Wednesday, February 25, 2009

New Discover Escape Card

Discover has introduced a new travel-rewards credit card. The Escape Card’s rewards are similar to many other “fake miles” cards, such as some Capital One, Merrill, and American Express cards. The Escape Card gives you 2 miles for every $1 spent – working out to a 2% reward ratio (but only 1% if you want to redeem your miles for cash instead). That’s better than some of the other cards’ reward ratios. However, like the other fake-miles cards, instead of actual air miles you are given credit that can be applied to any travel purchase made with the card.

Offsetting that 2% reward ratio is a $60 annual fee, although you receive 1,000 “bonus miles” every month for the first year. (There have been some reports of the 1,000 miles bonus for 25 months, but we can not find that offer on Discover’s website.)

But the intriguing part is the inclusion of primary car rental insurance (as well lost or damaged luggage insurance, travel delay insurance, and trip cancellation insurance). Note that for international use, Discover will be instituting a 2% foreign-currency-exchange fee in May. (Outside the U.S., Discover cards are currently only accepted in Canada, Mexico, the Caribbean, Central America, and China.)

We actually believe this type of fake-miles-reward card can be useful for some types of spenders and travelers. For infrequent flyers looking for some “incentive” to save for that basic economy ticket, these cards might be useful, and may have more perceived travel value than the same level of cash rebate.

Nonetheless, we think there are other cards with which you can usually obtain rewards that are better than 2%. If a flat 2% (for all purchases) is all you want, you can get that with the Schwab Visa (with no annual fee). Still, if you like Discover’s products, the Escape Card may be worth looking into – that primary car rental insurance is quite enticing.