Clear Language Establishes Trust, Minimizes Anxiety

October 6, 2016

How financial concepts are presented can have a big impact on how people feel about their bank statement. As part of the Karma of Money Collaborative research project, in August, Credit Karma worked with Qualtrics to survey over 1,000 people about their reactions to two descriptions of adjustable rate rules, one technical and one conversational. Their responses were highly correlated with their attitudes toward money and their credit score. In short, the closer the fine print was to language they would use to talk to their friends, the more likely they were to find it not just helpful, but trustworthy. This was particularly true for those with lower credit scores who were more negative about financial disclosures overall.

These findings mirror a Federal Reserve Board study in 2011 that concluded, “When reading disclosure documents, consumers are best served by terms that are straightforward. Small wording changes can significantly improve consumer understanding.”

Credit Karma Head of Consumer Insights Greg Lull is passionate about making managing money as stress-free as possible for everyone. “When we communicate in everyday language, we help people take control of their financial future. That is powerful.”

Technical paragraph

Your variable rates may change when the Prime Rate changes. After the initial introductory 0% interest rate period, the variable rate is calculated by adding a percentage to the Prime Rate published in The Wall Street Journal on the 25th day of each month. Variable rates on the following segment(s) will be updated quarterly: Non-Introductory Purchase APR: Prime plus 9.74%, 14.74% or 19.74%; Non-Introductory Transfer APR: Prime plus 9.74%, 14.74% or 19.74%; Cash Advance APR: Prime plus 19.74%.

Conversational paragraph

You’ll have an introductory interest rate of 0% for the first 12 months. After that, though, you’ll have a variable interest rate – meaning your rate will change based on the Wall Street Journal’s “prime” rate (here’s more about the prime rate). We’ll calculate your interest rate for purchases and balance transfers based on your credit. We’ll let you know the percent (prime plus 9.74%, 14.74% or 19.74%) after you’re approved.

Overwhelmingly, the conversational language was seen as more positive. In addition to being seen as easier to understand, helpful and less anxiety-inducing, it was also seen as more trustworthy than the technical language.

  • The majority (72%) of respondents said the conversational paragraph was at least somewhat easy to understand compared to less than half (44%) who said the same thing about the technical paragraph (the texts were rated separately and people could say that both were easy to understand).
  • The majority (55%) of respondents said they at least somewhat trust the information in the conversational paragraph.
  • One in five (20%) said they did not trust the technical information at some level compared to 13% who said the same thing about the conversational paragraph.
  • The majority (52%), said the technical paragraph made them feel at least somewhat anxious compared to 41% who said the same thing about the conversational paragraph.
  • Those with higher credit scores more often had positive perceptions of both descriptions, but a majority (52%) of those with Excellent credit scores said they had a positive perception of the conversational language compared to 36% who said the same thing about the technical language.
  • Men more often said that the technical language was helpful and trustworthy than women (53% of women agreed it was trustworthy vs. 41% of women).

Methodology: 1,109 people matched to U.S. census data for age and gender were surveyed by Credit Karma using the Qualtrics platform between August 24 and August 26. All data was aggregated and anonymized.