If you want to look at obfuscated user interfaces, you rarely have to look further than finance calculators. These handy little widgets sit on a lot of online retailers and financial institution sites providing an easy mechanism for showing just how cheaply you can pay for something really expensive.
However, they rarely tell the full story. Since people usually accuse me of being so pro-Apple that I won’t say anything wrong about them, I’ll give Apple as an example of how finance calculators rarely tell the real story. Just to cover the other base, I’ll also call out Dell.
Let’s look at the Apple Australia finance calculator page. If you’re not familiar with it, it’s here. A grab of the relevant portion of the website looks like this:
Now, that looks cheap doesn’t it? Borrow $6000 to pay for some fantastic piece of equipment, and you only have to pay $195.61 per month for it!
Just so you know I’m not picking on Apple, let’s look at Dell’s financial calculator:
In neither case is it the full picture though. Most most online financial calculators fail to show is the total amount that will be paid over the loan period. This figure should be mandatory.
Why? It would help consumers understand what the real cost of the finance is. If you want financial reform that will stop people going into debt for more money than they can really afford, let them see upfront how much they’ll end up paying for something, right from the point where they start to play with the figures – which is what the financial calculator should be for.
So if we expand that repayment schedule, what the Apple Finance Calculator doesn’t tell us is that the final figure for borrowing $6000 is $9389.28. (Don’t forget the 28¢ – finance companies don’t, after all.) Similarly, Dell’s Finance Calculator neglects to tell us that the final figure from borrowing $6000 is $9871.68.
Suddenly neither option seems like a particularly cheap option.
Now a lot of people will look at that amount and do the calculation – I know I do, automatically, if something offers me finance (and it’s something I want), and I’m not only bad at math but I’m also usually off in la-la land when it comes to money. However, I’d be willing to bet 4 cores out of my Mac Pro that the average person – i.e., the majority of people using finance calculators, don’t calculate the total amount paid.
Nor should they have to. If a finance calculator is offered on a website, it should be required (by appropriate per-country Federal laws) to show the total amount be paid over the life of the loan. Not doing it isn’t a case of an obfuscated UI, it’s just a case of being sneaky.
Of course, there’s a lot of other sneaky tricks done by the credit industry – for instance, I get a long and uninterruptible spiel from Citibank about upgrading my credit every time I call, no matter how frequently I tell them no. With credit so easy to get, and the terms never fully laid out, it’s no surprise that today in Australia it was announced that:
Household savings improved in the June quarter, but credit cards overtook mortgages as the main form of debt in a survey of Australian households for the first time in almost four years.
(Original article from Sydney Morning Herald, “Credit card debt eclipses mortgages“.)
Given the overall global financial climate, it’s time we start demanding that financial institutions be wholly transparent in the costs of their services. After all, we demand it of so many other industries. Why should financial services be a law unto themselves?