Discover Vastly Improves T&C But Reduces Open Road Rebates

Discover Card customers received a notice in the mail recently that the card was reducing the “Open Road” rebate on auto maintenance and gas dropped from 5% to 2%. Around the same time, customers have also received notice that the terms and conditions for the card are basically coming in line with the CARD act ahead of schedule. Hmmm, coinkydink?

Back in the spring, Discover also increased the cashback dollars required to cut you a check from $20 to $50. By rolling out these changes at the same time, credit card companies are trying to make good on their threat that improved consumer protection means higher costs and lower rewards. Here is the text of the new terms and conditions:

SUMMARY OF CHANGES
INTEREST RATES
?Annual Percentage Rate (“APR”) increases for paying late or exceeding your credit limit.
We will no longer increase your APRs on your existing credit card balances if you pay late or exceed your credit limit. Your APRs on new transactions may increase to a Default Rate only if you fail to make a payment when due. However, if we increase your APRs for new transactions to a Default Rate, we may, as described below, periodically review your Account to determine if your APRs should be reduced. Click here to see the manner in which we determine a Default Rate.
?Grace Period. Your grace period for new purchases is changing, which may help reduce your finance charges. (Click here for more information on “How We Calculate Periodic Finance Charges”)
FEES
? Overlimit Fee. We will no longer charge an Overlimit Fee. (Click here for more information)
? Pay-by-Phone Fee. We will no longer charge a Pay-by-Phone Fee. (Click here for more information) ? Balance Transfer and Cash Advance Transaction Fees. If you make a balance transfer or take a cash advance, the maximum transaction fees will be increasing to 5% of the amount of each new balance transfer or cash advance, as applicable, with a minimum of $10. (Click here for more
information)
PAYMENTS
?How Payments are Applied. Payments made in excess of the Minimum Payment Due will now generally be applied to high APR balances first. This may help you pay off your high APR balances sooner. (Click here for more information) ?Minimum Monthly Payment. The Minimum Payment Due calculation is changing, which may result in a higher required monthly payment. Making a higher monthly payment will help you pay down your balances faster. (Click here for more information) ?Payment Processing Time. Mailed payments received at our processing facility will be credited to your Account on the same day if received by 5PM local time, instead of the current 1PM cut-off time. (Click here for more information on “Monthly Payment Options”)
YOUR RIGHT TO REJECT CHANGES
You have the right to reject some of the above changes in accordance with the instructions described below.Click here for the instructions. If you reject these changes, we will close your Account, but you will have the option to pay down your balance over time, in accordance with the then-current terms of your Cardmember Agreement.

Please keep these documents with your records.

CHANGES TO YOUR CARDMEMBER AGREEMENT
We are changing the Discover Cardmember Agreement. These changes will be effective as described below. Please read this notice carefully and keep it with your records.

THE FOLLOWING ARE CHANGES YOU CAN CHOOSE TO REJECT AS EXPLAINED BELOW. THESE CHANGES ARE LISTED IN THE ORDER IN WHICH THE APPLICABLE SECTION APPEARS IN YOUR CARDMEMBER AGREEMENT OR THE PRICING SCHEDULE THAT IS PART OF YOUR CARDMEMBER AGREEMENT.

Minimum Monthly Payment
Effective Date: The following changes to the “Minimum Monthly Payment” section of your Cardmember Agreement will be effective as of December 1, 2009. Any outstanding balance after that date will be subject to the new Minimum Payment Due calculation.

The Changes: We are changing the Minimum Payment Due calculation, which may result in a higher required monthly payment. We are replacing the “Minimum Monthly Payment” section of your Cardmember Agreement with the following:

“Minimum Monthly Payment. The Minimum Payment Due each billing period will equal:
(i) the greater of:
? $40;
? 2% of the New Balance; or
? current Periodic Finance Charges plus Late Fees plus $20;
(ii) plus any past due amount.

We may also include some or all the amount by which you exceed your Account credit line. When we calculate the Minimum Payment Due, we may subtract from the New Balance certain fees added to your Account during the billing period. The Minimum Payment Due will be rounded up to the nearest dollar and will never exceed the New Balance.”
Please note: Our decision to make these changes to your Minimum Payment Due was not based on information obtained in a report from a credit bureau or other outside source. We made these changes due to the impact of new federal law and regulations, taking into account the extent to and manner in which you use your Account.

Default Rate
Effective Date: The following changes to the “Default Rate” section of your Cardmember Agreement will be effective as of January 1, 2010.

The Changes: We will no longer increase your APRs on your existing credit card balances if you pay late or exceed your credit limit. Your APRs on new transactions may increase to a Default Rate only if you fail to make a payment when due. However, if we increase your APRs for new transactions to a Default Rate, we may, as described below, periodically review your Account to determine if your APRs should be reduced. We are also changing the manner in which we determine a Default Rate. We are replacing the current “Default Rate” section of your Cardmember Agreement with the following:

“Default Rate. Each time that you do not make the Minimum Payment Due by the Payment Due Date we may, in accordance with applicable law:
(i) terminate the availability of any promotional Annual Percentage Rates on new transactions; and
(ii) increase your Annual Percentage Rates for new transactions to variable Default Rates. Each new variable Default Rate for a new transaction is determined by adding up to 5 additional percentage points to the otherwise applicable Annual Percentage Rate and will vary based on any changes in the Prime Rate. (For example, if the promotional purchase rate was 2.99% and the rate for other purchases was 15.99% and you paid late once, the rate for all new purchases could increase up to 20.99% variable and vary thereafter with the Prime Rate.) When we first determine the variable Default Rates, we use the Prime Rate effective for the billing period in which you pay late. The variable Default Rates are determined in accordance with the Variable Interest Rates section.

We will base your Default Rate on your creditworthiness and other factors such as your current Annual Percentage Rates and your Account history.

If we increase any of your Annual Percentage Rates to a Default Rate, we will send you a notice, in accordance with applicable law, advising of (i) the date the new Default Rate will apply (the “Default Rate Effective Date”), (ii) the type of new transactions to which it will be applied (note: the new Default Rate will not apply to any other transactions) and, (iii) your right to reject the new Default Rate. New transactions are those transactions which either (i) have a Transaction Date, as shown on your billing statement, of more than fourteen days after we mail or deliver the notice to you or, (ii) if permitted by applicable law, were posted to your Account after the current Default Rate Effective Date. Your Account will not be subject to a Default Rate for the first twelve billing periods after your Account is first opened.

If your Annual Percentage Rate for purchases, balance transfers or cash advances was increased to a Default Rate, we will, to the extent required by applicable law, periodically review your Account to determine if any of your Annual Percentage Rates should be reduced. Any reduced Annual Percentage Rates on new and existing balances may be different and may be higher than your previous standard Annual Percentage Rates for purchases, balance transfers and/or cash advances or any promotional rate.”
Cash Advance Transaction Fee
Effective Date: The following changes to the “Cash Advance Transaction Fee Finance Charges” section of your Cardmember Agreement will be effective as of January 1, 2010.

The Changes: We are increasing the Cash Advance Transaction Fee FINANCE CHARGE to a maximum of 5% of the amount of each new cash advance with a minimum Cash Advance Transaction Fee FINANCE CHARGEof $10. Please note: This new standard Cash Advance Transaction Fee will apply to any cash advance checks posted to your Account on or after January 1, 2010, even if a different Cash Advance Transaction Fee was disclosed on the check. However, if a promotional Cash Advance Transaction Fee applies to any check, you will be charged that fee, instead of the standard Cash Advance Transaction Fee, subject to the terms of the offer.

Balance Transfer Transaction Fee
Effective Date: The following changes to the “Balance Transfer Transaction Fee Finance Charges” section of your Cardmember Agreement will be effective as of January 1, 2010.

The Changes: We are modifying the “Balance Transfer Transaction Fee Finance Charges” section of your Cardmember Agreement to provide that, unless otherwise specified in a balance transfer offer, we will charge you a maximum Balance Transfer Transaction Fee FINANCE CHARGE of 5% of the amount of each new balance transfer, with a minimum Balance Transfer Transaction Fee FINANCE CHARGE of $10.

HOW TO REJECT THE ABOVE CHANGES AND NOT HAVE THEM APPLY TO YOUR ACCOUNT
If you do not want the above changes to apply to your Account, call us at 1-888-728-3440 or write to us at: Discover card, PO Box 30937, Salt Lake City, UT 84130-0937. The letter should include your name, address, phone number and Account number(s). Do not send it with your payment or other correspondence. In order to reject the above changes you must contact us by December 31, 2009. You have the right to reject the above changes by the date listed above, in accordance with these instructions, unless you fail to make a required minimum monthly payment within 60 days after the due date for that payment.

If you notify us by the date listed above that you choose to reject these changes, we will close your Account and you will no longer be able to use it for further transactions. If your Account is closed, you must pay your balance (over time if you so elect) under the then-current terms of your Cardmember Agreement, as modified below.

THE FOLLOWING CHANGES WILL APPLY TO YOUR ACCOUNT EVEN IF YOU REJECT THE ABOVE CHANGES OR IF YOUR ACCOUNT IS OTHERWISE CLOSED. THESE CHANGES ARE IDENTIFIED IN THE ORDER IN WHICH THE APPLICABLE SECTION APPEARS IN YOUR CARDMEMBER AGREEMENT.

Monthly Payment Options
Effective Date: The following changes to the “Monthly Payment Options” section of your Cardmember Agreement will be effective as of February 1, 2010.

The Changes: We are changing the time of day by which a mailed payment must be received to be credited as of that day. Payments received in proper form at our processing facility by 5PM local time on any day will be credited as of that day. Payments received at our processing facility after 5PM local time will be credited as of the next day.

How We Apply Payments
Effective Date: The following changes to the “How We Apply Payments” section of your Cardmember Agreement will be effective for all payments received on or after February 1, 2010.

The Changes: We are changing the way your payments are applied to your Account balance. To the extent your payments exceed the Minimum Payment Due, we will generally apply them to high APR balances first. Otherwise, we will apply payments and credits at our discretion. We are replacing the current “How We Apply Payments” section of your Cardmember Agreement with the following:

“How We Apply Payments. Each billing period, to the extent your payments exceed the Minimum Payment Due shown on your current billing statement, we will apply these excess amounts in order of the Annual Percentage Rate applicable to the balance of each transaction category (as referenced in the Finance Charges section), generally from highest to lowest, beginning with the balance subject to the highest Annual Percentage Rate. Otherwise, we will apply payments and credits at our discretion, including in a manner most favorable or convenient for us. In all cases, we will apply payments and credits in accordance with applicable law.”
How We Calculate Periodic Finance Charges
Effective Date: The following changes to the “How We Calculate Periodic Finance Charges” section of your Cardmember Agreement will be effective for all payments received after January 1, 2010.

The Changes: We are changing the grace period for new purchases. If you paid your New Balance on your previous billing statement by the Payment Due Date on that statement, we will not impose Periodic Finance Charges on new purchases, or any portion thereof, paid by the Payment Due Date on your current billing statement. We are replacing the current “How We Calculate Periodic Finance Charges” section of your Cardmember Agreement with the following:

“How We Calculate Periodic Finance Charges. We begin to impose Periodic Finance Charges on all transactions from the Transaction Date for the transaction shown on your billing statement, unless a transaction is posted to your Account after the close of the billing period in which it occurs, in which case we begin to impose Periodic Finance Charges on that transaction from the first day of the billing period in which it is posted to your Account. We continue to impose Periodic Finance Charges until the date you pay your entire New Balance shown on your billing statement by making payments or receiving credits. However, if you paid the New Balance on your previous billing statement by the Payment Due Date shown on that billing statement, we will not impose Periodic Finance Charges on new purchases, that is, purchases first appearing on the current billing statement, or any portion of a new purchase, paid by the Payment Due Date on your current billing statement. We call this the “grace period.” There is no grace period on balance transfers or cash advances. As more fully described in the section titled “How We Apply Payments,” we generally apply payments to your Account based on the Annual Percentage Rate applicable to the balance of each transaction category. This means that if you do not pay the New Balance on the current billing statement by the Payment Due Date shown on that billing statement, then, depending on the amount of your payment and the Annual Percentage Rates on other balances, you may not get a grace period on new purchases.

We sort your transactions into groups of purchases, cash advances, and balance transfers and then further sort the transactions within each group by their Annual Percentage Rate. For example, purchases subject to a promotional rate and purchases subject to a standard rate would be separate groups. We refer to these groups as transaction categories. At the end of each billing period, we compute balances and Periodic Finance Charges for each day of the billing period for each transaction category. We use the following equation to compute Periodic Finance Charges for each transaction category:

(Average Daily Balance) times (days in billing period) times (Daily Periodic Rate)

You may refer to the Finance Charge Summary on your billing statement for these amounts. Then we add up the Periodic Finance Charges for each transaction category to get the total Periodic Finance Charges for your Account. The Average Daily Balance is shown as zero if, because of the grace period, no Periodic Finance Charges apply to the balance in a transaction category.”
Overlimit Fee
Effective Date: The following changes to the “Overlimit Fee” section of your Cardmember Agreement will be effective as of February 1, 2010.

The Changes: We will no longer charge a fee if you exceed your Account credit line. We are deleting the “Overlimit Fee” section of your Cardmember Agreement.

Pay-by-Phone Fee
Effective Date: The following change to the “Pay-by-Phone Fee” section of your Cardmember Agreement will be effective as of February 1, 2010.

The Change: We will no longer charge a fee for making a payment over the telephone.

Arbitration of Disputes
Effective Date: The following changes to the “Arbitration of Disputes” section of your Cardmember Agreement will be effective immediately.

The Changes: The National Arbitration Forum is no longer handling consumer arbitrations. As a result, we are making modifications to the “Arbitration of Disputes” section of your Cardmember Agreement to change certain arbitration administrators and provide for an alternative administrator. We are removing the National Arbitration Forum as an arbitration administrator and adding JAMS as an arbitration administrator in addition to the American Arbitration Association (“AAA”). JAMS may be contacted at: 620 Eighth Ave., Floor 34, New York, NY 10018, Jamsadr.com (phone 1-800-352-5267). If neither AAA nor JAMS is able or willing to serve as the arbitration administrator and we and you are unable to agree on a replacement administrator or arbitrator, then a court of competent jurisdiction will appoint an administrator or arbitrator consistent with the “Arbitration of Disputes” section of your Cardmember Agreement.

FEDERAL EQUAL CREDIT OPPORTUNITY ACT NOTICE
The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant’s income derives from any public assistance program or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The federal agency that administers compliance with this law concerning Discover Bank, the issuer of the Discover card, is the FDIC Consumer Response Center, 2345 Grand Boulevard, Suite 100, Kansas City, MO 64108.

©2009 Discover Bank, Member FDIC

(Thanks to Miguel and Falcon!)(Photo: k a t m)