Discover has a reputation for not being widely accepted, which is the main reason why I’ve shied away from applying for a Discover Escape card despite the mathematically superior rewards it offers.
The bad rep is not without merit, but it’s quickly fading from truth into perception. Even since 2007, when Discover was the butt of jokes on Futurama and Family Guy, things have improved substantially. The company has been on a mission to improve merchant acceptance over the last 5 years, and the results are starting to show up in the numbers.
Discover acceptance is spreading domestically
In January 2007, Discover was only accepted at 77% of the stores who accepted Visa and MasterCard in North America. However, the company focused on working with third party merchant acquiring organizations (people who sign up merchants to accept credit cards) in late 2006, and it has started to pay dividends. By the end of 2007, 85% of Visa/MasterCard merchants also accepted Discover, and as of April 2010 that number grew to 90%. In the company’s fiscal 2Q 2010 earnings call, management disclosed that the number of Discover merchants had increased 7% versus the prior year. This is on top of a 5% increase the prior year.
Discover acceptance is also spreading internationally
Internationally, things have been improving as well. Discover Cards were virtually worthless outside of the United States five years ago, but a series of joint ventures and acquisitions are making the company a respectable competitor on an international level. Discover charges a 2% foreign transaction fee at the time of this writing, which is below the 3% that most competitors charge, so this is a boon to foreign travelers (Check out our rundown of the best credit cards for international travel for more information).
A joint venture with China UnionPay in 2005 has made Discover more widely accepted in China than Visa and MasterCard. Similar agreements with JCB, Redecard, and BC Card have made Discover acceptance pervasive in Japan, Brazil, and Korea.
Furthermore, Discover’s acquisition of Diner’s Club in 2008 has opened up Discover acceptance at an additional 8 million merchants and ATM locations in 185 countries. In February 2010, Discover announced a merchant acquiring agreement with Global Payments, which will further boost acceptance in the UK, Western Europe, Hong Kong, India, and Taiwan going forward.
In terms of being able to withdraw cash from ATMs, Discover’s acquisition of the PULSE network in 2005, as well as the company’s acquisition of Diner’s Club from Citibank in 2008, have also improved availability abroad.
Now That People Actually Take Discover Card, Is It Worth Applying For One?
Peter: “Hey, Lois… [customer] just asked if we accept the Discover Card.”
Lois: “Oh, they’re in an exclusive club called anybody.”
Peter: “You know, you know, I would rather take two live chickens than your fly-by-night credit card… I would rather take a jar of pennies that’s value was less than that of your bill.”
Family Guy
Discover has an inferiority complex, which means great things for people who want to collect great rewards. After all, how do you recover from having your brand ridiculed by Family Guy on national TV, except by offering amazing incentives (and a reputation for great customer service)?
Despite being one of the lowest-cost methods for merchants to accept payments, now that the company is outsourcing merchant acquisition to more efficient third parties, Discover is trying to become a real contender by offering some of the best rewards out there. Our rewards calculators agree.
Discover Escape is in a league of its own
The Discover Escape is a perfect example. When you factor in the Escape’s 25,000 Discover Miles sign up bonus (1,000 points per month for the first 25 months), and the fact that you earn 2 Miles per $1 spent, the card beats out just about any rewards card out there despite the $60 per year annual fee. The lone exception is the Starwood Preferred Guest American Express card, but that really only matters if you stay at fancy Starwood hotels.
Discover Miles can be used to offset statement travel expenses, which technically makes this a travel card, though the rebate is essentially cash. You can also redeem miles for true cash, but that’s not ideal because you only get 1 cent for every 2 miles you redeem.
To find out whether the Escape or any of Discover’s other cards are right for you, you can compare all of the rewards credit cards we’ve ever heard of, all at once, using our calculator. Or alternatively, to see just the Discover cards, check out our page of cards that earn Discover Miles.
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*View Discover® Card Rates, Fees, Rewards and Other Important Information. |
Addendum: A brief history of Discover acceptance
- 1985 – Sears, the biggest retailer in America, introduces Discover Card.
- 1993 – Sears spins off financial arm, called Dean Witter, Discover & Co.
- 1997 – Morgan Stanley merges with Dean Witter Reynolds, Discover & Co.
- 2004 – After the DOJ strikes down Visa and MasterCard exclusivity at banks, GE Finance and other card issuers started being able to issue Discover branded credit cards.
- 2005 – Discover purchases PULSE, allowing it to issue ATM and Debit compatible cards
- 2005 – China UnionPay partners with Discover, making it the most accepted US credit card in China
- 2006 – JCB partners with Discover, bring Discover acceptance to JCB payment locations in Japan starting June 2009
- 2006 – PULSE partners with UK’s Link Network, bringing ATM and Cash access to Discover users in UK
- Late 2006 – Discover shifts from signing up merchants internally to signing up merchants via 3rd party “Merchant Acquirers”, acceptance starts to grow at a rapid rate. Merchants are happy because rates come down and payments arrive faster. Customers are happy becomes more merchants start accepting Discover.
- 2007 – Discover enters the year at 77% acceptance at Visa/MasterCard merchants in North America, and exits the year with 85%
- 2007 – Discover becomes an independent company, after being spun off from Morgan Stanley
- 2008 – Discover acquires Diner’s Club International from Citibank. The company states that in 2 years, there will be cross network compatibility between Discover and Diner’s Club. This drives international merchant acceptance to 50 countries by mid 2009 and 185 countries by the end of 2010
- 2009 – Discover partners with Redecard in Brazil
- 2010 – Discover partners with BC Card in Korea
- 2010 – Discover reports 7% growth in merchants on a year over year basis. Merchant acceptance reaches 90% of Visa/MasterCard locations in North America.
