Is the Discover Card a "Game-Changer?

Petite answer, no. There are much better free cards available – looking at you Chase Freedom – and I generally prefer miles/points rewards over cash back credit cards. With that being said, I’d like to show you exactly what this card offers, since I have gotten this particular offer in the mail multiple times and feel like it’s worth describing what Discover has here.

The front cover is pretty explicit – Game Changer. I’m not positive on what the qualifications to change games are, but I suppose Discover is going to tell me inside this packet.

Here’s the first page:

  1. No Annual FeeAt first blush, this is a positive. Most people have had it drilled into their heads that paying an annual fee for a credit card is wrong.  Sometimes they are right, but a lot of offers today for cards with annual fees often have the first year’s fee waived, so it becomes a moot point. Additionally, you can usually earn many more points/miles/rewards with cards with annual fees. One example is the Chase Sapphire Preferred, which offers a 40,000 point signup bonus after spending $3,000 in 3 months and has the annual fee of $95 waived the first year. If you take those 40,000 points as cash, that’s $400. You could then pay the annual fee for four years and still come out ahead $20! The takeaway here is that reasonable annual fees – say $150 and below – should not be a dealbreaker when choosing a card.
  2. No Overlimit FeeSince 10% of your credit score is based on overall utilization of your total limit, I strive to keep my utilization below 30%, so as not to lower unnecessarily my score. Therefore, this “perk” is useless to me – I don’t want or need to max out my limit. For people who are maxing out their cards for whatever reason like running a new business or attacking shopping mall sales, this could come in handy, but to me maxing your limit is a sign of near term financial suicide, so this perk I do not consider a benefit.
  3. No Foreign Transaction Fee – This is the first useful benefit of the card. Generally, this will save you between 3-5% on every foreign transaction made. Therefore, a one week vacation in Mexico that would cost $800 with fees would instead be $760-$776, saving you $24-$40. This isn’t a great deal of money, but it’s better than a hole in the head, as Pops says. However, there are cards that offer greater benefits and have this feature as well. Still no defining reason to get this card. . .
  4. No Late Fee on First Late Payment – Everyone screws up, but hopefully not more than once and this goes double with credit cards.  This is a nice feature from Discover, but if you have a history of paying on time and in full, as you should, and you miss a payment or are late, you can generally call and beg for forgiveness. More often that not, banks will reward your long term good behavior and forget this aberration by waiving the late fee payment and won’t report it to the credit bureau. This feature should not be a reason to get the card. Sidenote – This happened to me once with BB&T when I was 21 and had (still have) a perfect history with them. They forgave the late fee.
  5. No APR increase for paying late – Pro tip: DO NOT PAY INTEREST EVER. Interest eats into your cash back and points rewards. If you can’t pay your monthly bills in full, don’t pay them with a credit card. Since APR doesn’t matter to me, neither does this benefit.

And the second page:

  1. 5% Cashback in Rotating Categories up to $1500 a QuarterFinally, real rewards that require quantification and justification. For instance, Discover lists “Movies” as a rotating category. Think about how many times in three months you have to go to the theater to spend $1500 – it’s over 100 times at $13-$15 a ticket. With 30 days in a month that’s more than 1 movie a day! Obviously, while it’s possible to spend $1500 at restaurants or gas stations (by buying extra gift cards at the gas station) over a 90-day period, it’s probably unlikely that you will max out the bonus each quarter. For this paragraph’s sake, lets say you do – that’s $6000 of bonused spend x .05 which equals $300. YAYYYYYYY $300, but wait. . . Remember the Sapphire Preferred card mentioned above? The signup bonus ALONE is $400 and with 2x bonused spend on restaurants and travel plus an annual 7% dividend on all points earned, your pockets would be much fuller then if you used the Discover card. The math here doesn’t justify getting this card over others.
  2. Unlimited 1% Cashback on All Other Purchases – Since the no annual fee Chase Freedom offers – through the Chase Exclusives program – a 10 extra points per individual purchase and 10% bonus on all spend points earned, it gives 1.10%+  cashback, rather than the Discover card at 1%. There are many other cards that give more than 1% cashback as well; I just don’t want to list them. Discover fails here too.
  3. Talk to a Real Human (Immediately) When Calling Customer Service – This is the best tertiary benefit, as I consider the signup bonus  the primary benefit and bonused spend the secondary benefit, and objectively makes each call much pleasant, but it’s not a must-have option of a credit card. It basically saves you between 30 seconds and 2 minutes each time you call, which probably is only after the statement posts and only then if you have a problem with your cash back rewards posting.

Third page:

  1. Choose Your Own Due Date and Pay Time – I’m not sure exactly why this matters, as when you get approved for a credit card you can usually call the bank and set the statement date. As for the time of when you want to pay, I’m confused as to why that matters as well- pay the bill on time or (pro tip!!) early! 
  2. Manage Account with Mobile App and Email/Text Reminders – Chase and Citi also offer this benefit. Chase has a fantastic mobile app and Citi’s is pretty decent as well. American Express’ tablet app I prefer over either Citi or Chase, however. Features generally include accessing statements, reviewing balances, paying bills, transferring money, etc. I do wonder what Discover’s apps look like and how user friendly they are, since the larger banks have more money to spend on mobile interfaces.
  3. Unemployment = lower APR and lower payments – Here is the sole unique feature of the Discover card. While I assume that if unemployment becomes your reality, you could call your bank(s) and negotiate a lower payment or interest rate, Discover is the only bank I know to offer this explicitly. Of course, the specifics are not clear, leaving the possibility Discover could only lower your APR 1-2%, which doesn’t aid much.

SUMMARY:

As I stated in the very first sentence, this card is not worth applying for. There is no signup bonus and there are cards, both free and with an annual fee, that give more cashback, making this card redundant. The game hasn’t changed; in fact this card ossifies your potential for points and cash rewards.

Remember: Don’t throw this offer away in the trash as paper is always recyclable!

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