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Are credit card offers more complex?

November 24, 2010

By Barbara Marquand | Money Rates Columnist

If it seems more complicated to compare credit card offers today than a decade ago, rest assured you're not imagining things.

Although credit card offers have been simplified in the last year since the Credit CARD Act went into effect, they're still twice as complex as they were in 1999, according to new research by the Center for Responsible Lending.

Researchers measured complexity by counting the number of numeric figures used in credit card offers' summary of terms, also known as the "Schumer Box." The box includes the most important credit card terms, such as annual fees, penalty fees and interest rates, and is named after New York Congressman Charles Schumer, who championed legislation that defines the structure and type of information that must be disclosed in the box.

That law, which went into effect in 2000, doesn't require the disclosures to be complex. Nonetheless credit card issuers added a growing array of figures in the summary of terms over the years. In 1999, the average number of numeric figures in the summary was 13; in the peak year of 2009, the average was 33 -- a 250 percent gain, according to the Center for Responsible Lending. The complexity varied widely among issuers with the simplest credit card offers having only five numeric figures in the Schumer Box and the most complex sporting 55 numeric figures.

Fortunately, the offers have gotten a bit simpler since passage of the Credit CARD Act, with complexity declining by 23 percent to an average of 26 numbers in the summary of terms. The Center for Responsible Lending says much of the decline in complexity was due to the simplification in annual percentage rate terms.

This research was completed before August when the last batch of new federal credit card regulations went into effect. Those limited penalty fees, and may help further simplify credit card offers.

Finding the best credit card: a tough call

Still, many credit card offers include so many numbers it's tough to sort them out. One offer might have seven credit card rates alone, researchers note -- three different long-term purchase rates based on credit, an introductory rate, cash advance rate and penalty rate. When comparing that offer with two others of similar complexity, you could end up overloaded with information.

"Add multiple miscellaneous fees and penalty fees to this APR-related complexity, and the typical consumer is unable to fully process much of the information when deciding how to respond to the offer," Center for Responsible Lending Senior Researcher Joshua Frank states in the report, "Numbers Game: The True Cost of Credit Card Mail Offers." "Rebates and rewards, which are typically not even discussed in the Schumer Box, add further to the complexity of the decision."

What to do? Go with an offer you understand.

"It may be too difficult to weigh and compare all the prices and fees at once, so choose the simple and transparent over the deal that looks too good to be true," Frank writes.

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