In my attempt to help point out what to look for in credit offers and marketing material I wanted to review the recent offer from Discover.
Sometimes the scans can be hard to read so this time I’m simply retyping the offer sent to millions and will comment about specifics of the message and terms.
As usual I found that the messages used to tease you into applying, misrepresents facts about the card. A couple of points really made me mad about this card offer but I think the one that is the furthest from the truth is the one “Discover Card offers up to 1% Cashback Bonus 4 on all your other purchases — automatically and unlimited.” Where you have to pay attention is the key two words “up to”.
I review the terms and conditions below and if you think you are really going to get 1% cashback then you need to read my review carefully.
You also need to read my review to find out why:
- Your payment can be twice as high on this card than the one you currently have.
- Your rate can get jacked up because Discover allows you to go over your limit.
- Your cashback bonus and rewards can be taken from you.
- You will waive your legal rights or participation in a future class action lawsuit if you have a problem with this card.
- Your interest rate can go to 30.99%.
- Your introductory rate period can reduced as you make payments.
So let’s get right into the marketing message. Here is the mailer.
To get a Discover ® More ® Card!
Your savy credit management places you in a select group of consumers eligible for this pre-approved1 offer with Platinum-level benefits from Discover Card — a select group that expects more from their credit cards.
Accept your Discover More Card today and get 0% APR2 on purchases until August 2009, unlimited rewards and no annual fee. Plus, you’ll automatically receive $100 Cashback Bonus® 3 when you make a total of $750 in purchases during the first three months after your account is opened.
Even if you decided on other credit cards in the past, this special reward provides 100 great reasons to get a Discover More Card now. But the one big reason to accept your card today is to make your money worth More.®
A stronger dollar and much more
With the Discover More Card, you’ll always know that the purchases you make are building meaningful Cashback Bonus.
- Discover Card gives you $100 Cashback Bonus 4 when you make a total of $750 in purchases within your first three months.
- Discover Card offers 5% Cashback Bonus 4 in categories that change throughout the year like travel, home improvement stores, department stores, gas, groceries, restaurants and many more.
- Discover Card offers 5% to 20% Cashback Bonus 4 at top online retailers like Dell.com, LandsEnd.com and Barnes & Noble.com through our exclusive online shopping site.
- Discover Card offers up to 1% Cashback Bonus 4 on all your other purchases — automatically and unlimited.
With your Discover ® More ® Card, unlimited means exactly what it sounds like. We do not limit the amount of rewards you can earn. So you’ll add up Cashback Bonus® on every purchase, every time.
Once you’ve earned the rewards, turn them into more.
Of course, you can choose to redeem your rewards for cash — as an electronic deposit into your bank account or as a credit to your Discover® Card account. But to make the most of your Cashback Bonus®, you can increase the value of your rewards every time you redeem for gift cards or instant eCertificates from our Partners.
That means, for example, you can redeem $20 Cashback Bonus for a $25 gift card from Borders or for a $30 gift card from Brookstone.®Or redeem $20 Cashback Bonus and get a $40 certificate from Samsonite. Boost your purchasing power with over 100 top brands and add punch to your dollar.
Security and service that are second to none.
Customers have raved about the security and service provided by Discover Card from day one. That’s because you’re never responsible for unauthorized charges. You’re protected with advanced fraud early warning alerts of suspicious activity. And our personal fraud specialists will help you day or night, 24/7.
If you call Discover Card for any type of customer service, you’ll speak with a real person in less than 60 seconds and receive exceptional personal attention. When you call, ask about our protection products that provide additional guards against identity theft, allow you to freeze card payments for up to two years in emergencies, help notify all your card issuers of lost or stolen wallet, track your credit score and more.
Control your account your way — online.
Our online tools let you manage everything important to you that relates to your card:
- Decide how and when to pay your bill. Pay online if you like. Even go paperless. You can also sign up for e-mail reminders when payments are due to help you avoid late fees.
- Track and review purchases simply and easily. Even get year-end summaries for tax time convenience.
- Choose your own card design. Over 150 options await — everything from baseball and football to flags and puppies.
- Manage your account with FREE online tools. Our tools can help you plan for big purchases and review your spending — even help you create a plan to pay down a balance.
The bottom line.
Savvy spenders are demanding more from their card every day. If your card isn’t working as hard for you as a Discover ® More ® Card will, make the switch for the only reason that matters — it’s your money.
Start enjoying your card and get $100 Cashback Bonus® when you make $750 in purchases within your first three months. Just complete the attached acceptance form, call…….
1: Subject to review of your financial information.
2-4: See reverse side of second page for rates, fees, rewards, payment allocation and other important information.
Terms and Conditions Highlights:
APR: 0% until the last day of the billing period ending during August 2009, then the standard APR, 6.99% variable.
- Balance Transfers: 6.99% until the last day of the billing period ending during February 2010, then the standard APR for purchases.
- Cash Advances: 23.99%
- Default Rates: Up to 30.99%
Variable Rate Information: The standard purchase APR may vary monthly and equals the Prime Rate +2.99%
Grace Period for Repayment of the Balance of Purchases: At least 25 days when you pay your balance in full each month.
Method of Computing the Balance for Purchases: Average Daily Balance (including new purchases)
Annual Fee: NONE
Minimum Finance Charge: $0.50
Cash Advance Transaction Fee: 3% for each cash advance, with a minimum of $5 and no maximum.
Late Fee: $19 on balances up to $250 and $39 on balances over $250.
Overlimit Fee: $15 on balances up to $500 and $39 on balances over $500.
My Comments and Review on the Marketing Message
The marketing material from the very start needs your careful attention. While the offer says, “Your savy credit management places you in a select group of consumers eligible for this pre-approved offer with Platinum-level benefits from Discover Card — a select group that expects more from their credit cards.” The footnote says that this depends on a review of your financial information. So you have to ask yourself how you can be in a select group but still need to qualify. The only thing you’ve been pre-approved for is to receive the offer, not the card.
You are presented with a $100 bribe to get an use the card if you make a total of $750 in purchases during the first three months. While the $100 may sound attractive because you need extra cash you can’t loose sight of the fact that you will have to run the card up by $750 to get it. If you need the $100 so badly, how are you going to pay off the $750?
Cashback Bonus Categories
If you decide to get the card because of the 5% cashback offers, watch put. The offer says that the categories chance throughout the year so rather than being able to take advantage of 5% discounts when you want them, you’ll have to use them when the merchants want you to.
The offer does not allow you to see the online merchants that might offer you discounts for shopping through the Discover online shopping site. It is also not disclosed what terms or restrictions may apply to obtain the online discount.
A 1% cash back bonus seems like a great reward but the minute you carry a balance on the card you are not getting 1% back, you are actually being charged prime rate + 1.99%. The 1% cashback is an incentive for you to use the card and hopefully carry a balance on which the credit card company can make a lot of money off of you.
Plus, you won’t know it till we review the terms and conditions but there are some pretty severe limitations on what earns you a 1% cashback bonus. Not all transactions qualify and they are not guaranteed.
The line that jumped out the most to me was, “That’s because you’re never responsible for unauthorized charges.” So if I’m never responsible for some of my debt because it was not my fault then why can’t I be relieved of my debt when it was not my fault that I got hit by a truck? It just seems that the victim excuse to not repay your debt when used as marketing message is lame since debt forgiveness and understanding is certainly not the position of credit card companies when you get into trouble, through no fault of your own.
The offer brags that I will get to speak to a human in less than 60 seconds when I call. But it is not just the human that you need, it is a human that can actually help you. It seems like this is using the fact that the phone will be answered as a benefit for you to apply for this card.
The offer says that you can “Decide how and when to pay your bill”, but that does not mean you can change your due date or pay when you feel like it. It means that you can choose when you want to pay your bill any time before the due date that you have no control over.
Let’s Look at the Terms
So here is some critical fine print information that you need to make sure you don’t miss. Above I told you that the default rate can be as high as 30.99% but wait till you see how easily you can be in default.
Default Rate: If you are late making a payment or your account is overlimit twice, we may increase your APRs to a Default Rate. Your Default Rates are determined based on factors such as your current purchase APR, your payment history with us and your general credit history.
So you’ve got to be very careful here. It does not say if you are over your limit twice in a row, it says twice. And remember, the credit card companies allow you to go over your limit. Plus they charge you an overlimit fee on top of all of that. Watch Out!
If you were hoping to use a balance transfer so you could get your $100 bribe, you are out of luck. “Balance transfers do not earn rewards.” You also need to be careful, interest on balance transfers will begin to build immediately. “There is no grace period for balance transfers.”
My favorite line in this section is, “If more than 90% of your new balance consists of special rate balance transfers, we may increase your minimum payment due to a maximum of 4% of the new balance if it would otherwise be less than that.”
So if you transfer over $10,000 of debt then your monthly payment could be $400. This might come as a surprise since your new minimum payment on this card could be twice as high as your old card before you did the balance transfer. You also need to be extra careful because if you transfer over $10,000 and you want to make sure you don’t get hit with this jacked up monthly payment then you are going to have to add a purchase balance of over $1,000 to the card. But guess what gets paid off first, making the creditor more money off of you? Keep reading.
I had to read this section twice to make sure I understood it correctly. Here is what it says:
“We apply payments to balances with low introductory/special APRs (such as balance transfer and purchase APRs) prior to balances with standard APRs. Therefore, your savings will be reduced by making additional transactions or having balances with standard APRs. In addition, the length of time the introductory/special APRs will apply to your account may be reduced by the amount of your payments.”
Now the fact that they will apply payments to the lowest interest rate debt so your other debt is running up more interest, I understand that. But the section also says that my low introductory interest rates may be reduced or shortened by the amount of my payments. What does that mean? Does it mean that ever time I make a payment my introductory period gets shorter and shorter?
“You agree to be bound by the terms of the Cardmember Agreement, which will be sent with the Card.” So even though there are some terms and conditions associated with this credit offer sent through the mail that includes an application, you are not given the full set of terms and conditions that will bind you until you first apply for the card and then receive it.
“The Cardmember Agreement provides that we may choose to resolve a claim relating to your account by binding arbitration, in which case you will not have the right to have that claim resolved by a judge or a jury and you will not have the right to participate in a class action in court or arbitration. You may reject the arbitration provision with respect to your new account within 30 days after receiving your Card.”
So this agreement will be settled by arbitration, that creditors pay for and which almost always rules in the creditors favor. And if there is ever a class action lawsuit against Discover, you do not have the right to participate. If you ever get this card make 100% sure that you opt out of this arbitration clause within the first 30 days. Arbitration only benefits the creditor, not the consumer. If you have a dispute or claim against the creditor and you hope to settle it through arbitration, you will get screwed.
The promised rewards are not a sweet as you think they are. Even the cashback marketing messages are very, very hollow once you read the fine print.
“Earn unlimited cash rewards on all purchases. Earn a full 5% Cashback Bonus on category purchases throughout the year by signing up for each program. In addition, earn a full 1% unlimited Cashback Bonus on all other purchases after your total annual purchases exceed $3,000; other purchases that are part of your first $1,500 earn .25% and other purchases that are part of your second $1,500 earn .50%. Warehouse purchases (those made a select warehouse clubs, discount stores and their affiliates earn .25%. We do not include warehouse purchases or 5% Cashback Bonus program purchases (up to the dollar limit specified in each applicable program) in calculating your total annual purchases to determine your tier level. Rewards are redeemable in $20 increments. Rewards have no expiration date; however, if your account is closed for any reason or inactive for 18 consecutive months or if you fail to make the Minimum Payment Due by the Payment Due Date for two consecutive billing periods, your Cashback Bonus will be forfeited.”
So before you get 1% cash back you’ll have to charge more than $3,000 a year, avoid using the card a wholesale club, discount stores, or for 5% cash back transactions. I’d have to say the 1% cashback bonus marketing message is disingenuous.