The Discover card site describes a series of new cards (launched this Monday according to the customer service representative). I learned of this from a casual mention in the Discover Gas card discussion, but the three new cards (Education, Home Improvement, Restaurants) deserve discussion.

All appear to be reverse tier cards with similar terms. Reverse tier means that the first $1500 of charges earn a 5% rebate, the next $1500 3%, and then 1% after that. There is a $25,000 annual limit on spending for rebates in the category. These rebates can be doubled to get coupons worth twice the value at certain stores) on the items in the relevant category. A separate thread on Fatwallet discusses the strategies for using the doubling. Apparently, many of the double offers have fine print that makes them less useful than one might think. Note rebate on 1500 at5% is only $75.The Gas card has been discussed extensively elsewhere in Fatwallet and much of the discussion probably applies to the other cards. http://www.fatwallet.com/forums/messageview.php?start=0&catid=52&threadid=261374

I assume Discovery Card intends to have you choose to carry the card because of the generous rebate, but then have you use it for all your purchases. However, an obvious strategy for those with multiple cards of different types is to get a specialty card for what you charge heavily, and use other cards for other items such as groceries and general shopping. A spouse might pick a different card. The terms specifically state "Every applicant, including a spouse, may apply for a separate Account. THIS OFFER SUPERSEDES ALL PRIOR OFFERS". This suggests one such card per person, but two for a married couple (obviously for different types of purchases, with each an authorized used on the others card).

It might even be possible to purchase gift cards at a Home Depot or elsewhere to get the rebate for the project, and then to do a balance transfer or an exchange for another type of card. One might hit the rebate limits quickly with tuition payments, collect the rebate, and then request an exchange to a different type of card. It may also be possible to exchange one card for another type, once the limits had been reached but I did not discuss this with her. Usually, one will not want to be purchasing when one has a balance transfer because the payments are applied first to the purchases. A possible exception to the latter is near the end of the balance transfer period or when ever one intends to pay it off. Then a month's interest or so may be acceptable if the rebate could not otherwise be earned.

The terms on their web site are very vague on what stores are in each category, giving only code numbers that the charges have to be on. The Customer Service representative stated that for home improvement that the stores included hardware, home improvement warehouses (Home Depot type), garden stores, lumber stores, but did not include appliance stores, furniture stores, or wall covering stores. Obviously, with the rebate depending on the type of store one might find stores that had what one wanted. Appliances are at Home Depot I believe and would probably be covered, but not if from Sears, Sam’s club (Discover earns a very low rate here according to the fine print, but discover is apparently about the only card they take). Of course, some items may be cheaper if from stores not covered.

I was able to change my Discover card into a gas card, and then a couple of days later changed the change to the home improvements card, but my wife’s Gold Card was not eligible for an exchange (three different representatives said this).

It seems to me that there are a lot of open ends here that members may have an insight on.

This offers raises some obvious questions about how to combine with other offers and rebates. For instance I had just requested an exchange of my card into a gasoline card and the woman processing the transfer had not mentioned these other options. Since I buy much Shell gasoline and already had 5% rebate from Shell, the gasoline rebate offer was of less use. I was converting to be free to use other brands, and in particular to buy Exxon and get also the Upromise rebate after the 5%. However, when I heard of this offer, I decided we spent more on home improvement type items and requested two days later that they change the conversion to that (which they could).
Incidentally, conversions apparently keep card number and become effective on the next closing date. It seems I should delay non-essential home improvement type purchases till Dec. 11. Since you keep the same card number, apparently the change occurs on the closing date, even if you have not yet received the new card. Hence, (as first representative pointed out, you would have been able to start earning earlier if the exchange was done just before closing rather than just after). This may be relevant as to whether to call in a hurry or wait to learn more (such as by reading comments hopefully to be posted here, or by phoning and requesting the information pack).
AMEX is apparently giving double Cash Back on their rebate cards for shopping (which apparently would cover home improvement stores) till the end of December, if you sign up on their website.

One MBNA rebate card I have includes restaurants, making it a possible alternative if I cannot max it out on groceries and drugstores...

Possibly skillful use of DealPass or similar sites could give better rebates on home improvement stores.

I know of no other good way to get 5% off on tuition or daycare (if Discovery is taken at those places). One could easily use up the $1500 (or $3000 for the second tier) for one or two cards at some universities for tuition (such as the one I teach at) and then do a balance transfer or replace it with another card. I cannot tell whether if you maxed $1500 on tuition, and then changed to a gas card you could get another $1500 or whether they would rule your $1500 was used up. I could imagine someone who had used say $1200 on Spring tuition (and not expecting to have a use for “education” in the near future) deciding to shift to another card in either case.

Below are the materials from their web site on the home improvement card (terms appear similar for the other Specialty cards).

Annual Percentage Rate (APR) For Purchases The standard APR, 13.99%* or 15.99%*
Other APRs Balance Transfers: 0.00% until the last day of the billing period ending during December 2005;* thereafter the standard APR for purchases

Default Rate:
19.99% or 24.99%*

Cash Advances:
20.99% or 22.99%
Variable Rate Information Your standard APR for purchases may vary and is determined monthly by adding 9.24% † or 11.24% to the Prime Rate. †
Grace Period for Repayment of the Balance of Purchases At least 25 days when you pay your balance in full each month
Method of Computing the Balance for Purchases Two-cycle Average Daily Balance (including new purchases)
Annual Fee: NONE Minimum Finance Charge: $0.50

CASH ADVANCE TRANSACTION FEE: 3% for each cash advance, with a minimum of $5 and no maximum. LATE FEE: $15 on balances up to $100; $25 on balances of $100 up to $1,000; $35 on balances of $1,000 and greater. OVERLIMIT FEE: $15 on balances $1,000 or less; $35 on balances greater than $1,000.

*Default Rate: If you are late making a payment, any introductory/special rates terminate and the standard purchase APR will apply to purchases and balance transfers. If you fail twice to make a required payment when due or if you exceed your Account credit limit twice, your purchase APR will be increased to 19.99%. If you fail 3 times to make a required payment when due or if you exceed your Account credit limit 3 times, your purchase APR and cash advance APR will be increased to 24.99%. See Cardmember Agreement for details.

† The Prime Rate used is the highest prime rate listed in The Wall Street Journal on the last business day of the month.

You agree that if your application for a Discover Card with a minimum credit limit of $5000 and the lower APR(s) shown above is not approved, your application will also constitute your request for a Discover Card with the higher APR(s) shown above, a lower credit limit and different insurance coverage.

Introductory/Special APRs: If you are approved for an Account, you will be able to make balance transfers under this offer until March 1, 2005. If you request balance transfers after this date, or, we do not receive all required information for the balance transfers requested, we will not make the balance transfers.
Please allow up to four weeks before payments to your other Accounts are made. Accordingly, you should continue to make all required payments until you confirm that the balance transfers were made.
Balance transfers as well as purchases and cash advance transactions are subject to your available credit. Your Account credit limit will not be automatically increased to allow you to make the Required Transactions each billing period.
Balance transfers may not be used to pay any Discover Accounts.
Balance transfers do not earn a CashBack Bonus® award/Gold Rewards award/Miles.
Balance transfer requests will be processed from the lowest to the highest dollar amount. If a balance transfer request is more than your available Account credit limit, we will automatically lower the balance transfer amount to your available credit and complete the transfer.
You may only make balance transfers to Accounts that list you as an Accountholder.
There is no grace period on balance transfers.
Any introductory/special rates will terminate if you are late making a payment or your Account is over limit as discussed in the Default Rate section above and in the Cardmember Agreement.

Payment Allocation: We apply payments and credits to balances with low introductory/special APRs (such as special balance transfer and purchase APRs) prior to balances with standard APRs. Therefore, your savings will be reduced by making additional transactions or having balances that are subject to standard APRs. In addition, the length of time the introductory/special APRs will apply to your account may be reduced by the amount of your payments.

Application Information: Federal law requires that we obtain certain information about you such as your date of birth and street address in order to verify your identity. You authorize us to obtain a consumer report from consumer reporting agencies in considering this application. Upon your request, we will inform you of the name and address of each consumer reporting agency from which we obtained a consumer report relating to you. Offer available to US citizens and permanent residents only. To apply with a joint applicant, write to us at PO Box 30943, Salt Lake City, UT 84130-0943. Every applicant, including a spouse, may apply for a separate Account. THIS OFFER SUPERSEDES ALL PRIOR OFFERS. Terms of this offer, including fees and calculation of variable rates, are accurate as of October 2004 and may change after that date. To find out what may have changed after that date write to us at PO Box 15410, Wilmington, DE 19886-0820. Please allow 30 days for us to process your application.

Cardmember Agreement: You agree to be bound by the terms of the Cardmember Agreement, which will be sent with the Card. You also agree that the Cardmember Agreement and the Account are governed by Delaware and federal law. The Cardmember Agreement, which includes the rates and fees, is subject to change.

Arbitration: The Cardmember Agreement provides that we may choose to resolve a claim relating to your Account by binding arbitration, in which case, you will not have the right to have that claim resolved by a judge or jury. You may reject the arbitration provision with respect to your new Account within 30 days after receiving your Card. For restrictions and details, write to us at PO Box 15192, Wilmington, DE 19886-1020.

Ohio Residents: Ohio laws against discrimination require that all creditors make credit equally available to all creditworthy customers, and that credit reporting agencies maintain separate credit histories on each individual upon request. The Ohio Civil Rights Commission administers compliance with this law. New York Residents: Call the New York State Banking Department at (800) 518-8866 for a comparative list of credit card rates, fees and grace periods. Wisconsin Residents: No agreement, court order or individual statement applying to marital property will adversely affect a creditor's interests unless prior to the time credit is granted the creditor is furnished with a copy of the agreement, court order or statement, or has actual knowledge of the adverse provision. Married Wisconsin residents must furnish their spouse's name and address to us at PO Box 15410, Wilmington, DE 19886-0820.

Rewards: With this CashBack Bonus program, you will earn a cash award on qualified purchases, up to 5% of each home improvement purchase and up to 1% of each other purchase, based on your annual level and type of purchases, with your first $1500 in purchases accruing awards at 5% or 1%, respectively. You will not earn a CashBack Bonus award on annual home improvement purchases in excess of $25,000. Transactions must be sent to us under merchant category codes 5200, 5211, 5231, 5251, 5261, 5039, 5065, 5072, 5074 and 5198 to qualify as a home improvement purchase for purposes of calculating your CashBack Bonus award. For purchases made at select warehouse clubs, discount stores and their affiliates, you will accrue a cash award at a rate of .25%. Get up to 10% CashBack Bonus award when you exchange your total cash award for up to double the amount in gift cards or certificates from our CashBack Bonus Partners. Award is redeemable in $20 increments. Other restrictions apply. You will receive complete CashBack Bonus Terms and Conditions with your Card.

Insurance: Scheduled Air Travel Accident Insurance is underwritten by National Union Fire Insurance Company of Pittsburgh, PA. Certain limitations and exclusions apply.

Secondary Rental Car Collision Coverage is an insurance program. Certain restrictions and limitations apply. Refer to the Description of Coverage for full disclosure. The Plan Administrator for the Secondary Rental Car Collision Coverage is AON Innovative Solutions, PO Box 220, Golden, CO 80402-0220. The Plan is underwritten by Virginia Surety Company, Inc., Glenview, IL 60025.

The gas card looks red hot. Unfortunately, I'm trying to keep my applications to once a month, and ones w/ $100 sign-up bonuses get top priority. Tempting though. I'll consider it. Thanks.

Thanks for the detailed info, OP.

Discover's reverse tier strategy has had me scratching my head and wondering if Discover really thinks we're stupid enough to keep using a card once it drops to a lower tier.

poo said:5% AAA - limited to 2% of your total net retail purchase transactions per billing cycle
AAA Mid-Atlantic doesn't have this limit. Just $2/day = $40 of gas/day.

ability to pay-in-full
This ability is assumed by default on this forum. Otherwise, a wallet cannot be fat

the mysterious statement below should be expanded on with links and an explanation offered of how to earn 20%. It may be useful to say how much spending and on what stores is needed to make his strategy preferable.

seahawk said:Never apply for the Home Improvement card. 5% << 20%.

Thanks OP. I put in an online request last night to convert to restaurant card, had reply this morning it'll be done on statement close date. Message mentioned that forfeited CashBack will not be reinstated - I take that to mean that if CashBack balance on next statement is under $20 (likely), it's gone.

The commentators posting about the high cost of using one of these cards for large purchases such as tuition or home improvements(where a project or a new house can result in high charges) is of course valid. It shows an important tradeoff for the firm (Discover Card) in selecting a category to give high rebates on (such high rebates, of course, are loss leaders). If they pick expensive items they make it easy for smart individuals (such as read this site) to use one card for these items and then carry another in their wallet. However, if they get card holders who need financing to spread large purchases out over several months or years, these customers will be more profitable than the customers who merely make everyday purchases and pay their balances in full.

If they make the loss-leaders an item frequently purchased (such as gasoline, restaurant meals, or groceries) the reader is virtually forced to carry the card in his wallet (carrying it out only when such a purchase is intended that day takes too much planning for most card holders). He may then decide to use it for other purchases also, rather than carrying another card for those (although such a strategy gives higher total rebates over the year).

High rebates on everyday purchases may also lead the customers to use the card when for budgeting reasons some would otherwise use cash, checks, or debit cards, and may also lead these customers to ask stores to accept the cards, leading to greater acceptance.

It is not clear yet what is the most profitable strategy for card issuers. It is likely that there will be some experimentation, with the Discover offer possibly representing such experimentation (as was the MBNA offers with a monthly limit). Fortunately, with cards that give rebates in a reverse tier (every $20 earned can be rebated and rebates start with the first dollar of spending) the card holder will probably lose little if they discontinue the card or force conversion. (With a traditionally tiered card a card holder might lose if just when he had spent enough to be in the higher tiers, the card was discontinued).

Received my discovery card converted into home improvement card. Still not list of what types of stores are included. The ad on their signup site said
" Transactions must be sent to us under merchant category codes 5200, 5211, 5231, 5251, 5261, 5039, 5065, 5072, 5074 and 5198 to qualify as a home improvement purchase for purposes of calculating your CashBack Bonus award."
Even after transfer from activation to customer service representative I was unable to learn just what was in these categories. She did mention Lowe's and Home Depot as included, but could not refer to on list of what categories mean. She did claim that statements would show the category of the store so that after the fact I could find out. (i.e. a small purchase might be needed as a test).
I have a MBNA card under the HGW4 offer (expired) for 10% rebates and it gives two categories covered on that card as
5200--Home Supply Warehouse Stores
5251--Hardware Stores
Thus it appears the Discovery card covers somethings MBNA does not, but I have not found out what. Given that my family has but one of the MBNA cards which can also be used in grocery and drugstores (which use its $25 per month rebate up quickly) it does not follow that the MBNA card should be used first.

As pointed out in posts above, 20% off is available at Lowe's and Home Depot through versions of DealPass such as MainStreet, but everyone may not wish to go through the hazzle of getting and using these, or they may not be convenient to where they live.

It is perhaps a sign of bad management by Discover that they have not bothered to post a list of their codes, or even to provide them to their customer service represtatives for these speciality cards (their customer service representatives must be getting unnecessary calls on this).If anyone has a list or knows where to find one, they might do a service by posting one. It is easy to imagine someones decision of whether to apply for one of these cards depending on just what was covered.

ProfessorEd said:It is perhaps a sign of bad management by Discover that they have not bothered to post a list of their codes, or even to provide them to their customer service represtatives for these speciality cards (their customer service representatives must be getting unnecessary calls on this)I think it is a sign of good program management by Discover.

I got a letter from my Discover Gas card today, spending $100 within a month and receiving a cash rebate of $15. Then it is 5% for some "Plus" purchases (waht is that?) and 1% for other purchases... Did anyone else receive it? Thanks.