With the changes included in the Credit Card Act, credit card companies are now required to give users more info on their monthly statements. My colleague over at Five Cent Nickel has whipped up an informative graphic that provides an anatomy of a credit card statement:
These changes are designed to help credit card users become more aware of the costs associated with using credit.
While I think these changes are good, I’m skeptical they’ll do anything to help those who are struggling with debt problems. When I was addicted to credit, I was well aware of the costs associated with my habit. Math wasn’t the problem — psychology was the problem, and no number of changes to a credit card statement would have made a difference.
Also, I wonder how many folks actually receive paper statements nowadays? I’m sure most older people do, but how many people in their twenties actually opt to receive a credit card statement in the mail? I’ll bet that most folks are like me, and instead keep things completely electronic. It’s possible that many young adults with credit problems will never even see the new, “improved” statement.
All the same, I approve of any step that might make consumers more aware of the dangers of credit card abuse. The new statement format may only help a handful of people, but I still call that a win.
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Just like you, I receive my credit card statements electronically, but they still have the same information on them. I check my statement every month to make sure that no unaccounted for charges were made to my credit card. I’m not sure how many other people actually look at their e-statements, but if they do the same info should be there.
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Interesting Shawn. You may have pointed out a flaw in my personal-finance workflow. I get electronic statements in my accounts, but I never print them out. I look at the web-based info to be sure all of the charges look right, but I never look at the actual statement. Maybe I should. (Or maybe I shouldn’t. Since I pay my credit card off every month, does it really matter?)
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Neat.
I hope this isn’t too political… but I find it really exciting that government is making these changes that researchers have been recommending from experiments. There’s some really awesome work being done by economists and psychologists and the quick turnaround into actual policy is just amazing to me. It’s wonderful that I will see a researcher make suggestions about how to nudge people into the right behavior and within 1 to 3 years have that actually be implemented. There’s some really exciting work being done with student loans and making the FAFSA accessible too.
Re: statements. We get the printed ones because I don’t trust citibank. However, they keep trying to trick me into going all-electronic. One of these days I may mis-click the mouse when I do my online payment. (And the online payments are because they weren’t getting my paper payment on time several months in a row… the new law will prevent that from happening, but I’ve gotten into the habit of saving stamps.)
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My Discover card allows me to view the past 24 months of statements online. I figure any legitimate c-card company offers similar historical views, so I’d say nobody needs to print or maintain them. Discover even has some nifty little online analyzer tools that will categorize and trend your data. Slightly interesting stuff I guess. I jokingly run what I call a “spending firewall” and it’s always on. Since I give front end thought everytime I open my wallet, I don’t feel that I need to pick it apart on the back end or do trend analysis on 24 months of c-card statements. But I still download my c-card data into Quicken every few months.
Analytical types like myself are an odd bunch. Even though I don’t do anything with it, I have nearly 15 years of c-card & bank data in Quicken. How much did I spend on Gasoline in April 1997? Who cares? But if I did, there’s a quicken entry for that!
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I don’t print my electronic statements, but I do look at them online. It is probably easier to ignore the content of an online statement, but even with a paper statement there is no way to ensure that somebody actually reads the information on the page!
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I would definitely agree with J.D. that even with this change, most people will probably not change their habits.
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I don’t print my electronic statements but I save the PDF files to my harddrive and they do have the exact same layout.
I pay off my credit card in full every month, but one of my twitter friends posted recently that her credit card statement said if she paid $37 more a month she’d pay off her card in three years, and she thought that was doable.
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I’m a young guy that does all of his banking electronically, but I still receive paper statements/bills for everything that I have to make a payment on. For me, the physical paper is actually my reminder that it’s time to pay the bill. I place the bill at the top of my keyboard once I receive it, then throw it in my “paid” drawer once taken care of. Seeing that bill sitting there makes it hard for me to forget. If it’s only electronic, I sometimes forget to pay.
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What study shows that this is effective?
The government requires that the nutritional value of food is printed on all food sold (an attempt to educate us). Still, obesity is on the rise in the US.
I’m not holding my breath on this one.
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@9: Ease of information for interest rates is based on work done in an experiment on payday lenders by Marianne Bertrand at UChicago:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1532213
On the other hand, there’s work done on calories is by Lowenstein and colleagues at CMU– it actually hasn’t shown much of an effect in experiments. People overestimate the number of calories in fastfood items and are pleasantly surprised to find actual calorie counts, leading them to consume more of things they’d been overestimating (I forget if that’s drinks or burgers). There’s also some concern that they don’t understand what the number of calories means in terms of their own diet.
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I should switch to getting my statements electronically. I obsessively read them, but I hate that they are now two pages apiece ONLY because of all the mandated info they have to include. Plus, the paper statement gives them an excuse to include those “convenience checks” that go straight into the shredder.
Of course, the phone bill is just as bad. I need to get that electronically too. Sigh. More chores!
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@J.D.: I never *print* almost anything at all, it doesn’t mean I don’t read my email or other electronic documents. You can read your electronic statements without printing them.
To be 100% honest though, I really don’t read my bills. I just have them automatically pay themselves. I never even look at them.
Finally, along with others, I don’t think the new statement requirements will make any more difference than putting warnings on cigarette boxes does.
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@Tyler K
Cigarette box warnings don’t work for the same reason that calorie postings don’t work. People already overestimate their chance of getting lung cancer from smoking. So the warnings don’t add new information.
The money information is different… people really do not know how many years it will take to pay off a balance if they’re only paying the minimum, or how much they will end up paying in interest at the end of that. That does provide new information to consumers.
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I agree with Nicole. People don’t know how long it will take to pay off that balance, not unless they sit down and calculate everything. Most people just aren’t going to do that. That money information is a revelation to most people. Of course whether they act on that information is totally up to them.
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I use electronic statements, and my credit card statements already reflect these changes. For me, I find it unnecessary, but perhaps others don’t realize just how long it will take to pay off making minimum payments only.
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I really liked the changes to the statement. I get e-statements, but I print them off because I write all of my credit card charges in my checkbook so the money is already psychologically gone for me when the statement comes. I reconcile my checkbook with my printed statement.
I think seeing the amount of interest and the pay-off time could be a mental “slap in the face” to some people who may not have fully understood the implications of Interest. We always pay off our credit card every month, too, and I felt really smug about how much money I have saved after seeing the new info.
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I’m a mathematician. I know the math behind interest and how credit cards work; I am still consistently surprised when I open my new statement and see how much an extra 20 bucks a month can save me in both time until I’m out of debt and money I would have otherwise thrown away in interest. It’s a psychological thing… even though you know it will save you time and money unless you see the numbers spelled out right in front of you, you tend to underestimate the savings and overestimate the short-term inconvenience.
I think the new statement is totally a win for psychology.
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We’ve had this kind of stuff printed on our credit card statements forever in Canada. It doesn’t appear to make a difference – or didn’t to me when I was in debt. What helped was adding up how much per year it was costing me to service debt. It seems I just had to extrapolate it out to an annual basis to get the significance of it. And for a while, even that wasn’t enough to get me to change my wicked ways…
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I was going to post and say that I don’t think we have this in Canada. I just looked at my (online) credit card statement, and I didn’t see anything about how long it would take to pay off the balance if I just paid the minimum payment, or anything about how I could pay it off in three years. I no longer care, though, as my own personal credit card is now paid off, except for the phone/internet bill that isn’t even showing up yet on the statement (it’s showing up if I subtract the available credit from the credit limit, and I know what it is because I just got the withdrawal notice in the mail today). So now, I intend to pay off whatever I put on the credit card each month. I will probably still use it.
Then I have to work on my husband’s credit card, and I don’t think I’ve seen the information mentioned above on his statement, either.
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I am a self-employed man in my late 20s, and I receive ALL of my financial information through the mail – bills, statements, &c. I am able to receive it online, but I feel more secure and “audit-safe” when I have THEIR copy of MY bill in my hands. I’m just weird like that, I suppose.
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This isn’t designed to prevent people from getting into debt,
it is designed to prevent people from claiming that the credit card “fooled” them and “made” them get into debt.
Just like warning on the cigarette packs–the real purpose is to protect the seller/credit card company from litigation.
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Even though I do all my banking and bill paying online, including my credit card bill, I still get paper statements for everything because I need to file & keep them for at least 5 years.
You’d be surprised how hard it is to get access to past electronic statements, if your bank or credit card company or whatever changes hands or even updates their computer system. Poof! All your records are behind some firewall and you’ll have to pay a fee to get any of them.
For my divorce a few years ago, I had to obtain statements from bank accounts and credit cards going back 10 years. I had a lot in paper but trying to get the electronic statements was a nightmare since many had vanished.
If I couldn’t find the statements myself I had to call the bank/other company and *they charged me $10 for each monthly statement they had to find and send to me.* Yes, I paid >$500 just to obtain monthly statements of my boring old savings account! This is required in a divorce to prove that you haven’t shifted funds anywhere without your spouse’s knowledge etc.
Now I keep everything because my lawyer warned me that my ex might sue in the future over the child support he has to pay–I need to keep documents to prove how much I’m spending on my children. Which means all credit card statements as well as anything else…. Arggggg.
Anyway—if you’ll need those statements for anything in the future you should probably keep them in paper form. Or else download them as pdfs and store them on a couple hard drives somewhere so you can get them. You can’t rely on the company to make them accessible to you forever or even more than a year or so.
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@Karen- interesting. I never thought of that
For those who never look at their bill. Over the last 20 years I have probably found at least one wrong charge a year. Sometimes the decimal is wrong, othertimes it is simply frudgulant. Always check your bill.
The new statement was excellent for my 28 yr old daughter. Once she saw the “how long/how much” part she paid off her card. She was under the belief that she needed to carry a balance for credit.
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JD – you don’t actually need to print the e-statements to read them. The PDF view is the same as a piece of paper. I get everything I possibly can electronically and read it for any errors, changes,etc. Saves trees
I also think this is a good thing. Most people are not great at math. When I had credit card debt, it would have been hard to ignore “it will take you 13 years to pay this off paying the minimum payment”. Sometimes people need to see stuff right in front of them in black and white to get it. I hope it helps some folks and helps stop making cc companies rich on ridiculous charges.
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I get my CC bills electronically and always read them. I have had fraudulent charges in the past. I also take the various charge amounts and input them into my spending spreadsheets that I maintain. Then I save the PDF to a flash drive where I store my financial documents.
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“I also think this is a good thing. Most people are not great at math.”
I think children learn about percentages and decimals in elementary school. No one needs to be a math wizard to understand how this stuff works.
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I’m 22 and have been using my own credit cards for 5 years, getting paper statements mailed to me every month (despite having changed addresses 9 times in the last 4 years!).
Although it’s great to have the convenience of accessing online and save some paper (although really you are just saving the credit card company money), I really appreciate the monthly trigger of getting the bill in the mail to remind me to sit down and evaluate the bill for accuracy.
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I get my CC bills electronically too. Keeping paperwork organized is my Achilles tendon, so I keep it simple as can be these days. I have access to 2 years worth of statements. I do most of my banking/bill paying online these days.
But I have to boast – we are now CC debt free as of this month. We worked extremely hard and paid off $18,500 in CC debt in 23 months. We also paid of $18,500 of back taxes. I can’t tell you how much easier I am sleeping at night.
We will never use a CC again unless we absolutely must. They can format that statement any way they want – it will help some, it won’t help others. Regardless, CC debt is just the worst!
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I really like the new change. It really opened my eyes when I looked to see if I paid the min it would take me 9 years to pay it off, I mean it only had $300 on it. With 7 credit cards, including 3 store cards we are spending a ton on interest and were’nt really realizing it. Now that it’s right in front of us it makes me more determined than ever to get the debt down.
I do also get my statements electronically, but I always but a reminder into my google calender to pay so I don’t forget.
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A win I hope the statement format is for people. But as you pointed out the most important thing is for people to stop placing debt on their credit cards. It doesn’t matter if a person eventually gets out of debt through bankruptcy or if a family member pays their debts off. If they don’t stop silly spending it won’t matter they can end up in the same situation.
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“With 7 credit cards, including 3 store cards we are spending a ton on interest and were’nt really realizing it.”
You know what your interest rates are. How could you not realize you were paying interest on the cards? Is it that you have a hard time with the math? Or that you just tried not to think about it?
I am genuinely curious to hear from someone who does this.
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JD, much of the information on the credit card statements does not apply to me because I always pay my credit card every month.
Only time will tell all of this information helps people to pay off credit card debt.
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