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Readability of the credit card agreements and financial charges

Alyxandra Cash and Hui-Ju Tsai ()

Finance Research Letters, 2018, vol. 24, issue C, 145-150

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.

Keywords: Credit card; Readability; Financial charges; Annual percentage rates (search for similar items in EconPapers)
JEL-codes: G21 E40 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:finlet:v:24:y:2018:i:c:p:145-150