The most prominent parts of my credit card statements are two numbers: my money-back rewards for the current month and the total rewards I’ve received since I got the card. This gave me an idea for “improving” credit card statements.
What if the most prominent part of a statement was the total interest you’ve paid since you got the card? For many of us, that would be zero or close to zero, but for too many it would be a nauseatingly big number, perhaps a 5-figure sum.
I’d be interested to see what effect this would have on people’s credit-card spending. It would likely be a slap in the face at first, and later there would be some numbness to it, but it might help some people control unnecessary spending.
Another possible effect would be for people to spend with a different card. If seeing the total interest we’ve paid over the years is painful, it makes sense that people would avoid this pain by using a different card.
Sadly, this will very likely remain just a thought experiment. I don’t think there are any credit-card issuers who’d be willing to reduce their profits this way unless the law forced them to do so.
I'd settle for more prominently visible total outstanding balance as of last statement date, i.e. the amount you need to pay to avoid interest. On most paper statements I've gotten in recent years, it is no more prominent, and often less prominent, than the minimum payment required. And on my current bank's website, you actually can't find that number (without re-downloading the statement as a pdf): you can get the minimum payment due, and you can get the actual current balance (including transactions since the last statement), but not the amount to pay to stay interest free. I'm sure that's planned and deliberate.
ReplyDelete@Martin: I agree that this is a problem. The most prominent number should be the amount you have to pay to avoid interest.
DeleteA display of total interest paid in the lifetime of a credit card wouldn't affect me directly, but I think it might help those who don't handle their finances well.
Hello Michael, I agree for some it would be a wake up call. I recall when they added the section " if you pay the minimum it will take you 22 years to pay this off". Wasn't that supposed to focus peoples minds? Personally I love my West jet points for travel but as a small business feel the pinch when people ask me if they can pay by card. I pay $10 month to Eleavon and 2.9% of the payment. Applying that logic to other small business when I brought a piece of machinery for our acreage $1800.00 I asked if I used Interac or cheque if they would give me a discount. They took 2% off which was more than my card points and they won as well!
ReplyDelete@Kathy: We all pay a price for credit cards, some more than others.
DeleteI think seeing how much interest you have paid to date would make you sick enough to change your spending habits. I think it's a great idea. Especially when it's your first credit card and you are starting to build your credit and you are new to the way interest is charged. However I also agree with you that I don't think any company would do that.
ReplyDelete@Anonymous: If enough people like this idea, maybe it will become law at some point.
Delete