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Discover credit card

About Discover

The Discover Card is a major credit card that is issued primarily in the United States. It is the third largest credit card brand in the U.S. when measured by number of cards (with nearly 50 million cardholders) and the fourth largest credit card issuer when measured by card balances (behind Bank of America, JPMorgan Chase, and Citi, and ahead of Capital One and American Express). It competes mainly with Visa, MasterCard, and American Express. But unlike Visa and MasterCard, Discover directly issues its own cards, through its Discover Bank unit.

History of Discover Card

The Discover Card was originally introduced by Sears in 1985, which, at the time, was was the largest retailer in the United States. The introduction of the Discover Card was an another an extension of Sears' efforts (along with their purchase of Dean Witter and Coldwell Banker) to add financial services to their portfolio of retail services. The Discover Card quickly gained a large consumer base due to having no annual fee (which was uncommon at the time), higher credit limits, and cashback.

However, the plan to position Sears as a one-stop financial-services center was not successful, and the performance of the Discover Card was hurt by the fact that other retailers resisted accepting it because they believed they would be helping their competitor. Sears sold its financial businesses in 1993 after they began to face difficulties from their competition with Wal-Mart and other emerging big box retailers. The Discover Card became part of the Dean Witter financial services firm, which later merged with Morgan Stanley in 1997.

The popularity of the Discover Card was hurt by the collective power of the Mastercard/Visa monopoly. Visa and MasterCard would not allow banks to issue a Discover Card if they issued a Visa or MasterCard. But in 2004, the Supreme Court upheld a ruling in Discover Card's favor that challenged exclusionary policies of Visa and MasterCard.

After a couple of years of going back and forth, Morgan Stanley spun off Discover as a standalone company in June 2007.

Discover Card Problems

  • Payment Protection Program scam - In 2010, a class action lawsuit filed in New Jersey accused Discover of engaging in deceptive business practices to enroll cardholders into its payment protection program without their knowledge or permission. Participants in the protection program pay a certain percent of their balance every month remain enrolled. Then, if they experience a hardship (such as a disability or hospitalization) they can put their payments on hold without paying finance charges and late fees.

    The lawsuit accuses Discover and its agents of using confusing and misleading sales tactics to get cardholders to sign up for the supposedly optional plan, as well as not properly disclosing fees related to the payment protection program. In most cases, cardholders were unwittingly enrolled in the program when signing up for the card. In other cases, card members were enrolled without any discussion or knowledge of the enrollment.

    “Even if you tell them you are not interested, they turn around and say ‘Let me send you more information’ and then basically disregard your rejection and enroll you unilaterally,” Mr. Paris, a lawyer of the lead firm for the class action suit, said.

    A lot of times these kinds of scams are set up to take advantage of elderly, which is a particularly crappy thing to do.

  • Discover Card is not taken at all places. - When it comes to choosing credit cards, I believe in only getting a Visa or Mastercard. It is simply not worth getting a card which isn't taken everywhere, such as: Discover, American Express, or Diner's club (if that is still around). There are plenty of places that don't accept the Discover card and its not worth worrying about whether or not someone will accept it.

  • Difficulty canceling the card - There seems to be a larger than normal amount of complaints by consumers about how difficult it is to close their acounts.

  • Calling customers at home - When my mom was a Discover card member, she actually received a call from Discover for no reason other to to ask her why she hadn't used her card lately. It's bad enough that most credit card companies maintain adversarial attitudes towards their own customers by with their general practices of high interest rates and fees. But it's pretty ridiculous when a credit card company calls a customer to interogate them about how they are spending their own money.

My Opinion

The Discover Card has a very negative customer reputation. Although I take individual customer reviews (and other people's opinions in general) with a grain of salt, when a company is universally hated it is usually a sign that something is wrong.

The main draw of the Discover Card is the large cash back. But if you want a card with good cash back then get a Mastercard/Visa from one of the big banks (Chase or Citibank) instead - and if you have a Discover Card, close it.

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