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Readability of the credit card agreements and financial charges

Author

Listed:
  • Cash, Alyxandra
  • Tsai, Hui-Ju

Abstract

We examined the readability of credit card agreements and its relationship with financial charges. Examining the credit card agreements filed with the Consumer Financial Protection Bureau in 2014, we found that the typical credit card agreement is written at an 8th to 9th grade level, which is higher than the average American reading level. We show that the readability of credit card agreements is negatively related to financial charges: cards with easier-to-read agreements are associated with lower annual percentage rates, lower minimum monthly payments, and lower cash advance fees.

Suggested Citation

  • Cash, Alyxandra & Tsai, Hui-Ju, 2018. "Readability of the credit card agreements and financial charges," Finance Research Letters, Elsevier, vol. 24(C), pages 145-150.
  • Handle: RePEc:eee:finlet:v:24:y:2018:i:c:p:145-150
    DOI: 10.1016/j.frl.2017.08.003
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    References listed on IDEAS

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    More about this item

    Keywords

    Credit card; Readability; Financial charges; Annual percentage rates;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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