Accepting credit card bills that are in simplified language and contain relevant information about payment options can improve understanding of this product, help make better financial decisions, and reduce public debt. In a study published this Wednesday (5) by the BC (Central Bank), the agency estimates that these effects seem even more significant for people with low levels of education.

The central bank warns about the ease of communication with customers. Photo: Marcello Casal Jr/Agência Brasil/ND

The central bank conducted an experiment to see if different layouts (the way information is disseminated) of card accounts would improve understanding of the terms of use of the product and potentially influence decisions to pay full or partial bills. The study was conducted by British Columbia in partnership with the consulting and research firm Plano CDE and funded by Tufts University’s Fletcher School of Law and Diplomacy at North American University.

During the experiment, groups of participants were presented with different layouts of credit card statements. They then completed a questionnaire regarding account understanding and decision making. Alternate account layouts compared to existing credit card account layouts have allowed behavioral science-based solutions to be tested.

According to BC, the result showed that participants who received invoices with the new layouts had a better understanding of the data presented and were better informed to determine the consequences of accepting a revolving loan or paying an invoice in installments, conditions under which the interest rate is higher.

The credit card is widely used in Brazil. According to the BC, in 2021, about 65 million citizens, almost 40% of the adult population, performed more than 200 million operations every month. On average, families have about 30% of their debt in the SFN (National Financial System) linked to credit cards.

“Despite the convenience of using the card as a means of payment, its careless use can be costly for the user – for example, when he does not pay the full amount of the bill and, as a result, takes a revolving loan or uses the installment option. . With average annual interest rates above 300%, these types of loans are the most expensive in the country and are mainly used by people with an income of less than two times the minimum wage,” warns BC.

Simplification

In addition to inattention, product complexity, users’ poor financial literacy, and confusing invoices are some of the factors that can lead to unwanted use of revolving credit or installments, according to the agency. “In this sense, credit card billing simplification is seen as a possible way to improve the usage profile of this tool,” he said.

The main hypothesis of the experiment is that the information conveyed by credit card bills is usually presented in a technical and confusing manner, which limits citizens’ understanding and encourages paying smaller amounts, increasing interest costs. Therefore, it is expected that by simplifying the accounts, people will better understand the use and risks of this financial product. “It is expected that the reorganization of information will create additional incentives for payment decisions that will lead to [de pagamento] higher, reducing interest costs and fees that consumers typically incur,” BC said in a statement.

According to a study published by the agency, which is part of the Banking Economics Report, a strong impact on the payment decision was also observed when entering a larger pre-filled amount on the bill payment screen in online applications. “This is evidence that, through binding mechanisms or standard selection in general, the value that appears in this response field at the time of payment influences the consumer’s decision to pay,” BC said in a statement.

This Thursday (6) British Columbia will publish its full 2021 banking report. In addition, the body has already put forward several information boxes that are extracts from special studies in the document. The credit market during the covid-19 pandemic, sustainability-related bond issuance, and the bond market in Brazil were topics covered by BC in boxes.