Earlier this month, Smithee shared his glee after receiving his new Chase credit card statement, reflecting changes brought on through the new rules affecting credit cards. I received a new statement this month, as well. I used my Bank of America Signature Visa card recently to purchase airfare for a short vacation, and the charges are now due.
The new statement visualizes how long it would take me to pay off the total charges if I paid only the minimum every month. Here is the new information included at the top of the first page of the bill.
While it’s hard to illustrate the massive long-term detriment of credit when my balance is short of only $900, if I pay only the minimum balance each month, I will pay almost a 40% premium. It would be like paying $625 for each airline ticket rather than $450. This doesn’t account for future interest rate changes. This minimum payment wouldn’t change for me, but cardholders with a larger balance will experience their minimum payment shrinking as their balance shrinks.
The chart describes how much interest expense I could save just by doubling my payment each month.
I don’t think these changes to the credit card statement will change consumer behavior. Unless there is a system of immediate feedback, the consequences (paying more that you imagined) are too separated from the action (buying something you can’t afford on credit). Immediate feedback would have to consist of some kind of warning at the point of sale. Obviously, that will never happen, as it is in retailers’ and credit card issuers’ best interest to encourage everyone involved to complete a purchase.
Short of immediate feedback, there should be more education about credit cards deals and interest in advance. This is not a perfect solution either, but I am not convinced that the changes to the statement along will have much of an effect.
What do you think of these changes to credit card statements?