Courtesy of Nancy Castleman,
CardRatings.com Senior Reporter
Motiva, a unique new credit card from Discover, is designed for people who carry a balance and can use some extra motivation to pay their bills on time. Here's how it works: When cardholders make six on-time payments in a row, they receive the seventh month's interest as a "Pay-On-Time Bonus." Send in that seventh payment promptly, and it counts toward the next set of six timely payments, so there can be two bonuses a year.
You can use the Pay-On-Time Bonuses, along with other Discover cash-back bonuses, to pay down your credit card bill, which could be helpful in getting that balance paid off. If you prefer, Discover will send you a check or direct deposit the amount into your bank account. All you have to do is call or go online to let Discover know how you want to redeem them.
Motiva is a no annual fee card with a teaser rate of 3.9%, good for 10 months on purchases, which then goes up to anywhere between 10.99% and 17.99%, depending on the cardholder's credit picture. That 3.9% rate is also offered on balance transfers made by July 1, 2007 - and it's good through April, 2010.
When you sign up for Motiva, you can choose the due date, and pay by phone or online, even on the due date. (Discover will also take checks and money orders, as well as automatic direct payments from your checking account.) If you want, Discover will even send you email reminders to help you avoid fees and pay on-time.
Does Motiva Motivate People to Stay in Debt or Get Out of It?
Personal finance writers and consumer advocates recommend that folks with balances pay them off as fast as they can, using a "no frills" card with the lowest interest rate they can get. That rate could be less than Motiva's teaser or long-term rates.
One viewpoint is that Motiva encourages people to spend more money, to carry bigger balances, and to remain in debt longer. After all, there's no "Pay-On-Time Bonus" if you don't owe anything, and the more you owe, the bigger your bonus will be.
I asked Margo Georgiadis, Executive Vice President and Chief Marketing Officer at Discover, for her response to these points of view. Here's what she said:
Some people are always going to carry a balance. We feel that our cardmembers should be rewarded for using our card, no matter how they use it. Motiva is part of our commitment to make sure we offer a range of smart products designed for the different ways people choose to use credit. We're giving people more options to make the most of their money.
If you usually carry a balance, have higher rate cards, and think the bonus might motivate you to get out from under, Motiva is well worth considering.
Here are some tips for using Motiva to get out of debt:
1. Transfer balances from higher rate cards.
2. Limit your card use to emergencies, only. Resist the temptation to spend!
3. Pay off as much of your credit card bill as you can ... every month ... especially while you have the teaser rate.
4. Apply every single bonus against your outstanding balance.
5. Don't be late! If you're late making a payment on your Motiva card, your rate will go up - to as high as 28.99%.
Discover Card Rewards On Time Payments
