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The personal finance Web site studied two cards each from the top 10 issuers, including Discover More and Discover Motiva.
All issuers will hike your rate if you violate any part of the credit agreement. Discover will raise it if you pay late or your account is over the credit limit twice. USAA Federal Savings will raise your rate if you miss two months of minimum-due payments. Others will raise your rates if you make one mistake, Bankrate found.
The study also looked at grace periods. In other words, how long can something stay on your bill before you're charged interest? In the survey, grace periods ranged from 20 to 25 days. Capital One, Discover, USAA and Wells Fargo all had 25-day grace periods.
In April, Discover announced it was hiking interest rates on a "small percent" of cardholders and moving to more variable rates.
Discovering Discover: Keefe Bruyette & Woods upgraded Discover from "market perform," or hold, to "outperform," or buy.
It's trading at $10.49, but KBW has a target price of $14.
Discover has lower exposure to California and Florida and is less likely to be hurt by credit card reform, partly because it doesn't focus on the deep subprime segment and is less active in student marketing, the KBW report said.
Its 2009 over-limit fees are expected to be a relatively small $75 million. It's well-capitalized and has loyal cardholders.
It's also a potential mergers-and-acquisitions candidate. When Discover was spun off by Morgan Stanley two years ago, many said its independence would be short-lived.
"While it's tough to envision an M&A scenario involving Discover in the current environment, considering that most banks are strapped for cash, we believe Discover is attractive to a number of financial institutions when conditions improve," KBW said. Its assets could be acquired together or separately.
Let's talk about it: Lowcards.com last week published tips for people unable to pay their credit card bills.
If you're in danger of missing a payment, contact your creditors promptly. If you can make some monthly payment, ask your issuer to lower your rate and waive your fees. If the first person you speak with can't lower your rate or adjust your account, ask for a supervisor. Explain that you're in debt, the steps you are taking to repay it, and what you can pay today. Document all conversations.
There's more assistance from Help With My Credit at 866-941-1030, or online at HelpWithMyCredit.org.
If there's no hope of repaying the debt, ask your credit card issuer about debt settlement; just remember that closing an account hurts your credit score. And if the forgiven debt is more than $600, you must also pay income taxes on the amount forgiven.
Be wary of debt settlement firms because they can charge high fees for services you can sometimes do yourself, said Lowcards.com.
byerak@tribune.com
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