Posted by: itneverrainsinseattle | February 21, 2010

It Doesn’t Pay to Discover

Dear Discover Card:

Really?

By the time I graduated from college, I had three credit cards. One was from MBNA (a Mastercard, I think), one was from American Express, and one was a Discover Card. MBNA and I parted ways when they started playing games with their APR. That was, oh, fifteen years ago or so, I think. As for Amex, well… I’ve changed accounts as my needs dictated, but I’ve always had an Amex card of one sort or another.

But you, Discover Card… I’ve had the exact same account number with you ever since I got my first card from you back in… wait for it… 1989.

Over twenty years ago.

While there’ve been the occasional late payments (by a few days) over those twenty years, I never actually missed a payment. Ever. I’ve managed my credit pretty well, I’d say.

Alas, with the shifting tides of the current economic climate, my wife and I have found it difficult to make our house payments of late. And so, we are falling behind in paying our mortgage even as we apply for assistance from various governmental and nongovernmental programs. But, that means our credit scores are hurting.

And now, even though I do not owe you any money, even though I haven’t had a late payment with you in *years*… NOW you cancel my card (on February 14th, no less — such a love letter I received from you with that date written upon it!)? Really?

Really?!

This, Discover Card, is the exact same scenario as what we call a “run on the bank.” Where panic amongst the account-holders — be it justified or unjustified (but, typically, unjustified) leads to many people trying to clear out their accounts all at once, which in turn causes the bank to lose its liquidity, which in turn leads to it actually being in trouble, which in turn leads to more people trying to cash out their accounts, which creates a death spiral.

Only, what you’re contributing to is a run on my household. You cancel my account with you regardless of my actual standing with you because of what you perceive to be as a threat. Your closing my account adds another negative to my credit score, making it more likely that others might cancel my accounts. If this does, in fact, lead to a credit squeeze on my household, you will actually put me into the situation where I have to change from one form of economy (credit based) to another (cash based), which will necessarily require me to… wait for it… stop paying my credit card bills. Oh, the irony! If you create a credit squeeze on me, my business won’t be able to buy on credit, either (because corporate cards are tied to personal accounts), which means my business will essentially be frozen, which means my business will go out of business, which means my reduced income will become zero income.

Oh, and many employers now run credit reports on potential applicants, which could mean I’d be unable to return to the big business, high-tech employers of my past if such a domino effect makes me appear to be untrustworthy to my potential future employers.

My wife and I have not let any other payments lapse. We are on time and on target with everything except our house, and we have reason to believe that we will be able to resolve the house situation before too long — probably through either  a sale or a short sale. But if this chain of dominoes leads to a run on our household, we won’t be able to stay solvent. And where does that leave any of our creditors?

For the time being, the best I can do is vow never again to carry your fetid orange card in my wallet again for as long as I live, and to refuse to accept Discover Card payments for my business (which, quite frankly, are rather rare in the first place). Of course, that won’t work quite as effectively if I lose my credit cards from Visa or Amex.

But even so, Discover Card, keep in mind this: you reap what you sow. Just as the account holders of banks can end up losing everything by giving in to panic, so too can banks lose everything by giving in to panic.

I’ll be back on my feet soon enough, Discover Card. No thanks to you. But thank you for making the challenge that much more interesting.

Give my regards to the horse you rode in on,

–Inris

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Responses

  1. I don’t really know what to say about your situation. I can’t really find the words. But, I will say that you are an excellent writer and I do enjoy reading your blog. -Pippi

  2. Ouch! Somehow you will get through this. We always do, just not necessarily unscathed. Know that I’m thinking of you and rooting for you.

  3. Ugh, those credit card companies are heinous, especially in the US. I don’t think we have those same issues here in Canada but I could be wrong. I wish I had some practical advice but I don’t really. This week, I did write a letter to the Chair and GM of our local transit authority about being on the receiving end of crappy service from one of their employees on Wednesday and I received a reasoned and thoughtful personal response but I suspect that is only because I work on a transit project and had access to their email addresses. It might be worth sending them a (slightly reworded) letter as well. Good luck, my friend.

  4. INRIS~
    In honor of your situation I will never, ever do business with Discover.

  5. In fact, I should print your post and send it to them in their postage paid envelope, which I received just yesterday… with their “offer” to grant me one year at 0% interest on balance transfers.
    Please. I am smart enough to know that’s simply a “legal scam”, enabling them to collect an upfront balance transfer fee of 3%.

  6. I agree with this. The credit card companies seem to be doing things backwards and to the detriment of them selves.

  7. man…i have a discover and this makes me nervous!! plus, i dont like that new employers can run credit checks on you! that just doesnt seem right…

  8. Actually- this is happening in Canada now as well. Credit card companies are getting nasty out of fear that people can’t afford to pay their bills in this economy.

    I’ve had my TD Visa card since I was in college (6 years) and had never missed a payment until early last year. I had my card number changed and forgot to change the # on the auto-payments. Instead of calling to notify me that the payment hadn’t been received, they just TOOK the money out of my bank account. That was my first warning sign.

    Then, a few weeks ago I received a letter stating that my card was expiring and was not going to be renewed, due to my credit rating (which went down the tubes when the EX failed to pay his half of our joint debts and wedding expenses after we split).

    I was furious. I’ve paid off ALL of our debt (including his), I’ve wiped the balance on the CC clean twice this year and other than the ONE incident above, I have NEVER been late or missed a payment and I ALWAYS pay well over my minimums. Not to mention I’ve got a good salary and job security.

    When I called them and said “I know my rating is crap now but do you not take into consideration the clients personal history with your bank?” I was met with “Umm… uhhh… well….” So basically, no.

    Banks have tightened their belts and if you’re any sort of a risk then they’re cutting you. Like you, this puts me into a bad situation because I had been using the card to maintain the little credit I have left, and to attempt to build it back up. I made one stupid mistake with one stupid boy and I’ll be paying for it until I’m 30. Lesson learned, *never* joint your finaces!

  9. I think the timing probably has to do with the new regs that just went into effect. Well, at least I now I know to stay away from Discover!

  10. There was a period of time while I was putting the distaff half through grad school (a sordid tale I won’t go into now) when we had -by actual count- 12 credit cards, including a Discover card. We only got that because at the time Sears would only accept that and their own card, and we still patronized Sears fairly regularly. But once we got around to paying cards off and closing them, Discover was the first. It was the easiest to pay off as it had the lowest balance. It didn’t hurt that Sears had pissed me off and I wasn’t going to give them another dime (another sordid tale I won’t go into now).

    It took several years to get rid of all those cards, and that was during a time when the economy was in good shape and there were jobs to be had just for the applying. Not so anymore, alas.

    Maybe in a way Discover was doing you a favor. Considering your tough times right now, you won’t be tempted to put a balance on it even for something important. You wouldn’t want to default on that card and lose your house because that is the only asset of any value you still have. It has happened here in California a couple of times that I know about.

    I happen to be very sensitive about that prospect myself, for I’m on extended medical leave and have little reserves to fall back on. I’m not in danger of losing anything yet, but I have to be vary selective about what I use my credit card for. Right now it’s just the doctors, my meds and other supplies, and a bit of gas to get about as necessary. But if things continue without remedy, I will have to cut back even on that. We have already discussed our alternatives, and they aren’t pretty. Suffice it to say that the scroungers at the dump would be in Hog Heaven going through our leavings.

    So forget about the obvious slap from Discover. And when you get back on your feet, don’t even give them a second thought when they solicit you to resume being their customer.


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