Okay Discover Card.. what is the catch?

[mdmc]

I recently started using a new discover card. I was interested in this "cash back rewards" feature, so I basically replaced my debit card with my Discover card. Now I use my discover card whenever I can - I pay off the balance as I use the card - I usually make several payments per month.

Anyway, I got my first monthly statement yesterday - I had over $100.oo in "rewards". I used my "rewards" to make a cash deposit into my checking account.

I've never been given a thing from a bank, except fines, fees, and headaches. What is the catch with these "cash back rewards"?

[brooklynite]

1. The "catch" isn't really yours...

The cash back is being paid by the retailers as part of the fees they pay to Discover. In the long term, however, you're effectively paying for the cash back in higher prices charged by the retailers to cover the fees.

[Motown_Johnny]

3. we are all paying those higher prices

so in effect the user of the cash back card is still getting something out of it

[Exilednight]

15. And there is the catch. Everyone is paying for it in higher prices. And when you really ..........

think about it, it's the working poor that are getting screwed in this deal. These are the people who have jobs, but don't make enough to qualify for such cards. And as this credit crunch gets worse, it will even begin to effect the middle-class who have had their credit damaged or ruined due to the past three decades of bad economic policy.

[Statistical]

24. Honest question.

If tomorrow either
a) credit card were baned
b) merchants were allowed to accept credit cards but it cost merchants nothing.

Thus eliminating the roughly 2% overhead related to credit cards.

Do you honestly think prices would go down? Or do you think profits to shareholders would go up?

For large merchants credit cards are actually one of the cheapest methods to do business.
Do you know what a twice a week armored car pickup cost?
Do you know how much checks cost in terms of check cashing fees charged by banks (no free checking for large business accounts), check fraud, and bounced checks?

[Exilednight]

29. Profits would go up.

It's rare that prices ever actually go down. There might be a handful of areas throughout the country where prices will go down, but not many.

Someone once did a study, when prices go up due to a crisis within an industry, prices only go back to relative levels of before the crisis in less than 10% of the cases.

[Kalyke]

27. I'm working class and I have one.

My credit also isn't damaged. And I'm one of the few people I know who isn't under their mortgage.

[Statistical]

28. Income doesn't determine credit score.

Anyone can get a credit card.

Obviously someone making $10K isn't going to get a $80K credit card though.
Still the idea that only the ultra-rich can get a rewards card is kinda silly.

[Exilednight]

30. Most credit cards require your annual income to be at least 18k per year, many high end

cards (those with cash back type rewards) require your annual income to be over 25k per year.

So yes, income does matter when it comes to credit cards. They may not effect your credit score, but do they effect eligibility, and as you pointed out, how much credit a person might be given.

[proud2BlibKansan]

2. Out of curiosity

How much did you have to put on the card to get that $100?

[trud]

5. cards

I have a Schwab card and get 2% cash back, so I charge everything I can instead of paying cash and pay in full each month.

Another theory is that those of us with cash back cards are feeding off the people who don't pay in full each month. I'm not sure what is going on.

Update: I looked up the Discover program on the web. It seems very complex - varying percentages for varying categories varying with time. I would never remember which card to use in the grocery store, etc. if I tried to get the best savings between this and Schwab.

[mdmc]

25. ..

about a grand

[proud2BlibKansan]

31. Not a bad return

[blue neen]

4. Discover has really good customer service.

When you call, you get someone in this country....I like that they haven't outsourced those jobs.

The line is not fuzzy, it's not difficult to hear or understand the reps...they are also very courteous.

You can call and make your payment by phone without extra charge.

So far, with them I haven't found a catch. :)

[OhioChick]

9. I agree and have been pleased with them for years...

When you call Customer Service, you're told in which state you'll be speaking with someone from.

:thumbsup:

[noamnety]

19. I cancelled them because of their horrific customer service.

Their customer service/fraud department is (was?) in Ohio. We aren't in Ohio, and we had fraudulent charges on our card - made within the line of sight of the office window of their "security investigative team." I took that to mean it was an inside job from someone with access to all the card numbers. That belief was reinforced when it took over 6 months to get the charge taken off despite multiple reassurances over the phone that it was done.

They finally cancelled our card, we told them not to issue us a new one, not because of the fraud directly but because it was so impossible to clean up afterwards.

Then a year or two later we got turned down for a mortgage because the assholes hadn't removed the charge - they cancelled our card and reported it to collections and we were never told they still considered that we owed it; we were explicitly told it was taken care of.

It took filing a complaint with the Better Business Bureau to get it fixed.

[blue neen]

22. I'm sorry to hear that happened.

We're lucky that we haven't had the same kind of trouble.

[Statistical]

6. No catch.

Discover makes money on interchange fees.

They are giving you a "cut". They are also hoping you start thinking "I should buy X to get rewards" and eventually end up in debt.

Pretty much no different than any other "reward" credit card. I have gotten a free Royal Caribbean cruise from their rewards card (now it took about 5 years worth of purchases). :)

[trud]

7. other savings

By the way, another "card" to save with is RiteAid's wellness card. It's not a credit card, but you show it when you make a purchase and you get discounts on some products and, if you spend enough, reach a magic level where you get 20% off everything for the rest of the year except prescriptions.

Of course, you normally have to spend a bundle to reach that level, but when they introduced the card, which replaced, for me, the senior discount card that gave 20% on all purchases on the first Tuesday of the month, I wrote to them and pointed out that the new card was of no value to seniors, since government insurance, for example, Medicare prescription purchases, unlike other insurance prescription purchases, did not count towards that level for some reason, they flipped my card up to it.

I'm not sure why government insurance purchases don't count, probably some legal thing and perhaps they have fixed that by now. I am very happy each time I look at my RiteAid receipts.

[shimmergal]

21. No, they haven't change it,

and it makes me mad.

Has it never occured to whoever set up this stupid regulation that Medicare and Medicaid recipients could really use the small boost to their budget that such incentives provide?

[scarletwoman]

8. The "catch" is that the Financial Sector grows ever larger & more powerful and controls ever more

of our economy and the poltical decisions made in DC.

But that's okay, you got $100.

[LawnLover]

14. Yeah, the OP is just evil

:eyes:

[scarletwoman]

16. I'm just pointing out the big picture.

People complain about how money corrupts our politics, and then willingly enable it.

[LawnLover]

32. How is this corrupt, and how does it enable anything?

Give me a break.

[scarletwoman]

34. Apparently you haven't noticed the stranglehood that Big Banks, Wall Street, & the Financial Sector

in general have had on the policy makers in DC. Apparently you haven't noticed that as the U.S. manufacturing sector has declined, the Financial Sector -- which produces nothing except mega-profits for the players at the top -- has grown to the point of siphoning off approx 40% of the wealth generated by Labor.

And it witholds that wealth from the rest of the economy -- it does not invest, it does not lend, it uses it to generate even more wealth for the select few by playing games like credit default swaps and derivatives and creating bubbles (like the housing bubble, for example).

So, maybe you haven't noticed these things. Maybe you haven't noticed any of the discussions here and elsewhere about the problems this causes in terms of policies passed by politicians beholden to Big Banks and Wall Street for campaign contributions -- policies which favor the Wealthy Elite, the corporatists, the Bankers, etc. over the interests of the working class.

Maybe you haven't noticed the growing wealth inequality in our country, and the way that Big Money interferes in our democracy (did you notice the "Citizens United" Supreme Court ruling?).

For those who have been noticing these things, one of the big questions that arises is, "How do we take back our country from these forces who have grown so powerful and who seem to control so much of our collective fate?"

And one of the logical answers to that question is, "Stop empowering them." Stop cooperating with your own enslavement in a rigged system. Stop feeding the beast. Stop buying in.

Move your money out of the Big Banks and put it in a local Credit Union, or a small independent bank where the money actually gets put to work in your community. And stop using credit cards.

That's the "big picture" I'm talking about.

[Bandit]

10. Most people don't pay off their balance each month so pay high interest

I would bet the interest rates for Discover are well over 16% and the cash back is only on certain purchases..

[OhioChick]

13. Interesting theory....

My balance is paid off monthly, my interest rate is well below 10% and I get cash back on all purchases.

:shrug:

[JCMach1]

11. I get 5% cash back when I travel! 1% when I am in the UAE

That's how you know it's not a US credit card...

Banking in America, SUCKS!!!

Though DISCOVER sucks a little less.

[LawnLover]

12. I've been using and enjoying Discover's cash back rewards

for years. Haven't seen a catch yet.

But then I pretty much use the card like a debit card, since I pay it off every month, so have never been subject to any kind of interest payments or fees.

[Yo_Mama]

17. They are trying to get and keep customers

The company makes money on fees paid by merchants as well as interest paid by customers.

Everyone has some bad credit card debts in their portfolio, but getting and keeping a lot of good new customers helps makes those losses a lower percentage of their portfolio. Also, creditworthy customers are now much less willing to carry balances (for good reason). Therefore the best way to make money is to get good customers to charge a whole lot.

The policy you are describing will help them make money and keep up their rolling portfolio numbers to offset the bad debt.

A recent survey showed that only 17% were planning to charge holiday purchases this year, which is a huge drop from the percentages even from the 90s.

http://www.federalreserve.gov/releases/g19/current/g19.htm

On a non-seasonally adjusted basis, revolving (mostly CC debt) consumer credit was at 801.6 billion in October. This is well below the ending 2005 number of 856 billion. It peaked in 2008 at about 990 billion.

The very worst thing to have in the credit biz are rising losses on a falling portfolio, because your losses become an ever-larger percent of your total loan balance, which means falling profits. That's one reason why credit regulation is necessary - a lend can make the position look better in the short-term by adding new customers and new loans, so left on its own the industry tends to loosen underwriting standards to a ridiculous level, and then contract hard when the handwriting appears on the wall.

Edit to add article:
http://www.wtop.com/?nid=111&sid=2203248
Increased card use and higher transaction volume helped boost the company's fourth-quarter profit by 5 percent over last year, Discover Financial Services Co. said Thursday.

[noamnety]

18. While we're on the subject of credit cards

I know American Express isn't the favorite of merchants because they charge higher merchant fees. But they do have a buy local promotion going on right now that I like - register your card in the buy local program, then spend $25 at a local (not big chain) retailer or restaurant by Dec 31 and they'll credit you back the $25.

https://enroll.amexnetwork.com/US/sbs/

We got an extra takeout meal from a favorite local restaurant because of it, it's money the business wouldn't have gotten at all otherwise.

[blue neen]

23. That's a pretty good deal.

I'm going to check that out--hadn't seen it before! :)

[Codeine]

20. They charge retailers a shitload.

This is why many businesses, including the one I work for, do not accept Discover. To do so would force us to raise our margins or take a big hit whenever someone swipes their card. Not worth it.

[Statistical]

26. Not true.

Just a couple examples but discount rate for discover is exactly the same as visa & mastercard.
AMEX usually charges more but even then it is more like 0.25% to 0.50% more.

http://www.1nbcard.com/content/wireless_credit_card_machines_artisan.html

https://www.wellsfargo.com/biz/merchant/options/gateways/ima/pricing

[onenote]

33. No catch. I take advantage of it as much as I can

When i go to the grocery store, I use my Discover Card not only to pay for the groceries, but also to get cash over the amount of the groceries. Its a win-win-win for me. I leave my money in the bank drawing interest until my credit card bill comes (and avoid money machine charges), I get the "cash back" bonus on the total amount of the charge (including the amount that was handed to me as cash). And I cash in my rewards from time to time for Borders gift cards at the Discover card special deal of a $50 card for $40 in rewards cash.

[NNN0LHI]

35. When you open a drawer and see some expensive gizmo you bought several years ago and never used ...

... and never plan on using, and you would have never purchased if you had been using cash, you will know what the catch is.

That is what happened to me.

Don

[pitohui]

36. i haven't had any "catch" from discover

no worries, if you really have such a high spend that you're earning $100 a month, you'll get the $100

i guess i'm a low income cheapskate it took me a year to get a $40 coupon and if i had taken the cash they would have only given me $20-- i cxl'd the card and focused my tiny spend on the airline cards, since i don't spend much and i get way more than $100 in value with airline miles (most people can't, i'm a little bit of a miles hustler!)

but at the end of the day your kickback is based on your spend, unless you got a VERY interesting opening offer

i did get a mailer a couple months back saying if i re applied for my discover cash back card, they would give me $100 the first month -- is that what you got? in that case, the catch is, you're never getting that $100 per month again, you're only getting a 1 percent kickback on most things and maybe 5 percent kickback on gas/groceries

see what you get kicked back next month before you assume you can quit your job and just apply for credit cards all day, i supplement my income by applying for credit cards and i can't live off it, it's enough extra money to fund a vacation or a christmas spending spree each year, that's it

as others say, merchants are putting in to fund the kickbacks, i don't much care if it's big corporate, but if you're charging something to a small business where you have a personal relationship/friendship, don't use the cashback cards, every little bit helps the little guy