Discover's New Business Credit Card May Transform Card Industry

Written by Mike Killian
Posted On: August 18, 2006

Discover has launched a very unique and innovative business product simply called the Discover Business Card. While having some similarities to Discover's standard Platinum Card that has been offered to consumers since 1985, the business card is customized to meet the needs of the small business market.

I spoke with Sastry Rachakonda, Director of Discover's Business Card division, about some of the special features of this card. I was particularly interested in learning more about "PurchaseChecks", a benefit which Discover has been touting in marketing efforts. According to Sastry,

"Fee-free PurchaseChecks are a unique feature of the Discover Business Card. Unlike convenience checks which many other institutions offer with their card, these checks are completely free with no hidden charges. They get similar benefits as the Discover Card, such as earning rewards, and the same APR and payment grace period as card purchases. This is especially useful if the business-to-business source does not accept credit cards as often is the case. PurchaseChecks provide a flat .25%, and the Discover Business Card provides 5% Cashback Bonus on office supplies, 2% on gas and up to 1% on all other purchases. There is still no limit on cash reward, it never expires and Cardmembers have the ability to increase -- even double -- their rewards (turn $20 into $40) by purchasing from any of the 70 brand-name partners."

I must admit that I was impressed by this concept and could see that it could possibly create major ripples in the card industry. After all, many business transactions are still done without the use of credit cards. Sastry was quick to point out another unique feature of the card,

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"Employees can be offered credit cards for any specified limit which can be changed in real time. For example, an employee may have a $25 credit limit but is required to make a $500 purchase at Home Depot. The business owner can telephone or go online and change the credit limit to $500 and then change it back upon completion of the transaction."

 

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Sastry concluded the interview with a comment that I think is worth noting.

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"The key to this program is that it addresses an underserved small-business market. We believe it has the potential to fundamentally transform how small business makes payments."

 

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That evening I caught a competitor's ad boasting about their cash back rewards program and was reminded that Discover is often credited with having created America's growing addiction to cash back credit cards. My next thought was that in the not-so-distant future others will probably start mimicking the innovative Discover Business Card as well. :)

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