Why Johnny Can’t Read His Credit Card Agreement

From CreditCards.com comes the news that U.S. credit card agreements are unreadable to 4 out of 5 adults. It is not that they are written in invisible ink, or tiny print, or even that they are hidden away in the deep recesses of someCredit-cards Lotus Head web site. The agreements are printed in easy to see black and white and mailed to the card holder’s house.

Are they in Latin? Do they involve obscure legal terms? Perhaps they are poorly translated from some foreign tongue?

No, they are unreadable to 4 in 5 Americans because those sneaky credit card companies have written them in standard English, but at a 12th grade level. Bastards.

Do not let the fact that 80% of Americans have successfully completed the 12th grade confuse you. The average American adult reads at a 9th grade level.

At least we are in high school. More than half of us, anyway.

From CreditCards.com:

"Credit card contracts and other such documents are written in dense prose for a reason: So that the customer will NOT be able to understand it," notes Roy Peter Clark, a national expert on writing and a senior scholar at the Poynter Institute in St. Petersburg, Fla. "I may be cynical, but I don’t think their writing strategies are accidental, the collateral damage of a bureaucratic mindset. I think those writers know exactly what they are doing."

Much as I hate to admit it, Mr. Clark is more cynical than I am. (And can there be any clearer indication of widespread illiteracy than that a man who uses “NOT” in a sentence is considered a national expert on writing? Alas, I digress.)

12th grade is the average reading level of all agreements, not weighted by the size of the issuer. Most of the really big boys had appropriately dumbed-down ones. Wells Fargo, Citibank, B of A, and Amex all came in at 9th grade or below. Capital One managed to suck down to a 7.3 grade level. (New slogan: What is in your wallet besides cash and ID?)

In contrast, the top 10 agreements with the highest grade levels measured is a list of tiny and obscure issuers you have never heard of. Top honors went to GTE Federal Credit Union at an 18.5 grade level. Apparently, you need to be halfway through your last year of law school to understand it.

I hypothesize (that means guess) that the larger banks have more money to spend and hire professional writers to make their agreements easier to read. The smaller outfits mostly don’t, meaning what you see was crafted by a lawyer who had other concerns on his mind.

Of course, the much bigger problem here is that Americans can’t read. As disheartening as it is to learn that the average American reads only at a 9th grade level, it is truly alarming when you learn what is meant by 9th grade. CreditCards.com provides a graphic with an assortment of works and where they score on the same scale as used for the card agreements.

Twilight, that favorite of sixth grade girls, comes in at 8.2. The King James Bible gets an 11.1. But it’s not the real 17th Century King James, the one that starts “In the beginning God created the heaven and the earth.” This is a modern version that starts “First God made heaven & earth.”

The graphic shows the average credit card agreement at 12.4, but, in what I can only assume is a desperate effort to make us all feel better, it illustrates this with what is probably the most difficult sentence from the worst-case GTE Credit Union agreement. Nice try, guys.

A New York Times editorial measures at 17.2, meaning unless you have a little more than a year of grad school it is incomprehensible to you. Just as well, I suppose.

The Bill of Rights comes in at 22.6, or more than six and a half years of grad school. No wonder phrases like “Congress shall make no law” and “a well regulated militia” cause so much confusion.

But in a way this discussion of reading levels and card agreements is, you will pardon the expression, academic. Four in five Americans may not be able to read the agreements, but I am willing to bet that 99 in 100 have never tried.

Much as I applaud Capital One’s effort to rephrase their contracts into the monosyllabic vernacular (they use common short words) I think it is more good citizenship than good business. They could issue the agreements in Latin, which would be a nice tie-in with their anti-barbarian ad campaign, and I don’t think their business would suffer at all.

How often do the 80% of Americans who can’t understand their card agreements cancel the cards because of it? Has it, in fact, ever happened?

Telling consumers to read the agreements they sign, including credit card agreements, does indeed have the flaw that they may not understand them when they do. (CreditCards.com calls this a catch-22. It is not. That term is from a great work of American literature by the same name, in which…. Oh never mind.)

But let us all be honest and admit that the core problem is not that Johnny can’t read his card agreement, it is that he won’t. It is not the evil banks writing obscure prose that are at fault. Indeed, it seems to me that they would generally prefer that consumers understand what is expected of them. But the consumers cannot be bothered. Just sign up for the card and assume that the rules are what you think they should be. If you get in trouble later on, well that’s what government is for, isn’t it?

[Photo – Lotus Head]

No Comments

  • By Money Obedience, July 28, 2010 @ 12:09 pm

    Your are just talking about English in this post. What about the complicated math on these statements which refer to obscure symbols like %, APR, etc.?

    Also, rest assured that these reading and math abilities have been imported into higher education as more and more youngsters attend college, who all pay dear money for more illiteracy. Now, there is something we should all refudiate, right?

  • By Investor Junkie, July 28, 2010 @ 12:28 pm

    What’s that saying..”if you design something idiot-proof only an idiot will be able to use it” We keep lowering and lowering our standards on everything! All for everyone to be equal.. Newsflash! Everyone is CREATED equal but not equal in their abilities.


    You’ll love this Fed reserve report on how the rich are getting rich from the poor via credit cards I just wrote:


    Truly unbelievable time we live in.

  • By Neil, July 28, 2010 @ 1:06 pm

    Is anyone else disturbed that a preschool song is a grade 3 reading level? I also have a hard time believing that it’s reasonable to expect a university graduate to be able to understand a NYT editorial. It’s not something I would expect of a high school graduate, but even someone who qualifies for admission at even the crummiest 4-year school should be able to do it.

    Definitely a case of needing higher standards. Even if it is a 12th grade reading level, maybe schools should be failing people who can’t read at that level.

  • By jim, July 28, 2010 @ 2:07 pm

    Yep. People are lazy. I honestly can’t say I’ve ever read a credit card agreement in full. But does skimming it count??

    Personally, I simply don’t buy the argument that people are that bad at reading.
    27% of Americans have a bachelors degree. So if you believe that 80% of Americans don’t read at a 12 grade level then that means about 7% of Americans, or over 25% of college grads, got a 4 yr college degree without actually being able to read their course work. I know the standards at some schools aren’t all that high, but seriously folks this doesn’t pass a common sense sanity check.

  • By Denise, July 28, 2010 @ 5:32 pm

    All of this is very true. If only they somehow could base your approval off of your reading level than your credit score or worthiness, we wouldn’t have anything to discuss.

  • By Frank Curmudgeon, July 28, 2010 @ 6:25 pm

    Investor Junkie: You were one of the authors of the Fed report? Please tell me your real name is Oz Shy. Best author name on an economics paper ever.

    Seriously though, you are right about the pretzel logic. Check out the NYT’s Bucks blog discussion of what richer consumers “can do now to alleviate any guilt they may have about using their cards.”


  • By Investor Junkie, July 28, 2010 @ 7:43 pm

    Actually it’s Jack Off. :-)

    Yes I also saw the NYT blog post. Some of the comments are too funny. But inline for my state’s thought process.

    “I will use my rewards card even more, now that I understand that I am punishing poor people. Double win! “

  • By Dan Ray, July 28, 2010 @ 8:25 pm

    Thanks for your thoughts on our series (I’m the editor of CreditCards.com). It was a lot of work, but a lot of fun to do.
    A couple of notes/amplifications on your post: Credit unions happened to occupy most of the slots at both ends of the scale — most readable and most unreadable. I don’t know why. I’d speculate that their relative small sizes could result in two outcomes — their nonprofit ethos makes them really care enough to take the time to write understandably, or their small size leaves them unable to find lawyers who write in clear English.
    When I open and skim one of the most-readable, then follow it by opening and reading one of the most-unreadable, the difference is night and day. The two documents convey the same information, but one is easily read, the other is needlessly complicated as a Rube Goldberg cartoon.

  • By Paul, July 29, 2010 @ 2:40 pm

    For what it’s worth, the excerpt used for the King James Bible in the creditcard.com article is not actually from the King James (neither the 1611 nor the 1769 versions, nor the more modern “New King James”). The funny thing is, I can’t find a bible translation that uses that block of text (complete with ampersand!). Best I can tell, someone lazily copied it from this site, http://www.bibleontheweb.com/Bible.asp , which erroneously attributes it to the Revised Standard Version, not even the King James.

    It kinda calls into question their analysis if they can’t even provide accurate samples of the texts they supposedly analyzed.

  • By mightymouselives, July 30, 2010 @ 11:23 am

    I have a dollar for every American who has read and understands the card’s privacy policy. I’ll email you the quiz.

  • By Michael Covington, July 31, 2010 @ 8:24 pm

    How are these grade levels measured? The technology of measuring readability has changed little in 75 years, except that computerized shortcuts are now common.

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