Discover Randomly Raises 400,000 Members' APR "To Remain Competitive"

Discover card holders, check your bills. You may be one of 400,000 lucky members getting their interest rates significantly increased for no apparent reason.

We received a “Love Note” separately from our statement from Discover stating that our APR will be rising from 12.74% to 19.99% . While I do carry a small balance on the card sometimes, it has never been one that I use much because I have cards that are below 8% APR and still offer rewards. Now, my credit isn’t bad (744 FICO – just checked after getting off the phone with Discover). I have no past dues, never pay late, etc. I also noticed that the statement said “this decision to change your terms was NOT based upon information in your credit file”.

Bewildered, I called Discover and could not believe the explanation I got….

I was told approximately 400,000 cards were given this APR increase so that they “remain competitive” in the industry. Say what??? The representative had no explanation how raising my APR to the point where I would be determined to pay off the card and let it rot was going to help their bottom line though. I guess they are trying to make up for the third quarter 16% decline in revenues by strapping it to the backs of their consumers. Stupid move, but all too typical, I guess.

Jim F. – Frankfort, IL

If you’re affected by this rate raise, and threatening to move to another card doesn’t get the rate lowered back to normal, it’s time to shopping for a new credit card company with a better rate and initiating a balance transfer between the old and new cards. Bankrate’s credit card comparison tool is a great place to start.

RELATED: Discover Financial Profit Falls on Higher Expenses


Edit Your Comment

  1. morganlh85 says:

    Can’t he opt out of the rate change? Usually they make you cancel the card when you do this but it seems he wants to do that anyway.

  2. mantari says:

    “Increasing your chocolate rations by 19.99% since 2001.”

  3. teh says:

    “members’ APR” not “member’s APR”

  4. Charles Duffy says:

    @morganlh85: sure, but having a live card (that’s not *completely* inactive — buy a stick of gum every few months) with a very long history can help your credit score. If this is his oldest card and his others have significantly shorter histories, I can understand why he’d want to keep it open.

  5. mantari says:

    @Charles Duffy: Somewhat true. The credit balance is also important. Another part of your credit score is your overall balance versus your overall available balance. Extreme example: getting rid of a $10k card that you’ve had for one year can cost you (depending on the rest of your situation).

  6. humphrmi says:

    @Charles Duffy: Even if it’s an old card, at 744 he’s not going to lose much by dumping this card. At the FICO range he’s in, in general terms, he’s not going to feel any interest rate pain until he loses more than 34 points.

  7. timmus says:

    I own a small business and I dumped Discover a couple of years ago, as they were giving us mediocre discount rates compared to Visa and Mastercard and imposing a lot of lengthy rules and procedures on sales. Every now and then I’m asked if I accept American Express, but it’s been about 5 years since I’ve been asked about Discover.

  8. tcp100 says:

    Well, I wonder how the heck they determine this. I just called them and apparently my rate got -lowered- to prime+2.49 (was prime+2.99) without even asking. My FICO is 760, so not really in a different “range” than the OP.

    Usually, i’ve seen cards lower the APR on unused cards to get you to use them.. (That, or they up the limit. A good way to get your credit limits raised is to use a card for a while, pay it off, and then ignore it. Repeat.)

    The folks who get penalized (contrary to common belief) are actually the people that pay off their balance in full every month. The CC’s don’t want those folks as customers, they make them 0 money..

  9. Mr. Gunn says:

    It’s all my fault. Discover’s paid me ~$150 to use their card so far, and they’ve gotten exactly $0 from me. Actually, as much as I use it, they’re probably still making money from the merchant fees.

    A good way to get your credit limits raised is to use a card for a while, pay it off, and then ignore it.

    That tactic doesn’t work with Capital One. I used their card for a year, then abruptly quit. All they do is send me those damn checks, which I promptly shred.

  10. xanax25mg says:

    I actually called Discover about this after getting the note. They told me the rate affected certain customers for “business reasons” but couldn’t tell me why I was singled out. I have good credit, never been late and carry a good size balance. She told me my only options were to write a letter opting out which would cancel my credit card or to accept the 25.54% interest rate. I told her to transfer me to customer retention and she refused to, saying there was nothing they could do either as customers that got that letter had no other option. I argued some more that it made no sense that I, a good customer, was being told I had basically no choice but to cancel my card with them. I told her I demand to speak to a supervisor, she put me on hold and before I could even say a word, a fella in retention offered me a fixed 14% on the spot. I asked him why I had to spend 10 minutes arguing with a woman who was effectively telling me I had no alternative but to cancel and he shrugged and asked if I caught her name. Either way, my APR is actually lower now then before they were gonna jack it up to the deadbeat rate.

  11. nweaver says:

    Discover is hurting. Back when Costco used discover-only, that was a real incentive.

    But now that they have shifted to Amex-only, that has really hurt Discover… so i guess their buisness model

    1) Raise prices

    2) Tell customers to “go to hell”

    3) ???

    4) Profit

  12. alhypo says:

    It sounds to me like they are exploring the effects increased rates will have on their customers. The reason no one can tell you why you were singled out is because you are just part of their random sample. (They, of course, don’t want to tell you this for obvious reasons.) They are collecting data to see how customers will respond to the change then decide if they want to raise the rates for everyone.

    On second thought, 400,000 is an unnecessarily large random sample, so it’s probably something else.

  13. alhypo says:

    @tcp100: How does raising rates penalize people who pay their balances in full every month? Any interest rate on a balance of zero is zero. I get what you are saying, though: Maybe they are trying to scare those customers away.

    Also, my understanding is that they make money either way, though less if you pay off your balance. They actually charge the vendors a percentage of any transaction. Stores should offer a percentage discount for people paying with cash (unless the extra expense and risk of dealing with cash is too high). It’s like those “rent-to-own” furniture stores where the interest is hidden in the price of the item. If you go in and pay the entire amount, you are being ripped off relative to the customers who “rent-to-own”, so they would need to offer a substantial discount to balance it out.

  14. BigNutty says:

    I went in person to a Sears store to make a $2000 cash payment on my Discover card and was told my card had been cancelled. I was never late or went over the limit.

    I called and found out they were worried I had too many open accounts on my credit report. All my accounts were in perfect standing and even though they had high limits and balances, they were always paid off in 3 or 4 months. This went on for 2 years.

    I got so pissed off I put the $2000 back in my pocket and told Discover to screw off. Cancel an account with a perfect record? They must have seen my future. I was so young and stupid I didn’t even thing about my credit.

    That’s why my user name is BigNutty.

  15. IRSistherootofallevil says:

    I use my discovercard as leverage when negotiating. I’m just like “um I wanna see if I qualify for a lower rate…my discovercard has a promotional 0% for 6 months when it reverts to 17%….” Chase lowered my rate to 12% from 23.75% before I could say any more. They actually offered me 10.74% variable vs. 12% fixed…I went with the fixed. Time to give Discover a call.

  16. FLConsumer says:

    Is there anywhere that still accepts Discover (besides Sam’s Club & Sears?) I see Amex making some real inroads in FL and Discover on the way out. Visa & Mastercard still appear to be the dominant players and now there’s very few places which won’t accept credit cards.

    I’ve only encountered one restaurant in the past year which doesn’t accept credit cards, a little lunch place and they comp’d us the meal. I’ve since returned many times, insisting to pay for the original meal, but they still won’t accept it. Despite the hassle of having to pay cash there, their service keeps me coming back.

  17. jamar0303 says:

    @nweaver: Their new business model probably involves their link to UnionPay in China. (UnionPay is China’s main card type). Basically, in China Discover is accepted everywhere while the big-name cards are limited to places that foreigners frequent. For example, I know of a school in my area of China that only takes UnionPay/Discover for any credit card transactions. Same with the convenience store chains and supermarkets. And even some of the stores that take Visa/Mastercard/Amex only take locally issued cards, but Discover cards are treated as local. So for frequent travelers to China Discover is a lot handier.

  18. MercuryPDX says:

    I had (well still have but) a Discover card from way back when. I stopped using it because merchants just stopped accepting it. Every time I get a new one, I just cut it up; I don’t even call in to activate it. I suspect at some point they’ll close the account for me due to lack of activity.

  19. Trojan69 says:

    My FICO is in the high 700s. I have had a spotless credit record for two decades. There were a couple of minor problems many, many moons ago. Discover wouldn’t issue me a card despite my sterling, long-term, circumstances.

    When they reduced the cash back a few years back, I decided not to try for the card anymore.

    They are fools.

  20. Nytmare says:

    @tcp100: Contrary to your belief, there are no penalties for paying off your credit card every month, and 2-3% from the merchant for every transaction is pretty much the opposite of 0.

  21. topgun says:

    I totally agree with you. I’ve used Discover for several years (with no problem being accepted) just for gasoline purchases. With 5% off that’s close to .15 a gallon discount. I pay it off monthly and Discover must like me
    since I just got a new card. YTD rebate=$90

  22. @MercuryPDX: I suspect at some point they’ll close the account for me due to lack of activity.

    Would there be somewhere in the fine print of my card agreement that would tell me when (and if) a my credit card company would indeed cancel my card for lack of activity?

  23. JustAGuy2 says:


    It’ll take a long time, I think. I’ve had a discover card in the drawer that’s still valid that I haven’t used since at least 2002. I get the checks every couple of months (a-shredding we will go), and I got a new plate when the old one expired, so it’s still an open account.

  24. kimsama says:

    @loquaciousmusic: I had Chase cancel one of my cards as a “courtesy” due to lack of activity. I also have a score in the high 700’s, and never used that Mofo because it didn’t have high enough cash back awards. I was still ticked off that they pretended it was a “courtesy,” though. (I’m also a “deadbeat” — I pay off in full every month — so I wonder if that helped them reach the conclusion that I wasn’t generating any interest revenue, so they could cut me loose).

    I’m pretty sure they can cancel your card at any time for pretty much any reason. Don’t have my ToS here with me, but most have a clause allowing them to stop service to you at any time.

  25. anatak says:

    @tcp100: you’re correct. Credit card companies have been going after the bankruptcy and subprime markets for years. Its much easier for them to rip off people who don’t have a financial clue.

  26. emjsea says:

    Discover did it to me. I called as soon as I got the letter and complained and they dropped the APR back down to the old level.

  27. cotr says:

    “I have cards that are below 8% APR and still offer rewards”

    what would this be? Im looking for something to substitute my AMEX One card.

  28. The Walking Eye says:

    Discover’s done the same to me, except mine is now at 26% (26!). I’ve emailed them, but have not yet heard back. I was going to call them, but hadn’t gotten around to it. So, looks like I’ll be transferring to another card and not using my Discover anymore.

    They must be counting on people not looking and the APR being charged.

  29. FLConsumer says:

    @camelontherun: FIA Card Services (fmrly MBNA) used to handle Wachovia’s credit card business until Wachovia decided to get back into the game. I still have a platinum Visa with them that pays ~1.0% back on everything, and I think the rate is 7.8%. I only have one small recurring payment on there every month. I do everything else on my Wachovia Visa signature card, 1.5% back on everything, not sure what the rate on it is ‘though. Personally, I’d much rather have my credit cards through my actual bank who has a vested interest in keeping me around.

  30. protest says:

    Citibank is/has been doing the same thing. i have A+ credit, and the citicards csr i spoke to admitted that i had an excellent record with them. so why is my rate 15.5%? she told me it had nothing to do with my credit, that it was because of rising costs to maintain the accounts. i asked her if they could offer me ANY card of theirs that had a rate of less than 10% and still offered rewards. that’s a big fat NO.

    to be clear, i’ve only ever paid them $4 in interest, and have made several hundred dollars in bonus cashback. yet i still feel like i’m getting ripped off by having such a high rate.

  31. vex says:

    Meh, my cards are always raising my rates. Probably because I haven’t paid any interest to them in several years, and most I don’t even use except on vacation. I assume they do this to “deadbeats” like me because they figure eventually one day I’ll slip up, not pay, and they’ll reap some juicy interest.

    The 3 cards I have are from 20-30%…it has nothing to do with credit scores and everything to do with the CC trying to maximize potential profit. Since I never pay interest anyway I have no motivation to complain about it.

  32. mac-phisto says:

    it sounds like they are specifically targeting users with a low ROI – anyone not using the cards frequently & paying off balances in full.

    i had a similar problem with a rewards card that i have with bank of america. i wasn’t too attached to that card anyway.

    if you pay in full every month, i would be more concerned about other changes to your terms that could end up costing you more: switching from an average daily balance to a two-cycle for interest calculations & eliminating the grace period (is that even legal still?…i know a few cos. tried that in the 90’s), or a drop in rewards (that’s standard practice in the industry now).

  33. ancientsociety says:

    Ha! I got the same letter a few days ago, called and was told Discover was “reviewing” APRs to “remain competitive”. I asked specifically if this had anything to do with my credit score or history, and was told no, I was a “great customer, who regularly used the card, paid more than the minimum every month and on-time” and that they’d “hate to lose me”.

    No retention. No apology.

    I’ll be applying for another card with a 0% balance xfer rate and closing my account with Discover.

  34. pdxguy says:

    I had a Discover card until… was getting ready to take a long-overdue trip and getaway for my birthday. I knew it would be expensive and use up most of my credit limit. So, I sent them a large check in advance to pay down my balance. Instead, they “held” it for 3 weeks. Their excuse was that it was out of my pattern. Well, duh! Had to use a friends card to pay for everything. How damn embarrassing. And, to top it off, after the 3 week “hold” was over, they cancelled my card. A**holes. Thanks for the wonderful b’day present. Will never have their card ever again. I have a long memory for that sort of bs.

  35. Jamie Beckland says:

    @camelontherun: I have a Bank of America (formerly MBNA) WorldPoints card that has, duh, World Points (which are OK I guess) and 5.9% fixed. Worth asking after, if you’re so inclined…

  36. randombob says:


    Credit card dealers specifically state in their TOS that a business cannot pass the fee along to consumers, i.e. charge a higher price to people using the card than to those not, and they also have a section stating that a business cannot set a lower limit on what you can spend (like I always see in chinese food places, “No credit cards under $10”).

    So this is why typically you don’t see that happening, though I DO see similar on occasion at some gas stations where the cash price is less than the card priced, and advertised as such as well. Not sure how they get away with it.

  37. hollerhither says:

    Ah, so that was the “important message” I threw in the trash the other day. I haven’t used my Discover card in a long, long time — it had a lousy rate to begin with. It has a zero balance, and I could cancel, but since it’s the oldest card I have, I guess it will just stay in the sock drawer.

  38. duckduckem says:

    I was going to report this one, too. I got the notice in my mail yesterday. After I called Discover to see what was going on. This is the only credit card I actually use, I’ve never made a late payment, and I have a great credit score. They told me the same thing, that a huge number of people were effected. And not only did they not raise my rate the 10 or so points the letter indicated, they brought it down three points and told me to call back periodically to see if they could offer me anything lower, since I am a valued customer. I thought the whole thing was just stupid, and a horrible way of treating so-called “valued customers.”

  39. Pop Socket says:

    This predatory random interest increase is a natural result of the big fat present they got from Congress a few years ago on bankruptcy “reform.” The ability to ratchet up rates with impunity is great for them, lousy for cardholders.

  40. royal72 says:

    brilliant move discover card! hope you brewed a new pot of coffee for your legal department, ’cause i’m sensing a class action lawsuit in your future.

  41. FijianTribe says:

    On phone with Discover now…. THANKS FOR THIS POST.

    I was at 12.47% variable, all of the sudden I noticed that they jacked me up to almost 20% fixed.

    I called to figure out why. The nice lady said it was probably due to a delayed payment I made back in May (when the original hike occured). I did check my statements and it appears I was a few days late, so I was assessed a $39 late fee in addition to the rate hike. I’m suprised but not really, that they hiked up the rate with one late payment in at least 4 years.

    The lady lowered me back down to 11.74% variable. I asked if they had any fixed rates, she called accounts retention and the best they would offer me is 18%, which I declined.

    Since I was already on the phone I asked if she could check a limit adjustment. After a few quick questions they raised the limit $500. I don’t need it now, but who knows.

    I was very pleased with the person who handled my call. She was very nice and efficient. I’ve called a couple times throughout the years for rate adjustment inquries, and they have always handled my account well.

    I’ll stick with them.

  42. Anonymous says:

    That’s my favorite excuse ever.
    Dear Customer, we’ve decided to screw you to remain competitive.
    My company has a deal worked out with a local parking garage. We end up helping to fill it and they offer us a discount.
    A few months back, they sent out an email from the company that stated we were going to be paying $2 more per day. Why? So they could stay competitive. My company fills up that garage to the tune of 30%. After they raised prices? Around 20%. Many spots are now empty all day long. Did they stay competitive? Nope. they lost money and the garage, which used to be totally full by 9 am, now has spots available all day long.
    Staying competitive is not what happens when you raise rates.
    I just wish companies would be honest a la:
    Dear Mr. Customer:
    We need to earn more money. Our current rates aren’t doing it, so we do need to increase the rates. We apologize, but we must make this change.
    At least then, we wouldn’t be getting mind humped as well….

  43. Anonymous says:

    After 21 years with this company, always ontime, no credit problems, I’m not taking it. I also phoned them, questioning how they can raise the rates when the prime rate was just lowered. The answer I got was that the company anticipates the prime rate being raised significantly in the future. I didn’t bother trying to talk them down. I immediately went shopping and applied to transfer the balance elsewhere.

    This seems to be a growing trend among credit card companies (and other companies as well). They don’t make a lot of money off of their best customers, so they do their best to piss them off and make them want to leave. It will bite them in the butt in the end.

    Short term, I believe that they are looking for the cash flow that they will receive when their best customers pay up and move balances to another card. We are being played on this one, but, I’m not about to let them jump me from 14.77% to 22.99% because of their poor business practices. No one should accept this. Once Discover gets away with it, the rest will follow. Why do we even have a credit score????????

  44. DickDasterdly says:

    I also received this flyer last week. I called up and got the “standard business practices” arguement from the CSR. When I pressed further, I was told I had “low usage” on my card since I had not made a purchase in the past 60 days. I countered that I had spent almost $8K over the past 12 months and wanted to know how that could be defined as “low usage.” The CSR could not come up with a viable answer in my opinion. After trying a few different CSR people, I did talk to a competent representative in Discover’s Web Services who explained it slightly better. I had an “Adverse APR Appeal” mailed to me, which I must now fill out and return within 30 days. It consists of nothing more than filling out your name and address. I will be adding a nice letter blistering the lack of transparency in their “standard business practices” and will simultaneously e-mail Mr. David Nelms said letter in a bid to simply return my APR to 19.9 percent, which is what it was before I received a letter. If that fails, I will simply begin a mutual policy of salutory neglect detente that Discover Card has chose to start and expedite the process of creating a zero balance.

  45. smarty says:

    Heh! Just called them up and politely asked them to lower my rate back to the 12% it was before. They transfered me to another dept (retention?), and I repeated my request. I stated that since it’s not based on a credit report, and that they are still offering rates between 10.99%-18.99% on their web site, that I wanted my rate back to it’s original rate (12%). They lowered it to 10.99%. Total time on my cell phone counter, 5 mins, 52 secs. But we’ll see if it stays that way after Nov. 1.

  46. ancientsociety says:

    Okay, so I tried contacting them again today to at least get my rate to stay the same. Talked with a CSR, then a Mgr and neither would do this. When I asked the manager to transfer me to their retention dept., she said my account was “ineligible to be handled by retention”. She admitted that I was a good customer, used the card regularly, and paid on time always but that my only recourse is to close the account.

    Should I call/email executive customer service or just close the card at this point?

  47. sidetwo2 says:

    How To Play Ball with Discover:

    Thank you for your message about your Discover Card Account. Because we do value your business I have opted your Account our of the rate change. Your Account will remain open if you like and the rate will remain the same.

    We appreciate your business and the time you have taken to contact us today. Thank you for choosing to use Discover Card.



    ——- Original Message ——–
    Date : Oct 22, 02007 07:52 PM
    Subject : Re:Re: General Question or Comment [#494952]

    Here’s how this works. I’m not going to mail out a letter asking that my rates remain unchanged. If you don’t keep them the same (or even lower them – my average APR is approx. 10%) – I won’t use the card. As easy as that. Business lost.

    ——- Original Message ——–
    Subject: Re: General Question or Comment [#494952]
    Date: 10/22/2007
    Sender: Discover Card Customer Service

    Thank you for your message about your Discover Card Account. I can certainly understand why you would be confused about your rate being increased when you are a good paying Cardmember. While we do appreciate your timely payments, business demands and the need to remain competitive were the driving force behind this change.

    It is simply because of economic factors require Discover Card to review accounts and occasionally adjust the account terms to address business needs.

    Any Account that has been opened longer that twelve months and had an APR less that 20.00% was reviewed for this increase.

    Please note our credit decision was not based on information obtained in a report from a credit bureau.

    If you wish you may opt out from this change you may simply send a letter to the address below, and Discover Card will close your Account and the rates will remain the same.

    Discover Card
    Po Box 30951
    Salt Lake City, UT

    We appreciate your business and the time you have taken to contact us today. Thank you for choosing to use Discover Card.


    ——- Original Message ——–
    Date : Oct 22, 02007 01:30 PM
    Subject : Re: General Question or Comment [#494952]

    I recently received an unwarranted APR increase stating, among other reasons, the reason being to keep Discover card “competitive”. Unless you significantly decrease this APR, I will not use this card. I have not ever missed a payment and would prefer not be treated as if I had. Thank you.

  48. faustess says:

    Boy am I glad my husband told me about this site! I decided that before sending in my letter to not accept the higher interest rate (from 15.49% to 19.99%) – again, not based on my credit history – that I’d check here to see what other people had to say. I had the same spiel from the regular customer service “business decisions, blah blah.” But when I called back and asked to speak to someone in customer retention, the rep there gave me 10.99% interest rate effective on my next statement. I guess we’ll see how it goes on the November statement, but I’d prefer not to close the account if I don’t have to – their customer service has always been easy to understand, helpful, and pleasant. Hopefully this works out. If not, they’ll get my letter and the CEO will hear about it!