The Incontiguous Brick

April 22, 2009

Credit Card Games

Filed under: Money,Ramblings — iknowkeith @ 3:20 pm

I have a Discover card that I have had for many years. It has a decent interest rate (5.9%) and I use it for emergencies. The other day I received a letter from Discover informing me that the rate was going up to 12.99% and if I didn’t like it I could pay off my balance a leave. This applies to all new purchases and outstanding balances. I owe about a $1000 so I would rather not pay it all right now but the new rate is crap.

discover1I called them to complain and see what we could work out. They said the new rate was being instituted “across the board” for everybody and they would send me the paperwork to appeal it. Because I have never missed a payment I could probably negotiate a lower rate than 13%.

But here is the kicker… the guy on the phone said the new rate is “due to the economy.” Seriously? The new rate is Prime Rate + 9.74% (=12.99%). So the increase is not due to the economy because that would mean the Prime Rate had gone up. The increase is not because I am a high risk borrower because nothing in my life or bill paying practices have changed. The new rate of 12.99% is because they know they can get away with it and most of their customers will chalk it up the the bad economy and take it in the shorts.

Think about it. Why 9.74% and not something else? Because that plus Prime is just under 13% and “12 something” sounds less criminal than 13. It has nothing to do with the economy and everything to do with taking advantage of the consumer by playing the headlines. The letter states, “our decision to make this change was based on the higher cost of doing business due to the challenging economic environment.”  Again, that would be Prime Rate and it has not gone up.  In fact, Prime Rate is much lower than it has been in years.

ratecharts18

Discover is not hurting anymore than EXXON was hurting when gas prices were high. Discover does not make high risk home loans or anything of that nature. They only do credit cards and online bill paying. Discover’s stock is low but their P/E ratio is hanging around 4. They are showing a sizeable profit already and now Discover is going for the gold by jacking up the rates. Their profits in 2008 equaled close to $1 billion.

Discover Card… I call Bull $hit!

1 Comment »

  1. This is a great article. Thanks for sharing.

    Comment by Many — May 22, 2009 @ 8:29 am | Reply


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