Discover Card advertises its Cashback Rewards program as America's #1 Cash Rewards Program.
I wonder what that #1 ranking is based on. Do you think it means it's the best, most rewarding program? Maybe they did a scientific polling, and determined that it was the most popular cash back rewards program available. I'm guessing it means that either more people use their cash back rewards program than any other, or that they actually give out more money in cash back rewards than any other program. Either way, it is impressive, and worthy of boasting.
So, how good is the program? Well, on its face, not very. Used for normal everyday purchases, the cash back is according to the following schedule: 0.25% if the purchases are part of the first $1,500 in purchases during the anniversary year; 0.50% if the purchases are part of the second $1,500 in purchases; and 1.0% if the purchases are part of the purchases in excess of $3,000 during the anniversary year. So, depending on your usage volume you will earn up to a marginal rate of 1% cash back. Not bad, but we all know that there are plenty of cards that offer 1% from the first dollar.
But is that the whole story? Well, let's look at the language of the cash back schedule once again. The impression is that if you spend $5,000 in one year you will make $31.25 ($1500*.25%+$1500*.50%+$2000*1.0%). However, it depends on how you spend that $5,000. Let's say it's the first day of your card's anniversary period and you buy lunch at McDonald's for $4.76. Then a TV at Best Buy for $289. Then you buy dinner to go at Koo Koo Roo for $6.24 so that you can enjoy it in front of your new TV. Expensive day. You spent $300 even. But I get some cash back right? Yea, seventy five cents. Okay, fine but I'm buying an engagement ring tomorrow. Another expensive day, but at least it will mean big cash back rewards. So tomorrow, you go to Robbins Brothers (which you shouldn't do, see my post I Bought An Engagement Ring!) and plunk down $4,700 even on the rock. There $5,000. At least I get $31.25 back right? Sorry, the $4,700 purchase was "part of the first $1,500." You get $7.50 back.
Be careful of language such as this when you make large purchases. You make purchases like this only so often. You might as well make sure to maximize any cash back or rewards.
That's not the whole story. You only get your cash back in $20 increments. Any accrued amounts below $20 are not legally yours. Also, if your card is closed for any reason (by you or them), any accrued cash back rewards are forfeited.
So, why do I still have this card? Here's the good part. On an ongoing basis Discover Card has cash back promotions. They select a type of spending, and all qualifying purchases are rewarded with 5% cash back. From April 1 through June 30, they will pay 5% for gas, car washes, Auto Zone, Firestone, Midas, Pep Boys and Sears Auto. You get the theme right? You have to sign up for the program each time every three months when they change the promotion, but it takes only seconds.
The promotional purchases do not count towards your annual spending schedule, but heck, it's still 5%. In the past it was available on restaurants, grocery stores, drugstores. Not all at the same time, but they vary it.
So, as you can imagine I almost exclusively use my Discover Card for the promotional purchases. I also use it at the grocery store. I'm not sure if this is available at every grocery store, but at Ralph's (Kroger where you are), and Albertson's (Safeway where you are) when I use my Discover Card, I can request up to $50 cash. It does not count as a cash advance, and there is no fee. It is simply recorded as though I made a $50 purchase. This gives me the float time on the money, saves me a trip to my bank's ATM, and give me some cash back on getting cash, however small.
Redeeming your Discover Cash Back is also rather involved. When you have accumulated $20, you can request a check, or have them credit it to your account. They'll add 20% if you donate it to charity. Or you can redeem it for gift cards with their retail partners. If you choose the latter, you will receive up to double or greater value for your twenty dollars. You can get a $40 gift card from Lobster Gram or Sharper Image. You can get a $30 gift card from Sunglasses Hut, or a $25 gift card from Borders or Pier One. I always select Hollywood Video. You get a coupon book good for 10 free rentals from Hollywood Video.
My Fiancee and I used to be members of Netflix, but we didn't watch enough movies to make it worthwhile. However, we like to rent movies from time to time, and they are over four bucks each at either Hollywood Video or Blockbuster! This gives me a greater than $40 value for my $20 cash back, allows me to use it as I please, and I am not required or tempted to make a larger purchase (like using a $25 card to buy a $70 item). They are generally good for about a year.
So, overall, I have a lot of criticisms of the Discover Card, but I still use it. The key is to use it properly. I only use it for the promotional purchases, or at the grocery store when I need some cash and my actual grocery purchase is relatively small. I only redeem my cash back for Hollywood Video rentals. This way, if I am earning 5% on my promotional purchases, and getting double value from the Hollywood Video coupons, I am effectively earning a 10% cash back on my purchases. Pretty dang good.
Also, of course, there is no annual fee, and you should always pay your bill in full each month.