Discover not what it seems
Written: Mar 25 '06 (Updated Mar 25 '06)
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Pros: Cash back
Cons: Twice the interest
The Bottom Line: Don't buy into the hype. The cash you get back is taken away in the exorbitant interest you pay on the card.
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| foxshadow's Full Review: Discover Card |
So it was the cash you get every year that drew you to the Discover card, was it not? That is the case for many people. What many card-users do not realize is just who is getting that extra cash.
One word of caution for anyone with this card: beware of the method of interest calculation. If you have not already noticed, it is calculated on the two-cycle average daily balance. What does this mean for you? You are paying more than twice the interest that you normally would with a card using the single-cycle. It would take you an average of eight years to pay off a pack of gum if you only ever paid the minimum payment.
To help you understand, here's a brief explanation of how the two-cycle method works. On a regular single-cycle card (Average Daily Balance), your interest is calculated on any charges made during a 35-day monthly cycle. This would mean that a card with a $1,000 balance and a minimum payment of $43 will have $19 applied to the principal. With two-cycle, the interest is charged to the card in two 35-day cycles in one month, leaving you with twice the interest charges. On the same balance, and the same minimum payment, you will have $8 applied to your principal.
At this rate, the two percent of your charges you get back in cash every year do not matter much in the scheme of things. Some folks know this, and figure they will get around it by paying the card off in full every month. However, if you do this you may not get the cash back how you thought you would. Why? Because at the end of the month when you receive your statement, you've already paid two 35-day cycles worth of interest on your purchases. It's a catch twenty-two that's impossible to avoid.
Overall, you will be better off using a card that calculates on the Average Daily Balance. Check the information credit cards offer before you apply!
Recommended:
No
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Epinions.com ID:
foxshadow
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Member: Rhonda Hylton
Location: Eagle, ID
Reviews written: 6
Trusted by: 0 members
About Me:
I work in transportation, but enjoy a variety of interests.
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