Earlier this year the government made some changes to the disclosures credit card companies need to make on the statements you get in the mail every month.  The changes force creditors to talk about how long it will take you to get out of debt just by making the minimum monthly payments.   Something they have never disclosed on a statement in the past.

I’ve been banging on this drum for some time now, comparing this lack of disclosure to that the cigarette companies faced a decade or so ago. Now half a cigarette pack is designated for statements about you dying or your teeth and gums looking like a compost heap.   That change was an effective disclosure to the public that put cold hard facts front and centre.

The majority of people out there carry a credit card balance, many of whom just make minimum monthly payments each month because that’s all the card issuers ask for.  From my experience speaking to people drowning in credit card debt, many actually believe and trust that making just the minimums will get them out of debt fast.  You can learn about why just making minimum payments is dumb.

On my current statement, just making the minimum payment each month means it would take 102 years and 9 months.  Let me say that again:  102 YEARS.

Wow, but what’s the total cost to pay it off?  They don’t even talk about that part.  I practice a pay in full policy every month so – do the same if you aren’t.  NEVER ever carry a balance; it’s a path to deep financial trouble.

While I think their intention was good, the government totally let us down on this one.  Look at my September 2010 statement, while it’s a VISA card used for operating business expenses you’ll get the general idea:

The final effect is weak for two reasons:  Firstly the disclosure does not leap off the page and fades into the woodwork; to put it another way I knew it was coming on my September statement and I actually had to look hard to find it.  Secondly, card issuers were not limited to the amount of interest they can charge and according to experts banks are expected to actually increase the interest rates on credit cards to offset any loss in revenue they might suffer from people paying off their credit card statement in full.

So what’s my conclusion?  Great intent, but a weak final effect; make credit card companies disclose the true cost of just making the minimum payments in bold and/or larger font.  Better yet, make minimum payment disclosures look as scary to your financial health as cigarette companies make smokes look to your lungs.  Letting a fact like 102 years of payments blend into my statement like it’s nothing, has no real impact at all.

What do you think?  Are credit card companies doing enough to tell you the true cost of credit card debt?  I’d love to hear your comments.

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