Editorial: Demystifying credit cards

Monday, May 28, 2007 | 6:08 a.m.

We have no way of knowing for sure, but our guess would be that most people do not get very far into the fine print of their credit card disclosure forms before bailing out.

But this is costly for many people, because there are circumstances outlined in the pages of numbing financial language that can quickly trigger interest-rate increases.

For people to really understand their obligations under the terms of their credit card agreements, and the penalties for not meeting those obligations, they need concise information where they can easily see and comprehend it.

The Federal Reserve System, acting on a recommendation made last fall by the Government Accountability Office, is proposing a new design for credit card statements that would fulfill that need.

The GAO, the investigating arm of Congress, found that many consumers were unaware that late payments could result in hefty charges and boosts in their interest rates. The information had all been disclosed to them, but on separate forms that usually got tossed out because of the impenetrable language.

As now being proposed by the Federal Reserve, key information about credit card terms would be disclosed "in a clear and conspicuous format." Redesigned statements would include easy-to-read and easy-to-find information - right above the list of the consumers' transactions.

Interest information would be itemized, the financial impact of making minimum payments would be explained , and a summary of the account's key terms would be included among other information that consumers need to know.

The Federal Reserve is still taking feedback from the public and credit card providers on its proposal. We believe this change is long overdue and hope its proposal does not get watered down. Credit cards are almost essential today. Consumers should be able to learn their terms without incurring eye strain trying to read nearly unintelligible pages.