Don't be fooled by Discover's 'Cash Over' benefit
Just when you thought credit card companies couldn't go any lower with deceptive marketing tactics, Discover recently sent out a whopper of a mailer to cardholders. The new mailing focused on the many benefits that cardmembers receive from Discover, including the ability to get Cash Over at select retailers, including Wal-Mart at your current card rate without any extra fees. Discover claims that Cash Over is a great way to avoid ATM transaction fees and combine two trips without any surprises. But for most credit card users, this is almost as bad as using your credit card for a cash advance.
For example, if you tack on $100 in cash to your grocery purchase, you avoid any upfront fees, but if you aren't paying off your credit card bill every month that Cash Over transaction will cost you an additional $7 if you paid the minimum (at 12% interest). Assuming you have more debt than that on your credit card and you could be paying interest on your "Cash Over" for quite some time!
If you had used your debit card to purchase groceries at the same store you could still get $100 extra and you still avoid any fees, the only difference is now you won't be paying for that $100 for the next year.
Does getting Cash Over beat going to a payday lender? Yes, but a bullet to the arm beats one to your chest too. The fact that someone at Discover decided to pitch this as anything other than an emergency means to get cash is further proof that the only one benefiting from these supposed benefits is Discover Bank.
Don't forget that behind every marketing material your credit card company sends you is a corporation seeking to profit, so look at all those "benefits" carefully.
Reader Comments (Page 1 of 1)
6-25-2009 @ 2:12PM
Mark said...
Your math doesn't make sense. You would have to revolve that $100 for 6 months or more to get to $7.
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6-25-2009 @ 2:18PM
Josh Smith said...
Correct, and that's what many consumers will do.
6-25-2009 @ 2:12PM
FWall said...
I hear you, but....I just used Cash Over and it sure came in handy. My son in CA is an authorized user on my card and this came in super handy twice. Plus saved those ATM fees to get his money from Navy Federal..and maybe even those 3rd party fees that are such a pain. Now THAT hurts a lot. Cheaper actually than my sending him money thru my Chase account which charges me to transfer money. Yeowch!
Of course, I'll be paying OFF his two hits to Vons those realllll soon.
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6-25-2009 @ 2:14PM
rym said...
Your analogy with the debit card is unfair. By definition, using your debit card means you do have enough funds to pay off your purchase or ATM deduction...cash over doesn't cost you anything if you have enough funds to pay off and you avoid ATM fees. This is a great feature for those that are spending within their limits.
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6-25-2009 @ 2:18PM
Josh Smith said...
Sorry if I wasn't clear; Discover's mailer telling me all about the Cash Over service used that comparison. It's whole pitch was how Cash Over was way better than using your debit card to get cash back.
6-27-2009 @ 7:45PM
Carolyn Becktel said...
Discover Card also required two payments in May. Is that allowed. That is just wrong. That was just another way for them to squeeze money from hard working people. What is wreong with this company.
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7-05-2009 @ 1:40PM
athensguy said...
I don't get what you're complaining about. It's the same comparison as using a credit card for a purchase vs. using a debit card. If you didn't have enough to make the purchase with the debit card, then you're paying a $39 overdraft fee, so that's a lot more than a possible $7 in interest charges. I personally would never use a debit card for a regular purchase.
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