Word: crediteers
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...difference is that we'd be telling people not just about a particular credit card's characteristics but about what those characteristics mean in terms of human behavior. It would be similar to Federal Trade Commission rules that require auto manufacturers to say how many miles per gallon cars get whether a person is driving in the city or in the country. Depending on a person's behavior, the cost changes - and that is made clear right on the sticker. (See pictures of stores that are no more...
...same thing with that laundry list of fees that come with cards. We think that we're not going to be the ones to go over our credit limit or miss a payment and trigger a penalty rate, so we give those fees little to no weight as we're deciding which card to sign up for - even though they eventually make a big difference in what we pay. "We don't tend to take into account future costs," says Oren Bar-Gill, a law professor at New York University who has studied credit-card contracts and customer behavior. "Consumers...
...Once we've got our card in hand, our behavior becomes riddled with irrationalities. In one experiment, Drazen Prelec and Duncan Simester of the Massachusetts Institute of Technology found that people were willing to pay twice as much for basketball tickets when they were using a credit card as opposed to paying cash. Credit-card spending just doesn't feel like real money. In another study, Nicholas Souleles of the University of Pennsylvania and David Gross of the consultancy Compass Lexecon calculated that the typical consumer unnecessarily spends $200 a year in interest payments by keeping a sizable stash...
...seeming solution would be to make clear to consumers exactly how much their credit cards are costing them. In fact, over the past few decades, there has been a massive push in that direction, from the Truth in Lending Act to the "Schumer Box," which gives a one-page summary of credit-card terms in a font size dictated by the Federal Government (it needs to be large enough to catch your attention). Credit-card statements that were a page long in the early 1980s now easily run to 30. That's a lot of information. And yet America...
...What we need to do, that argument continues, is frame information about how much credit cards cost in a way that really drives the point home. In 2007, a group of Senators introduced a bill that would have required credit-card companies to state on each billing statement how long it would take a person to pay off his balance and how much it would cost in principal and interest should he make only the minimum required payment each month. (That's another psychological trip-up: having a low minimum payment printed on the statement in a big font ratchets...