause lingering damage on your credit.


Proponents such as such as the American Bankers Association argue that the contracts need to remain lengthy in order to remain enforceable; further stating that the language is written to conform either to legal precedents or federal regulations. However, several banks and credit unions, such as Navy Federal Credit Union have disproven this notion by  creating contracts that are written near the 9th grade reading level, which was suggested by consumer advocates. Additionally, an example of how to create a legally binding yet simple to understand contract was created by the Consumer Financial Protection Bureau (CFPB) in 2011. The CFPB urged banks to simplify and shorten credit card contracts. Unfortunately, little progress has been made. For instance, although the average credit card contract has been reduced by 500 words since 2011, the average contract length is still 4,900 words with some contracts maxing out at over 15,000 words. For reference, the model credit card contract created by the CFPB (mentioned above) is only 1,188 words in length.

Kathleen Taylor