Discover card: changes to cardmember agreement: if you have 0% for life this is important

I agree with Dave, close the card. Discover knows what it is doing obviously and this change is only in their favor. I just hope Citi doesn't decide to do this on my BT4Life.

So it seems the best option is to suck it up and pay the 4%?

ILikeDollars said: Good luck continuing to make the required monthly purchases once the account is closed.

@^%$#^$@ didn't think of that!!

Crap... I guess the people working there are always smarter than me.

Quoted from the Summary of Changes:

"If you choose not to accept these changes, we will close your Account and you must pay your balance under the current terms of your Agreement"

I crunched the numbers to see exactly how much in interest I would end up paying in the end should I go ahead and charge a new 10% of my current balance at my standard card rate of 9.99% APR, and here are the shocking results:

My balance, in October when the changes take effect, will be $3211. A new 10% charge would equal roughly $320. At a minimum payment due of 2%, it will take me 145 months to completely pay it off. However, in that same period, I would accrue about $737 in interest on that original $320.

Instead, should my minimum payments change to 4%, it would take me 89 months to pay off the $3211, so I loose 4.5 years of free money by this policy change. I'm not about to hand Discover a dime in interest though, so I guess I will just suck it up and pay the 4% minimum now.

Of course, I would assume that my scenario is one of the better ones among us FW'ers: A small balance and low interest rate. I would hate to run the numbers for those of you whom have upwards of 20% standard APR and >10,000 balance...

May the Force be With You All...

What I have been wondering is, can you force them to allow you to opt out without closing the account? The argument is: You set up the deal in such a way that the account has to be open in order for the deal to work. Now you come along and impose a unilateral change, and you say I can reject the change and pay off the balance under the original terms. But according to the way YOU set up the deal, closing the account makes it impossible to pay off the balance under the original terms. I am therefore entitled to reject the change without you closing the account, or alternatively to reject the change and have you remove the purchase requirement.

I can see how the change makes the BT4life not as good of a deal, but isn't it still a pretty great deal?

If you borrow $10,000, now you have to pay 4%/month rather than 2%/month. So after 12 months, you'll have a little over $6100 at 0%, instead of the $7800 you would have for 2%/month payments. You end up paying back an additional 17% of the initial BT amount in the first year. Still, you have 61% of the money still at 0%.

Compare that to the standard 12 month BT and you're still quite a ways ahead.

Not that I'm happy to see Discover downgrade the BT4life deal, but I wouldn't cancel my account over it, as it's still a good deal. At least it doesn't knock out the potential profit from BT's as much as the uncapped 3% BT fees that are becoming all too common.

I almost have to admire Discover for their cunning here. This change won't even be noticed by the people who are using their BT4life the way Discover wants them to (carrying large purchase amounts subject to interest), and only hits those trying to maximize their profits off the deal by spending a few pennies per month to keep their rate.

Plus, this change doesn't ruin the arbitrage potential, it only reduces it. Their BT4life will continue to attract FW types, because it will be better than 12 month deals, especially if they leave the cap on their BT fees.

OP, Firstly, thanks for alerting all of us here on FWF!

After numerous attempts to induce us into purchasing something of worth, (e.g. Credit protector, identity theft, wallet protector, 10$ CashBack bonus)this is definitely a smart move on the part of Discover - hope one of us manages to convince them that the alternate-offer of closing the account is not truly an "alternate" offer.

For now, i'm planning to milk them even if it looks like its going to end sooner ...

ProfessorEd said: One of you affected should talk to a good class action lawyer.

I would argue they are changing the terms of a contract without your permission. They are putting you in a position where rejecting the terms prevents you from continuing to make purchase. They should continue to let you make a small purchases.

Well usually they can change the terms pretty much any time they want assuming they give you enough advance notice. If change is due in effect in September, notifying people now gives plenty of notice. You can continue using them with the new terms or close your account. They have a clause that if you do nothing, you accept the terms of the new contract.

Now if they changed the APR on the balance transfers, yeah they'd probably be in trouble considering those are supposed to be fixed forever but it's still 0%. Look in the terms if there is something saying they guaranteed to not touch the minimum payment. I bet they went over it with a very fine comb here to find a way to cut on what was costing them a bundle.

Shandril said: Well usually they can change the terms pretty much any time they want assuming they give you enough advance notice. If change is due in effect in September, notifying people now gives plenty of notice. You can continue using them with the new terms or close your account. They have a clause that if you do nothing, you accept the terms of the new contract.

Now if they changed the APR on the balance transfers, yeah they'd probably be in trouble considering those are supposed to be fixed forever but it's still 0%. Look in the terms if there is something saying they guaranteed to not touch the minimum payment. I bet they went over it with a very fine comb here to find a way to cut on what was costing them a bundle.

I don't agree that they can change the terms any time they want, there must be some provision requiring them to give the the chance to opt out. There is probably some federal statute. So, my argument is that they are not truly giving you the chance to opt out, as required by whatever the applicable statute is. Opting out is supposed to allow you to keep the old terms, but canceling the account prevents you from keeping the old terms.

It's clear that they are changing a provision that is provided for in the contract, because they give you a chance to opt out, if it wasn't in the contract, why would they mention the opt out provision? APR, minimum payment, grace period, fees, those are all terms, and they're changing a term without giving you a true opportunity to opt out.

That's my argument; I think whether it flies or not depends on the wording of a specific federal statute.

My thought is that the minimum payment is established by the cardholder agreement. Meanwhile, the BT4L is a promo on the card. I do not have this promo, so I may be mistaken, but it is likely that the minimum payment required is not established anywhere in the terms of the promo, other than the minimum payment is required to maintain the rate (avoid default). I look at this increase in minimum payment as a change to the cardholder agreement (which requires the choice to opt out), not a change to the promo terms.

Now, if they came and made a minimum charge for the purchases qualifying the LOB, then that would warrant a change to the promo contract.

But then again, I do not have a LOB promo, nor am I a lawyer.

Does the minimum stay 4% all the time or just until the balance is < 90% ?

Another reason to say below 90% utilization.

SummerSoFar said: mhesidence said: Does the minimum stay 4% all the time or just until the balance is < 90% ?

Another reason to say below 90% utilization.

This has nothing to due with utilization. It is referring to the ratio of Promo BT's to Standard Purchases.

Your right, but then again it says "new balance" not standard purchases. So you'd need to make purchases of upto 10% of your promo balance every month. Clearly not worth it.

GroveStreetOG said:
I don't agree that they can change the terms any time they want, there must be some provision requiring them to give the the chance to opt out. There is probably some federal statute. So, my argument is that they are not truly giving you the chance to opt out, as required by whatever the applicable statute is. Opting out is supposed to allow you to keep the old terms, but canceling the account prevents you from keeping the old terms.

It's clear that they are changing a provision that is provided for in the contract, because they give you a chance to opt out, if it wasn't in the contract, why would they mention the opt out provision? APR, minimum payment, grace period, fees, those are all terms, and they're changing a term without giving you a true opportunity to opt out.

They can unilaterally change APR, grace periods and so on. CC companies do that all the time. People get a notice (usually hehe) that their APR is about to change some time after the next 30 days. Then they have the option to opt out. Opting out means you don't agree to the new terms. In that case, it means there is no new agreable contract between you and the CC company. The account is then closed and you have to pay the remaining balance on whatever terms you were before usually.

It's like when Citi discontinued its dividend card 5% CashBack card and changed it to 2%. You could either take the new terms or opt out in which case they closed the account due to lack of agreement. If there was an opt-out option where people could make Citi keep the 5% CashBack, I didn't hear anyone exercizing it successfully but who knows, might work this time with Discover hehe.

Not a lawyer here, but just my $0.02. There's been a bit of talk about closing the accounts and then not being able to "pay the balance according to the original terms". The way I understand it, is that if you opt out of this change, your account is closed and you continue to enjoy the 0% on your BT with 2% minimum payments, correct? Plus, you get to keep this rate without having to make the required monthly purchases. So, in effect, you're getting a better deal than you originally had. I understand that most here don't want to close their accounts (due to possible credit score implications), but I'm not sure that the argument would fly simply because Discover chooses to waive certain requirements (i.e. the monthly purchases) to maintain the promo rate.

Yeah, the original terms are "0% so long as you make the required purchases per month, changing to the purchase rate if you fail to make a required purchase." If you opt out, you (under what I think is Discover's way of thinking) are entitled to enjoy the original terms, which are 2% min payment, 0% on BT balances, so long as you make the required purchases.

Discover: What's that? You say you can't make the required purchases with the account closed? Too bad, so sad. . .

smith4r's statement of the deal is what I WANT the deal to be, and there may (or may not) be legal grounds for forcing Discover to honor terms similar to those, but certainly no one has yet pointed to any solid authority in our favor, and I'm sure Discover has nothing like smith4r's deal in mind. I bet whatever statute controls didn't ever contemplate this situation and doesn't have a provision for what happens if closing the account makes it impossible for you to do things that are necessary for maintaining the original terms.

JohnGalt69 said: smithr4 said: Not a lawyer here, but just my $0.02. There's been a bit of talk about closing the accounts and then not being able to "pay the balance according to the original terms". The way I understand it, is that if you opt out of this change, your account is closed and you continue to enjoy the 0% on your BT with 2% minimum payments, correct? Plus, you get to keep this rate without having to make the required monthly purchases. So, in effect, you're getting a better deal than you originally had. I understand that most here don't want to close their accounts (due to possible credit score implications), but I'm not sure that the argument would fly simply because Discover chooses to waive certain requirements (i.e. the monthly purchases) to maintain the promo rate.

What makes you believe Discover will waive the requirements?

Perhaps it's just wishful thinking, but that is how I would read it (although I could be incorrect). I certainly think that it's a reasonable assumption based on the wording in SummerSoFar's post:

Quoted from the Summary of Changes:

"If you choose not to accept these changes, we will close your Account and you must pay your balance under the current terms of your Agreement"

Since you obviously would not be able to make any purchases with a closed account, I assumed that the "current terms" applied to the 0% rate only and that the purchases would be waived (since you obviously can't make them). Again, I could certainly be incorrect in this assumption, so take it with a grain of salt...

So, some of you think Discover is going to let you close the account and just waive the purchase requirement? Have any of you ever dealt with a credit card company before? Do you normally do business exclusively with First DreamBank of Candyland?

And I'm always amused by the "CLASS ACTION!" people. Good luck with that one.

Just be thankful most of you actually have the money in the bank. The poor saps who are carrying real debt on this offer might have a hard time making that higher minimum payment; their only options will be to
A) charge a bunch of stuff at the standard rate to keep the minimum payment low, or
B) default and lose the 0% offer entirely.

Delaware and South Dakota (and maybe New Hampshire too) have weak laws for protecting consumers vs credit card companies. For example no usury laws, limits on APR and or fees that can be charged as long as they can get a consumer to sign an agreement to those terms. Laws there also allow teaser rates and provide only a 15-day notice requirement for raising rates, etc. without any need to provide a reason for changing the rates. Then the supreme court ruled that a national bank could charge the highest interest allowed in their state to customers anywhere in the US so you get the picture.

So, no one has actually asked Discover what the impact would be on the 0% promo if they refused the new terms of the card?