Discover Motiva Card

Discover has been a popular card for earning cash rewards on spending for more than 20 years. Now it's come out with a card that also rewards you for good repayment behavior if you carry a balance.

Who This Card Is For

• People who carry a balance but also want rewards.

Pros

• Attractive, unlimited spending rewards.
• Some interest refunded if you pay your bills on time.

Cons

• May encourage some cardholders to continue to carry a balance.

Discover Motiva Card Rewards

• Up to 1% cash back on spending.
• One month's finance charge rebated if you pay your bill on time six straight months.

APRs

• 3.99% for the first six months.
• Excellent credit: Between 11.99% and 18.99% after the introductory period; default rate 16.99% to 23.99%.
• Average credit: Between 12.99% and 18.99% after the intro period; default rate 17.99% to 23.99%.
• Weak credit: 18.99%; default rate 23.99%.

Fees

• No annual fee.
• Late fees: $19 on balances up to $250, $39 on balances over $250.
• Balance transfer fee: 3% of balance, 5% if you've had three or more late payments within the last two years.

All Discover cards pay up to one percent cash back on your spending. You can earn additional cash-back bonuses of 5% 20% by shopping at participating retailers through Discover's online shopping site. You can also increase the size of your cash-back bonus if you redeem the reward for a gift card at one of Discover's "Cashback Bonus Partners." For example, $20 in cash back can be redeemed for a $25 gift card at Staples; $45 buys a $50 gift card at Red Lobster. There's no limit on the rewards you can earn, and there's no annual fee.

Reward For Carrying a Balance

The new Discover Motiva card carries these same features, plus an additional benefit: if you carry a balance, you can earn back one month's interest payments if you pay your bill on time for six consecutive months. Discover calls Motiva the "good credit management card, the card that pays you back for paying on time."

Drawbacks to the Reward Program

However, trying to earn spending rewards on a credit card while at the same time you're carrying a balance is almost always a losing proposition, except for the card company. While you're busy spending on the card to build your rewards, you're also growing your balance, which only increases the finance charges and other fees you'll have to pay, which will more than wipe out any spending rewards you hope to earn. Plus, be late on your payment even once and you won't be able to use your spending rewards, you'll get nailed with a late fee, your interest rate will go way up, and there goes your bonus pay-on-time reward.

Rewards cards are strictly for people who never carry a balance. That way you never get into that vicious spending-and-borrowing cycle.

However, if you absolutely must have a credit card that earns rewards and you do carry a balance, the best method is to have two different card accounts: Get a rewards card where you do your spending - but be absolutely sure you can pay the bill in full every month. Then transfer the balance on the second card to the lowest rate card you can find where that interest rate is locked in for the longest period of time.

Of course, the best strategy is to cut back on your spending and use some of that money to reduce your balances. Trying to earn a few dollars in rewards simply isn't worth it.