Many people are surprised when I tell them how hard it is to get approved for a Discover card.
They don’t publicly disclose the credit score requirements, but I would say they’re comparable to American Express. In fact, I even hear from people who were turned down by Discover but approved for the AmEx Green or Gold.
So when I heard that there is now a Discover card for bad credit, I was skeptical to say the least. Turns out, I was right. Don’t apply in 2013 without reading this…
Who the heck is Cerulean?!
If you go on Discover’s website, you won’t see anything about the Cerulean credit card. Why? Because it’s not even issued by Discover! Don’t believe me? Take a look at the bottom of the application and you will see this:
As you see right there, the issuer is Services Credit Union and it’s serviced by Continential Finance Company.
What does this mean? Unfortunately, Discover is not the issuer of this card. So when you call up customer service, you won’t be talking to Discover.
Instead you’ll be communicating with Continental Finance, who is a subprime credit card issuer with many negative customer reviews posted about them online.
Then why do they call it a Discover card?
This card processes transactions over Discover’s payment network. Similar to how Bank of America processes their cards over the Visa or MasterCard network. Aside from that connection, there really is none.
So the Cerulean is not a “real” Discover card in the sense that it’s not issued or managed by them.
And that brings us to the next logical question… will having a card managed by Continental Finance be just as enjoyable? Probably not!
The fees are frickin’ ridiculous!
The Cerulean Discover has one of the most outrageous fee structures you will ever see.
At first glance of the application, it sounds like you’re getting a good deal…
It’s true there are no application fees, but what about all the other ones they will charge you?
- $75.00 annual fee, billed once per year
- $144.00 per year in “monthly maintenance fees” which are billed at $12 per month. This fee doesn’t start ‘til the second year and I’ll explain why in a moment.
- 29.99% APR on purchases
- Cash advance fee of $5.00 or 5% of the amount of each cash advance, whichever is greater. This is also not billed until the second year.
- 3% foreign transaction fees, which again starts at year two.
In a nutshell, during your first year you are paying $75 to have the card and then a 29.99% interest rate on any balance you carry.
But why do all the other fees not start ‘til the 2nd year? Because if they charged them during the first year, that would probably be breaking the rules.
You see the Credit CARD Act (this PDF explains it) requires that issuers cannot charge fees during the first year which exceed 25% of a card’s credit limit. Since Continental Finance’s Cerulean hybrid card has a minimum limit of only $300, the $75 annual fee in and by itself already is 25% of that amount.
But after the first year, the CARD Act doesn’t have any rules limiting fees. Presumably that’s why all these other fees don’t kick in until after the first 12 months is up.
My advice for 2013? Almost anything is better!
They’re almost on-par with the fee harvester cards issued by First Premier Bank. Yes, if you have bad credit you’re probably going to have to pay a fee, but that doesn’t mean you deserve to get ripped off with the excessive fees found on the Cerulean Discover card. Look elsewhere for something more affordable.
This review was written or last updated in November 17, 2013