Is Discover Payment Protection Plan a Scam?

Q: Should I cancel the Discover Payment Protection that I just enrolled in? I Googled it and am frightened to see all these things calling it a scam and even class action lawsuits. What’s up with this?

A: Before we get into whether it’s a scam or not, let’s go over how the payment protection plan from Discover actually works…

How much does it cost?

You pay $0.89 per $100 of your balance each month. When you think about it, that means if a $100 balance was carried for 12 months in a row, you will have paid a total $10.68 ($0.89 x 12). So in other words, you will have been paying what would equate to be 10.68% of your average monthly balance for this benefit… a steep price to pay. Is it worth it or not? We’ll get to that next.

What does it cover?

payment protection enrollment screenshotSo what is payment protection for Discover, anyway? It’s a program that defers minimum payments on your credit card account as follows:

Events that qualify for 1 month deferments

With these so called “celebration events” your minimum payment is only deferred for one month; graduation, new job, promotion, retirement, childbirth, adoption, marriage, moving

Events that qualify for 24 month deferments

With these “Hardship Events” you might be able to have your minimum payments deferred for up to 24 months; federal/state disaster, disability, death of a domestic partner, spouse or child, leave of absence, unemployment (if involuntary), disability, hospitalization

An important warning you need to know is that there are a number of qualifications and restrictions. Just because you experience one of these events it does NOT always mean you are eligible. I recommend you read about payment protection on credit cards to learn about some of the eligibility requirements that might be in the fine print.

Events that qualify for cancellation of debt

If you (the accountholder) were to die, you might qualify for your debt to be cancelled with the Discover payment protection plan (up to $25k balance on your enrolled Discover account). But there are restrictions and this benefit is not offered in any states or territories where it is regulated as an insurance benefit. At the time of this review, that means if you are a resident of the following locations you don’t qualify: OR, VI, RI, AK, TN, IA, WI, MT, NV, PR, GU.

Is payment protection a scam or not?

Let’s break the answer down into two parts:

(1) Class action lawsuits: Although none of been recently filed that I’m aware of, in the past few years there have been states that filed class action lawsuits against Discover alleging “slight-of-hand sales tactics” were used to enroll customers in these plans. Whether that’s true or not I do not know and since the cases are still pending, it’s too early to say whether or not that’s an accurate accusation until there’s a verdict.

(2) Overpriced: Meanwhile some people feel the program is not a “scam” but that it’s just a bad deal, because the benefits aren’t worth the cost. If you read up on how credit card payment protection works it is true that these programs are rarely worthwhile. However we shouldn’t single out Discover with this, because almost every credit card issuer sells these plans and they are more or less the same.

Do you have an experience with a Discover payment protection plan, either good or bad? Share your thoughts in a comment below!

Written or last updated in 2013

 
Comments
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Little details of how to cancel on the discover site. Discover has a number listed on its payment protection page that says it’s open m-f 9:30-7:30 to speak with agents. They’ll pressure you to stay. But here’s the direct line to agents available 24/7/365 where you can cancel no questions asked: 888-883-4393.

I signed up for Discover Cashback Bonus as a student back in 2008 and was unaware of these protection plans. Over the years, I brushed them off, thinking they were required and that they were only a couple of dollars every month – this adds up! Given the recent attention given to Discover about these “fradulent charges” and how they are used to make more money, I decided to contact Customer Service. I spoke with the representative in a calm and patient manner and they not only cancelled but also reimbursed me for all charges since then. $800+ credited to my account.

Note that many articles state that Discover was in a lawsuit over these fradulent payments and that they were required to refund/reimburse customers. Well I was still receiving these charges up till January 2016- I believe they are trying to fly under the radar and still siphon as much money out from unknowing customers as possible. However, the representative was very polite and I met no resistance when I brought this issue up. The phone call took less than 5 minutes and I got hundreds of dollars back. Don’t hesitate and save yourself some money.

I have had this payment protection plan since 2007. At that time, there was no “two year limit.” In early 2009, I was declared 100% disabled. My income will never change to allow me to pay the high minimum payments they require. I just got a letter from them that they can “no longer defer” payment on my account and the payment protection plan is no longer available. I feel I was scammed. When it was explained to me in 2007 and the accompanying paperwork, if you had a qualifying event, it would be deferred indefinitely or the amount forgiven. This is why we paid the premium every month – this was insurance. Discover continues to rip people off with ridiculous interest rates and fake insurance BEWARE!

I’m not saying the program isn’t overpriced, but it helped me. When I lost my job, I called Discover after my first delinquent payment and explained my situation to the customer service rep. I had no idea I had this protection, so I was surprised when she offered to transfer me to someone in that department. Long story short, they discussed my situation with me and I was approved to have my payment deferred for three months. It took a lot of stress off me and I was grateful for it at the time. I’m sorry to read about the gentlemen who was removed from the program, but I’m not sure what he expected if he was several months delinquent. Why would Discover continue to charge a delinquent account for a service they provide? Sometimes communication is better than avoidance.

I have purchased PPD from Discover since 2007. I actually think that I had the coverage prior to that time, cancelled it, and it somehow got going again. I was unaware of the Walker case and all the noise about the benefit. Suffice it to say in August 2013 hardship hit and we have been unable to pay our minimum monthly payment. Out of desperation, I called Discover Monday to activate the benefit we have paid nearly $4000 for. Suffice it to say, and to our GREAT surprise, the PPD benefit was cancelled the day after the last billing statement, because the account was delinquent. No, there is no way to reinstate it, now or ever. Yes, all that money went down the tube, and yes they insist at this time that none of the payments will be credited. So, IF you intend to use the benefit? Best put Discover right up ahead of potential employers, undertakers, hospitals or doctors. They are taking the money and running.

When I realized that I had paid almost 400 dollars for this payment protection program (I don’t remember signing up for it) I called them and I told them that I have never signed up for this and that I want my money back. They said they are going to do an investigation which can take up to 30 days. In about a week a got a mail from them stating that they returned the money to my account.

I am trying to buy payment protection but when I log in they say they are not taking any new apps.I think it because of my age.I have bad health and need it .I tried to get on another card same thing .has any one else had this problem ?

Charlotte Meagher

My husband, John, had four credit cards maxed out when he died from a cancer we were not told about by the doctors until it was too late. Most of the charges were medical as he had no medical insurance at the time. Three of the cards were covered by a payment protection plan. I felt so lucky that my husband had the forethought to get this protection. I wish now WE had the forethought to get extra insurance to cover ALL his bills I have had to pay on. Four years later I am still paying on that one credit card not protected. Not easy to do on a “Fixed” income.

I too was scammed by Discover’s Payment Protection Plan. After missing seeing the ‘fees’ for this program for several months, I finally contacted them personally and they said they had me ‘recorded’ signing up for the program. I asked to listen to it, because there isn’t a hair on my head that would even consider a payment protection plan, but they wouldn’t let me listen to the ‘recording’.

I then contacted the Attorney General for Colorado, with NO help. The Minn. Attorney General filed a class action suit against Discover and won. I then contacted a class action lawyer that was starting a suit. I wasn’t excited about using a class action lawyer because I know they get all the money and the real consumers don’t get much, so I didn’t sign up.

I then stumbled upon this site that the Feds, set up to help consumers with credit card and mortgage unethical practices, Consumer Financial Protection Bureau: http://www.consumerfinance.gov/.

I submitted my case and within one week I received an email from Discover that they had credited my account for all charges and interest associated with the Payment Protection Plan.

COOL! Mark ONE up for the consumer, FINALLY!!!

Thanks for pointing the website for- consumer finance protection Bureau, out.I was lucky to have looked up the fees early on and discontinue from the service and I am making a compliant to get the fees back from previous statements.
To anyone who is reading this, Payment protection is useless for all practical purposes, its just another scam to make money.Make sure you don’t subscribe to it without fully reading all “qualifications” and “exceptions”

So. I work at Discover right now and they give you a credit card with a $1000.00 limit when you start working there. They treat you just like another Card Member when you call in to set it up even if you tell them your standing like 5 feet away from them. They try so hard to get that Payment Protection put on your account and if you say no they are required to tell you why you should do it. Just asked them, if i am to reach my credit limit the first month with the card and keep it there the whole year and only making the minimum payment, what will i pay in a year for this program? They will have to give you the ugly truth of how much it really is. If you maintain a $1,000 balance you will pay about $100 a year and it will come all at once. Not over time. Sucks when you try and keep your balance down. I suggest getting it if you feel like something might happen because rarely it will and even if it does. how hard is a $40 payment per month? People do really appreciate it though when there spouse dies and they have a remaining debt of 5,000 due immediately from family or insurance. When they don’t have life insurance or this program though. those calls suck. 🙁

Hope this helped.