New study evaluates clarity of credit applications

Cardhub.com, a website specializing in credit card research, recently performed a study looking at how clearly terms were laid out for consumers in credit card applications. While these findings have yet to be confirmed by other sources, their results showed a wide disparity between different issuing banks. Capitol One and Bank of America earned the highest scores in terms of clarity of terminology and consumers being able to understand the card fees easily, with ratings of 96.4 and 95 percent, respectively. The study stated that the least coherent terms were found on applications for U.S. Bank credit cards, who earned a score of just 59.3 percent. Many other popular cards, such as Discover, Citi, and Chase, had scores in the low 80th percentile.

These percentage scores were based on a one through ten scale that ranked the clarity of several different items on the credit card application. The items taken into consideration included the rewards offered by the card, the annual fee charged to the consumer, the cost of carrying a balance on new purchases, and, finally, the cost of making a balance transfer with the card. The ability of consumers to understand the terms of the card before they apply is important, so that they don't inadvertently sign up for a card with unfavorable fees, or rewards that they will not be able to realistically earn.

Some credit card issuing banks are using this study as constructive criticism, and taking consumer suggestions as to how they can clarify their language.

Representatives of U.S. Bank stated that while their credit card applications were designed with the future cardholder's convenience in mind, they would re-evaluate the language used on these forms in order to ensure that any consumer can understand the expectations of their credit cards. Interestingly, non-cash-back rewards cards may face a change in their applications as well, since cash-back rewards cards seemed to have significantly less obscure terminology in their related forms.

-Seth Berger