“Looking over a credit card application is a study in opposites.  On the one hand, there are the bright, color advertisements offering low, “introductory” rates and cool designs for your plastic.

On the back of the application is print in six-point font where, if you can squint hard enough, you can make out a reference to information like the “universal default clause.”  That clause in particular is one few consumers read or understand – it gives the credit card company authority to raise the interest rate if you make a late payment, not just on that card, but on any credit card, loan or mortgage in your name.  Believe me, credit card companies use this authority, and they have plenty of opportunities.

It is an astonishing fact that the population of the United States is about 300 million, but Americans use more than 640 million credit cards, in excess of two for every man, woman and child.

Americans pull that plastic out of their wallets for their purchases often, too, totaling about $2 Trillion – with a ‘T’ – every year!

The rules governing the rates and fees on credit cards are usually written in fine print on a gray brochure that came with the credit card when you first received it, and probably found its way into the garbage, unread, shortly thereafter.  But those rules should be read, because they mean money right out of your pocket, in the form of fees, changing rates, and penalties.  These line items on your credit card bill can accumulate with dangerous speed, like an avalanche coming straight down a mountain aimed right at the consumer.

There might not be a better way to illustrate this point than to consider the testimony heard by the Senate Homeland Security Committee last week in Congress.

One man testified before the committee that his $3,200 credit card bill incurred 47 over-limit fees, even though he went over his limit only three times.  Even though he paid an average of $1,000 over six years, his debt ballooned, threefold, to $10,700.

Interest rates that shift with the level of debt on the card and confusing billing practices were cited throughout the hearing as reasons for situations such as the one above in which credit card users become completely hamstrung by their debts.

The first line of defense in preventing situations like that one is, of course, consumer awareness.  Congress and the credit card industry can, and should, make consumer awareness as easy as possible.  By simplifying billing practices and mandating straightforward, uniform statements and account rules, credit card companies can do a tremendous public service to Americans who use credit cards.

The pressure from consumers and Congress ought to convince credit card companies to change the practice of using impenetrable language in their rules and regulations – language that could make an economist blush.  If they don’t, we can always go back to good-old-fashioned money.”