Do you understand your credit card agreement?
Written by Robert Bester, Consumer Finance Expert Robert has been a writer for six years, specialising in consumer finance and the UK lending market. Concentrating on consumer credit products, Robert writes informative articles that help customers manage their personal finances efficiently.
11th October 2021
4 minute read
The majority of credit cards can now be signed up for online. This means with no one there to talk you through each point, the agreement needs to be detailed and cover every legal aspect. But does anyone really read the fine print? And if not, why not?
In this age of digital consumerism, when virtually anything you want is just a click away, it’s worrying that we could be agreeing to things we don’t understand. Skipping the terms and conditions page is something we’ve all done. So, we decided to dig deeper and find out if our fears were unfounded or just the tip of the iceberg.
We conducted a survey of 1000 credit card holders in the UK. Combined with research on the most popular credit card providers and their most popular offerings from our comparison website, we were able to find out more about the level of understanding from the British public.
How readable is your credit card agreement?
The Flesch Kincaid score is a readability test, commonly used in education. It uses word length and sentence length to determine how easy a piece of text is to read, equating it to the US school grading system. The lower the number, the easier the content is to read. We ran both standard credit card agreements for each provider through this test, as well as the card specific information on their website, given before you apply. The results were disappointing. In our research not one of the agreements was rated below 6th grade, which equates to the reading level of 11 and 12 year olds. Not bad, you may think. But the national average reading age for the UK is 9 years old.
The Flesch Kincaid Reading Ease score also takes into account syllables within a sentence and is based on a score of 0-100. The higher the score, the easier the text is to read. The UK Government advises to aim for an average sentence length of 12 words and a reading ease score of 60 or over. A higher number of syllables within a sentence indicates more complicated wording.
How complicated is the text?
In the graph above, we can see that standard agreements contain far more complicated wording, which could prove problematic for those trying to read and fully understand the text. With the exception of the Vanquis credit card, the information contained in the pre-apply pages appears less complex. While this might be great for helping you to understand the product before you sign up for it, it’s not the official document you actually agree to.
Out of 22 agreements and information that we ran through this test, only two fell below the average 12 words per sentence.
Are you bored reading it?
If you are able to understand the agreement, one thing that might still might make you skim it or not read it at all, is the length.
The reading time for standard agreements is generally much longer than the pre-apply information and it’s not surprising, given they are on average 16 times wordier than their pre-apply counterparts.
What our research told us
Our research was pointing us towards the following;
Both credit card standard agreements and the pre-apply information available on websites is not easy enough for the average UK person to read and understand well.
Pre-apply information usually contains less complicated text and is longer overall, taking more time to read.
Sentence length for both standard agreements and pre-apply information was over and above the recommended number of words.
The British public had their say
This paints a picture much like the one we thought might emerge. Credit cards agreements, terms and conditions and pre-applying information is often difficult to read for many reasons. But is this reflected in real life?
We conducted a survey of 1000 UK people. The results showed that;
- 64 % of people don't read a credit card agreement before signing up for one.
- Only 9% of people understand their credit card agreements.
- Almost half of all Brits could be paying too much on their credit card because they don't know how to dispute a charge.
- 48% of Brits don't know when they are liable for charges made on their card by someone else.
- A third of all Brits are unaware of how their credit score can be affected after missing a payment.
64% of people surveyed admitted that they didn’t read the full agreement when signing up for a credit card. 60% also said they don’t read any updates to their agreement and simply click accept.
This can be explained, in part, by how Brits view those agreements. When asked to describe their credit card agreement in one word, 12% said “confusing”, 15% thought “unreadable” and 64% called them “lengthy!”
The survey also found that 45% of people didn’t know how to dispute a charge on their credit card, which could mean that they are paying unnecessary fees. If you’re unsure of any recent charges or fees, it’s advisable to check, especially as your agreement can change at any time. 13% of our respondents didn’t know this.
When it comes to knowing how and when you’re protected from someone else using your card, almost half of those asked didn’t know their rights. In fact, if you have compromised your own security, such as losing your card and not reporting it or not using your providers authentication portal during a purchase, you are liable for any costs made to your card under those circumstances.
Your credit score or credit report details your financial history. Its purpose is to inform potential lenders how reliable you are likely to be when it comes to paying money back. If you forget to make a payment on your credit card one month, do you think it affects your credit score? Even if you’re successfully paying rent or a mortgage and other bills on time? The answer is yes! And a third of all Brits are unaware of this, thinking that missing a payment will either not affect your score or will only affect it if you miss payments repeatedly.
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