When applying for a credit card, you have to sign a contract that's crammed with legalese and fine-print footnotes.
It's time for a fresh approach to communication.
Companies should make it clear regarding what comes with your credit card besides reward points or cash rebates.
This week, the Financial Consumer Agency of Canada and MasterCard Canada released a model plain-language credit card application form.
When asked to test the redesigned form, consumers had the same reaction, says FCAC commissioner Ursula Menke: "Oh, my goodness, I didn't understand this before."
People who had used credit cards for years said they were willing, and even eager, to seek out additional information.
What would you see if companies tried to educate you about your rights?
Here's a guide to what's in the model application.
The annual interest rates.
Right on top of the first page, you find out all the rates you will be charged (such as 18 per cent for purchases, 20 per cent for cash advances, 4.9 per cent for balance transfers for six months and 20 per cent after six months).
The interest-free period for new purchases.
There's no interest charged only if you pay this month's balance in full by the due date and you've also paid last month's balance in full by the due date. (This two-month method of calculating interest on new purchases has been adopted by most credit card issuers.)
The interest rate for balance transfers.
There's no interest-free period for balance transfers. Say you transferred $5,000 to a new credit card on June 2. The interest on the balance transfer will be calculated from June 2 â even if the bill arrives July 15.
The interest rate for cash advances.
There's no interest-free period and the interest is calculated from the day you get the cash advance.
Other fees that apply to your credit card.
Getting a cash advance will cost you $2 inside Canada and $4 outside Canada (in addition to interest paid).
A bounced cheque costs you $25; an extra copy of your monthly statement is $2; going over your credit limit is $20; and for transactions made outside Canada, you pay an extra 2.5 per cent of the amount in Canadian dollars.
A privacy statement.
The bank will give access to your personal information to other organizations, such as credit reporting agencies, bank affiliates and selected service providers.
For me, the privacy statement was the real eye-opener.
I didn't realize how much latitude they had to share your personal information with companies selling unrelated products â and, of course, to profit by doing so.
Menke said she hoped credit card issuers would adopt a plain-language application. "It's in the companies' financial interest that people know what they're getting into."
I disagree. Credit card issuers make their contracts almost unreadable for a reason â they're happier if you don't know what you're getting into.
By communicating with customers at a Grade 5 level and disclosing all the ways they can make money at your expense, they're opening themselves up to questions about how their businesses work.
Of course, I'd like to be proven wrong by seeing a bank adopt this model application right away.
Toronto Star Business
It's time for a fresh approach to communication.
Companies should make it clear regarding what comes with your credit card besides reward points or cash rebates.
This week, the Financial Consumer Agency of Canada and MasterCard Canada released a model plain-language credit card application form.
When asked to test the redesigned form, consumers had the same reaction, says FCAC commissioner Ursula Menke: "Oh, my goodness, I didn't understand this before."
People who had used credit cards for years said they were willing, and even eager, to seek out additional information.
What would you see if companies tried to educate you about your rights?
Here's a guide to what's in the model application.
The annual interest rates.
Right on top of the first page, you find out all the rates you will be charged (such as 18 per cent for purchases, 20 per cent for cash advances, 4.9 per cent for balance transfers for six months and 20 per cent after six months).
The interest-free period for new purchases.
There's no interest charged only if you pay this month's balance in full by the due date and you've also paid last month's balance in full by the due date. (This two-month method of calculating interest on new purchases has been adopted by most credit card issuers.)
The interest rate for balance transfers.
There's no interest-free period for balance transfers. Say you transferred $5,000 to a new credit card on June 2. The interest on the balance transfer will be calculated from June 2 â even if the bill arrives July 15.
The interest rate for cash advances.
There's no interest-free period and the interest is calculated from the day you get the cash advance.
Other fees that apply to your credit card.
Getting a cash advance will cost you $2 inside Canada and $4 outside Canada (in addition to interest paid).
A bounced cheque costs you $25; an extra copy of your monthly statement is $2; going over your credit limit is $20; and for transactions made outside Canada, you pay an extra 2.5 per cent of the amount in Canadian dollars.
A privacy statement.
The bank will give access to your personal information to other organizations, such as credit reporting agencies, bank affiliates and selected service providers.
For me, the privacy statement was the real eye-opener.
I didn't realize how much latitude they had to share your personal information with companies selling unrelated products â and, of course, to profit by doing so.
Menke said she hoped credit card issuers would adopt a plain-language application. "It's in the companies' financial interest that people know what they're getting into."
I disagree. Credit card issuers make their contracts almost unreadable for a reason â they're happier if you don't know what you're getting into.
By communicating with customers at a Grade 5 level and disclosing all the ways they can make money at your expense, they're opening themselves up to questions about how their businesses work.
Of course, I'd like to be proven wrong by seeing a bank adopt this model application right away.
Toronto Star Business