Many Americans still struggle to understand card agreements

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Ever take a look at the terms and conditions when you sign up for a credit card? If you're like a lot of Americans, you probably haven't. And even if you have, it's likely you couldn't figure out what it said.

It turns out the average credit card agreement in the U.S. is written at an 11th-grade reading level, far higher than many consumers can understand. The average reading level is around a seventh-grade level. That gap can lead consumers to ruin their credit and rack up merciless hidden fees, according to a study out Thursday from

"Most credit card agreements are so confusingly written that the average person — even if they took the time to read it all the way through — probably won't be able to understand it," said Matt Schulz, senior industry analyst at

The study looks at more than 2,000 credit card agreements filed with the Consumer Financial Protection Bureau, a government agency created as part of the Dodd-Frank Act. In 2011, the CFPB began a program to simplify the reading levels of credit card agreements to make them more accessible to the consumers who use the cards. The analysis suggests that while some progress has been made, the agreements are still not within the grasp of much of the population.

Just look at a line from a Navy Federal Credit Union agreement, which outlines policies on security interest:

I/We acknowledge and pledge, specifically as a condition of my/our use of the credit card, that I/we have voluntarily granted NFCU a security interest in all of my/our individual and joint share accounts at NFCU. If my/our credit card loan becomes delinquent, this security interest may be used without further notice to pay all or part of such delinquency. This security interest does not apply to shares in an Individual Retirement Account (IRA).

That's a lot of legalese, and could be confusing to the average consumer who maybe doesn't know what "security interest" means. The clause basically says that if the cardholder is late in payments, the credit union can take money from other accounts the holder may have with the institution without alerting them at all.

"It's written in such a confusing way," Schulz said. "It's really more difficult to understand than it needs to be."

At the same time, credit card agreements are legal documents: Financial institutions have to be sure they're written to hold up in a court of law, should that be necessary.

Matt Freeman, manager of credit card products at NFCU, said the credit union works closely with its compliance and communications teams to hammer out language that is readable but also passes regulatory standards. "Our goal is to provide information that everyone can understand and use to make responsible financial decisions," he said.

NFCU scores fairly well in's analysis. It's in the top five for readability, with an average grade level of 9.9.

At the other end of the spectrum are agreements written at the 16th- and 17th-grade level. That's language that can be understood only by those with college degrees or in graduate school. As of 2015, just more than 30 percent of Americans had completed even a bachelor's degree. used the Flesch-Kincaid readability test to measure credit card agreements filed with the CFPB. The Flesch-Kincaid test uses the number of syllables per word and number of words per sentence to assign a grade level to how difficult a piece of text is to understand.

Of course, there are different ways to calculate readability and different software returns varying figures even for the Flesch-Kincaid grade level. CNBC ran the top-five and bottom-five credit card agreements, as identified in the study, through a number of grade-level calculators. While none turned out as high as those in the study, they had similar groupings and patterns.

CNBC has previously reported on the readability of political debates, both Republican and Democrat. State of the Union addresses have become simplified over the years.

Uncertain future for bureau

The CFPB was founded as part of the financial reforms found in the Dodd-Frank Act. The agency is funded through the Federal Reserve, but members of Congress have moved to bring it under their purview.

"It's been an absolute political football pretty much since the day it launched," Schulz said. Democrats have, by and large, supported the CFPB, but Republicans have moved to limit its regulatory powers and budget. "It will be interesting to see what happens to the bureau with the election in November."