Posted by Chuck on September 20, 2015
Manufactured Spending

Published on September 20th, 2015 | by Chuck

110

Discover’s Deal of the Year and the New Gift Card Exclusion

Apple Pay Promo

You’ve surely heard about Discover’s offer to get 10% back on all Apple Pay purchases until year’s end and how it would be possible to get up to $2200 or more in cashback by utilizing the offer.

Gift Card Exclusion

FrequentMiler reports that Discover has now added a gift card exclusion into the terms and they won’t give the cashback on any gift cards. The exclusion was now added to the FAQ:

Apple_Pay_Frequently_Asked_Questions___Discover

Not only are Visa gift cards under the exclusion, but even merchant gift cards are being said to be excluded.

This is terrible news because it will be much more difficult to take advantage of this offer as it limits us to physical goods.

Will it be enforced?

The $2000-question is whether the gift card exclusion will actually be enforced.

How would they even know what you bought to be able to start excluding the gift cards? Well, there is a concept of Level 3 Processing which tells the card issuer the exact items that were purchases, see Does A Credit Card Issuer Know What Items You’re Purchasing? We noticed, for example, that Amex knows exactly what items you purchase from Staples and it even shows up clearly in your online login.

Remember that we don’t know if Discover has Level 3 Processing at all. Even if they do, it’s unlikely that they have it with all merchants. If they don’t have the exact data on what was purchased, there’s no way the system can withhold the 10% cashback from being credited.

For what it’s worth, I chatted with Discover about this; here’s an exact quote of the conversations:

Me: I am reconciling my spend now and I’m trying to figure out what items were purchased on my Discover card a while back. Does Discover have access to that info? Or do you just see the amount without data on what was purchased?

Discover Rep: Thank you for contacting me about purchase information on your Discover account. I can confirm that we do not have information on what exactly was purchased. We only have the name of the merchant, amount of purchase, and date.

Me: So there would be no way for you to verify exactly what was purchased? I’ve heard of Level 3 Processing that some card issuers do which gives exact data. Does Discover use Level 3 Processing?

Discover Rep: We do not have information like that for your purchases. I would recommend contacting the merchant directly.

To be clear, I don’t trust every Discover rep to know exactly what info is transmitted and what isn’t, but in the case of Amex the info is clearly visible and isn’t a secret so hopefully if the Discover reps can’t see it their system can’t either.

Here’s a look at how a gift card purchase at a gas station shows up in my Discover account:

Discover_Card__Year-to-Date_Summary

It’s also worth noting that – via Flyetalk – the original terms did not mention the gift card exclusion, this was added afterward. That makes me more optimistic that the added exclusion is just meant as a deterrent and won’t actually be enforced in any way.

What to do now?

Within a couple of weeks, we should know more on whether it’s being enforced or not. Discover’s cashback doesn’t always post for the last week-or-so of the month until the following statement so we may have to wait some time to find out more.

The one thing that worries me is that even if it’s not system-enforced, which is my guess, they could start manually reviewing accounts. It’s never good to have manually reviewed accounts and it could be a red flag to have huge amounts of spend on the account.

Ultimately, it’s important to remember that the deal is a great one even for ordinary purchases, but since Apple Pay has limited acceptance it is hard for many of us to take advantage of it that way. Those who do merchandise reselling may be able to make $10,000 in purchases of resalable physical goods and make use of the offer that way.

One other interesting question remains with in-app purchases with Apple Pay. Officially only in-store purchases are included in the promo, not in-app purchases, but there is a chance it will work. If it does, that would open up a new front of possibilities of how to make use of this promo for ordinary purchases. For example, you would be able to pay your rent with Radpad using Apple Pay and get 22% back! Once again, in-app purchases are officially excluded in the terms and probably won’t work, but with gift cards becoming a gray area it’s worth checking out our options.

List of Stores that Accept Apple Pay 



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Wwllmm
Wwllmm

They see 2k purchases at RA, they deny the promo and ask for receipts?

W D
W D

Asking for you to provide documentation of line items seems pretty gauche, I doubt they actually do it.. but I’m not really a fan of the idea of sneaking around and disguising transactions to try to get cashback.

Wwllmm
Wwllmm

Agreed. But those were the official terms for recovering CB after the triangle of death in the OBC massacre. Discover retroactively adding that language after all the recent attention makes this radioactive IMHO.

kak
kak

I applied the Discover IT Miles card yet to receive. realized it doesn’t have 5% category bonus like IT card but it is having 1.5x miles compared 1% in IT. IT or IT miles does anyone know which one is better?

Dave C
Dave C

Ive been mulling getting a Discover card for the last couple months, for a couple reasons: I dont have a Discover so itd diversify me a little bit and the double first 12 months cashback. I believe the Discover portal bonus is only for the IT card, not IT miles. For that reason, Im planning on going with the IT card, even without the Apple Pay (we dont have a new iphone, were on Straight Talk!).

credit
credit

Do you think they will have humans verify transactions on cards? Where the card suddenly shows large spend on grocery stores or Walgreens etc

Dan
Dan

I feel a class action lawsuit coming down the pipe.

Db
Db

Why do you see a class action lasw suit?

alen
alen

because if they ask for the receipt and we don’t have them. what then…how can they not pay the cash back?

somy
somy

sorry for the dump question here but the in-app purchase you refer to is from the specific merchants app or the discover app? i am catching up to all this just now 🙂

chris
chris

“there is a section for” use apple pay in this apps…
do we still earning this 10%?

John
John

I used my apple pay with discover at a local grocery store yesterday to buy VCGs and groceries. The terminal recognized the apple pay but then it had me type in the card number, expression, and security code. Dose this mean my transaction didn’t go through as apple pay? Should I contact discover and see what happened?

fauxblogger
fauxblogger

+1 @Wwllmm

Thank you Chuck for your fabulous content of late, especially weekend content which further differentiates your site from all others.

These “too good to be true” stacked Discover deals just might turn out to be “too expensive to be honored” deals. Retroactive T&C changes create precedent for additional dilutive T&C changes, including imposing limits on back end cashback next year. This may be enough for me to avert the iPhone 6 upgrade costs and sit this one out. I can’t see any CFO/partner CFO approving these marketing programs upfront if all total program costs are known upfront.. Would be a non-starter from P&L perspective.

bellevuemike
bellevuemike

You people must be nuts if you think the entire universe of people who take advantage of this with gift cards comprises even one-tenth of one percent of Discover’s customer base. Get out of the fish bowl.

The only relevant issue is whether Discover can programmatically identify gift card purchases and programmatically not pay out on them.

If they can’t zero in on the line item detail, then the cost and potential LEGAL and PR EXPOSURE TO DISCOVER of hassling customers making legitimate purchases to identify the specific goods they’re purchasing………………

AND………….do you honestly believe that APPLE WILL ALLOW DISCOVER to hassle their co-customers and bring Apple into the mud over maybe 10 million dollars?! Absurd.

W D
W D

Discover can easily automatically flag large ($500+) transactions at drugstore merchant codes using Apple Pay as suspcious. BBVA Compass is much smaller and was able to do the same thing a few months ago.

The question is if Apple Pay records line item details with the totals. If they do Discover could identify and prove gift card spamming pretty easily.

Michael B
Michael B

I tend to agree that this would be the most likely starting point for Discover to start denying CB or clawing back later. Hence why I think it’s better to stick to MS at places where larger purchases are normal (Meijer, Office Depot, etc.).

That said, my worry is all the press this deal is getting on dozens of easily found websites. Does anyone not think that Discover has access to Google and can adjust their strategy based on what people are writing?

dave
dave

Alright! time to do $499.99 transactions!

Joe
Joe

“Apple Pay was designed so that when you pay in stores, Apple doesn’t collect any transaction information that can be tied back to you. If you have Location Services turned on, the location of your device and the approximate date and time of the transaction may be sent anonymously to Apple. Apple uses this information to help Apple Pay improve the accuracy of business names in your transaction history and may be retained in the aggregate to improve Apple Pay and other Apple products and services.” I don’t think anyone will know what you bought. I don’t see how they could. Also, it seems that if you don’t have your location services turned on Discover won’t even know where the purchase was made. I think, therefore, that the premise that you’ll get merchant category bonuses and Apple Pay bonus cash back is not correct, but I’m not sure. It would be great if you could find out what information Apple shares with a card issuer, but I don’t think Apple has the information in the first place. Finally, the analogy to AMEX doesn’t seem to the point, because in that case AMEX is processing the payment directly.

W D
W D

This is splitting hairs, but “any information that can be tied back to you” sounds like personal info (address, zip code, age, gender, maybe name, etc).. those are what people are concerned about with security breaches and what Apple is probably mostly trying to reassure people. But line item details of the transaction itself may or may not fall into the category of “information that can be tied back to you”.

I’m just as blind as anyone on this.. I wouldn’t risk it. Also it’d really stink to see the best rewards card (and trending upwards) start to get nerfed like Cash+ or PCed like Blue for the 99.99% that just want to enjoy it, because Discover needs to bend the iron bar the other way to overcompensate for MS idiots.

anthonyjh21
anthonyjh21

Hell, from a greedy bastard perspective, it would stink to be perma-booted from Discover for life and be banned from all future Discover deals, promotions, 5% cash back calendar etc.

This promotion feels more like a developing case study that we’ll read about as examples of balancing our ̶g̶r̶e̶e̶d̶ desire for maximum value versus long term fallout from abuse and what theoretically is the most profitable route to take. I can just see it now on a popular MS blog “The Case of Discover – Short Term Gain or Long Term Pain?”

Terry
Terry

Doesn’t seem invasive if Discover knows the specifics of what we buy at a drug store? Seems like a HIPPA concern.

Nick
Nick

My Walgreens pharmacy receipt reads “FSA RX 12345”, no mention of the prescription butt wart cream.

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