- Centurion Member
- Posts: 3941
- Joined: Thu May 08, 2014 7:42 pm
- Location: United States
Discover has a reputation for having unusual - though not necessarily financially irrational - criteria for credit card limits and APRs. Most issuers give limits and APRs according to a customer's income and a good credit history.
The best understanding I have is that Discover likes to show special treatment not to their customers with spectacular credit, but to their most profitable customers - people who use the card regularly and/or carry a balance. They may think you are just going to use the card to earn 5% cash back and pay the bill in full and on time each month. That makes you an unprofitable customer for them. If you don't pay your bill on time, they figure it's probably a rare event and they will charge you what interest they can. So why give you special treatment?
Compare your situation to someone in an earlier stage of rebuilding, who needs to transfer a balance, and doesn't have a good card for everyday use. That customer will give them a lot of business from spending outside of the 5% categories, and also they can earn some interest or fee income from the balance transferred in. That's where they make their profit, so if they think someone is a good credit risk, then that person may get a low APR and big limit so he or she will be encouraged to spend a lot, transfer in a balance, or carry a balance - making Discover a lot more money.
They wouldn't stay in business very long if they were only making ~2.5% of transaction volumes in revenues and paying out 5% in rewards. Making 2.5% of each transaction, paying out 1.5% in rewards, and making 15% interest on a moderate balance is a lot more profitable.
Discover makes much more money from interest than they do from swipes. They are the opposite of Amex.
I'm happy doing business with both companies.
Keeping indefinitely: IHG, SchwabPlat, CSP, Discover, Freedom, ED, BCE, Hyatt
May close or PC: Prestige, Arrival, BrooksBros
AA Platinum converting into Costco
Might add: Proper business card, CSR, Ritz, Delta Gold, First Tech
Letting new accounts cool off since May