Discover Card Changes
Change is always in the air in the credit card industry. This has never been more true than it is now that companies are quickly adjusting to the new realities of the CARD act.
At Discover, Change Comes Early
The Consumerist points out that the Discover Card is notifying customers changes to it’s terms and conditions in advance of the CARD act becoming effective next year. Unfortunately, the Consumerist didn’t read the notice all the way through when it concluded: “that the terms and conditions for the card are basically coming in line with the CARD act ahead of schedule.”
Granted, these notifications are full of long, rambling legalese, yet if they had read the whole thing, they would have noticed that most of the changes do not take effect until February 1st, 2010. That is just three weeks before the deadline for CARD act compliance. They are ahead of schedule, but just barely so. In fact, they are probably early because it was easier for them to make the changes on the first of the month than on the 22d, when the law mandates.
What Are The Changes?
One of the big ones that jumps out is that the “open road” rebate on gas and automobile maintenance is going from 5% to 2%. That is a major drop that mirrors my Amex OPEN Platinum Business card, that will be going from 5% to 3% next month. Another change is that you will only be able to receive a check for your cash back when your balance reaches $50. In the past, that threshold was a mere $20. This is no big deal for large spenders, but for those of you who use your Discover card sparingly, this will mean that you will get a return less often.
Other changes are positive and are a preview of what we might expect from Mastercard, Visa, and Amex as they retool their terms and conditions to become CARD act compliant. Some highlights changes include:
- Longer grace period
- Elimination of “over the limit” fees
- Elimination of “pay by phone” fees
- Application of payments to the highest APR balance first
- Same day credit of payments when received by 5pm (previously payments had to be received by 1pm)
What Do I Think?
The Consumerist feels that the negative changes are Discover’s way of making good on the banking industry threats of higher costs and fewer rewards. In absence of the CARD act, I think most consumers would gladly trade these new protections for the 3% reduction in cash back on gas and maintenance. I am a little confused about the change in the threshold for getting cash back. One would think the idea behind a reward card would be to highlight the rewards to encourage people to spend. Now, Discover will be issuing rewards less often, and generating fewer reminders of the benefits. The interest they make on the $30 extra they are holding on to for a month or two, here and there is trivial.
In order to achieve CARD act compliance and remain profitable, each credit card issuer is going to have to change their terms and conditions. Most changes will be positive, and there will be some negative ones as well. Cynics will conclude that they are just punishing consumers for the CARD act. Either way, the market will eventually determine which new fees will be accepted by consumers, and which will be rejected. On the whole, I think Discover Card holders will be happy with the net effect of these changes.
