Give Me Some Credit

People love their credit cards, and why not? A slim piece of plastic allows you to buy almost anything at any time; you don’t even have to leave your home. There’s just one small detail: eventually, you must pay it all back. And if you can’t do this right away, the credit card companies are more than happy to oblige, and will lend you the money at an obscene interest rate.

Millions of people don’t realize this, and simply pay the minimum balance because, hey, isn’t it easier to pay $30 now rather than $1,000 now? Credit card companies love people who think like this.

Deadbeat, and Proud of It

I, on the other hand, along with my financially intelligent peers, am scrupulous about paying off the balance each month, in full. In addition, I pay no annual fee, and actually receive back 1% of everything I spend in free groceries. Over the years, this has added up to thousands of dollars.

Credit card companies hate me. They have an interesting name for people like me who pay their balance in full: deadbeats. We’re deadbeats because we don’t provide any extra income to these companies.

Now, however, the number of “deadbeats” may be increasing, thanks to recently proposed Canadian government legislation. It includes a minimum 21-day interest-free grace period on all new transactions when people pay their balance in full by the due date. The other two main changes involve documentation; that is, the infamous Credit Card Statement.

An Inconvenient Document

Under the new law, grace periods and interest rates would have to be clearly displayed in a summary box on the statement. That’s important, but it’s not the biggest change.

The biggest change is that the statement would clearly indicate how long it would take you to pay off your balance if you only made the minimum payments every month. It is this omission of a single, small piece of data from this document that has cause more grief, more financial suffering, and more debt than anything else.

Loan Shark, Inc.

For example, let’s assume you have a $2,000 balance and the interest rate is 19% (a fairly common rate). If the minimum payment allowed is 3% of this balance, and you can only make this payment, then your monthly payments will be $60. It will take you a whopping 14.5 years to pay off this debt, and you’ll pay an astounding $2,007.03 in interest, just over 100% of the entire amount you borrowed! (To try more numbers, use this calculator.)

How many people would have paid off their balances sooner if they had known this? Now you can begin to see why the banks fought against this legislation. They (and many lawyers) are the antithesis of our profession, because they wage war against the most cherished principle of technical communication:

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