A Close Look at the Discover it® Secured Credit Card


Looking to build credit and snag some rewards? The Discover it® Secured Credit Card is a popular choice for folks with bad or no credit. Unlike many secured cards, it lets you earn cash back, and it keeps fees to a minimum. You won't find an annual fee, charges for using it abroad, or a penalty if you slip up with a late payment the first time (though later late payments can cost up to $41 each).

While some newer secured cards offer beefier rewards, the Discover it® Secured Credit Card stands out with its first-year bonus. Most secured cards don't come with welcome offers, but Discover will match all the cash back you earn during your first year with the card.

Let's examine the strengths and weaknesses to see if it's a good fit for your credit-building goals.

Rewards Breakdown

  • 2% Cash Back: Earn at gas stations and restaurants automatically (on up to $1,000 in combined purchases each quarter, then 1%).
  • 1% Cash Back: Get this on all other purchases.

Welcome Offer

Discover will match all the cash back you've earned at the end of your first year.

Rates and Fees

  • Annual Fee: None
  • Foreign Transaction Fees: None
  • Penalty APR: None, plus no fee on your first late payment (up to $41 after that)
  • Security Deposit: Minimum of $200, maximum of $2,500
  • Balance Transfers: 10.99% intro APR for six months (with a 3% intro balance transfer fee, up to 5% fee on future balance transfers)
  • Regular APR: 26.49% Variable

Credit-Building Perks

  • Free FICO® Score: Access your FICO® score for free through the Discover app, along with other tools to help you learn about credit. This helps you monitor your progress as you use the card.
  • Credit Reporting: Discover reports your payment history to the big three credit bureaus. So, responsible use helps build your credit.
  • Account Reviews: After seven months, Discover checks your account to see if you qualify for an upgrade to an unsecured card. If you do, they may return your security deposit and potentially increase your credit limit.

Other Benefits

  • Discover® Identity Alerts: Get free alerts for potential identity theft, including monitoring of your Experian® credit report and notifications about new inquiries or accounts, and if your personal info shows up on the Dark Web. Note that these alerts are available only online.
  • Free Overnight Card Replacement: If you lose your card, Discover will ship a replacement to you quickly at no cost. This offer excludes P.O. boxes and addresses outside the U.S.
  • Freeze it®: Block new purchases, cash advances, and balance transfers by activating this feature online or in the app. Good for securing your account if your card is lost or stolen.

Pros and Cons

Pros:

  • One of the few secured cards offering rewards.
  • The first-year cash back match is a great deal, particularly for a card with no annual fee.
  • It doesn't charge annual fees, foreign transaction fees, or a penalty APR, and waives the fee for your first late payment.
  • You could get upgraded to an unsecured card after just seven months of timely payments.

Cons:

  • Other secured cards might offer better rewards if you don't spend enough to fully benefit from Discover's first-year cash back match.
  • Discover isn't accepted everywhere, which may limit where you can use the card.
  • Some credit-building cards have lower ongoing APRs, which could save you money if you need to carry a balance.

How to Build Credit

The Discover it® Secured Credit Card can be a solid credit-building tool if used wisely. Here's how:

  • Pay on Time, Every Time: Discover reports to the credit bureaus, so on-time payments are essential for establishing a good credit history.
  • Monitor Your FICO® Score: Track changes and learn more about your credit through Discover's free FICO® scorecard.
  • Keep Credit Utilization Low: Avoid maxing out your card. Instead, charge small, regular purchases (like gas) to show you can manage credit responsibly.

Is This Card for You?

The Discover it® Secured Credit Card is worth a look if you want to build credit while earning rewards and enjoying a welcome bonus. The card also offers a relatively high credit limit based on your security deposit and has fewer fees than many similar cards.

  • Welcome Offer: A chance to double your rewards in the first year.
  • Rewards: A decent rate on gas and restaurants.

The card matches your first year’s cash back earnings with no minimum spending or caps. For example, if you spend $1,000 on restaurants each quarter, you'd earn $160 total at the end of your first year ($80 from the card's rewards, $80 from the cash back match).

Welcome offers aren't common with limited credit options, and Discover’s offer could mean earning more rewards faster than with other cards.

Secured cards aren't typically known for great rewards, so the Discover it® Secured Credit Card stands out. You earn:

  • 2% cash back on up to $1,000 in combined gas and restaurant purchases each quarter (then 1%)
  • 1% cash back on everything else

While not the highest rewards available on a secured card, it beats the standard 1% to 1.5% flat rate on some credit-building cards. Many secured cards don't offer rewards at all.

You can redeem your rewards any time, in any amount (except for gift cards, which require $5 increments up to $200).

Rewards can be redeemed for:

  • Statement credit or direct deposit
  • Gift cards
  • Amazon purchases
  • Paypal purchases
  • Charitable donations
  • Credit Limit: A high $2,500 maximum starting point.

If you're looking for a secured card with a potentially high credit limit, this is a good option. The security deposit ranges from $200 to $2,500, and your credit limit matches your deposit. This allows for a larger credit line than some other secured cards that limit deposits to $500 or $1,000.

  • Fees: Few fees compared to similar cards.

The Discover it® Secured Credit Card has remarkably few fees compared to cards for people with bad or limited credit. No annual fee, foreign transaction fees, penalty APR, or fee on your first late payment (up to $41 after that).

These waived fees help keep costs down and make getting started with credit cards a little easier.

Why Consider a Different Secured Card?

While the Discover it® Secured Credit Card offers cash back, the elevated rewards categories are limited, potentially restricting your earning potential.

The purchase interest rate is also on the higher side, and the intro APR offer only applies to balance transfers. Aside from credit-building features, the card's other benefits aren't particularly noteworthy.

  • Rewards: Spending limits apply.

You can only spend a certain amount each quarter on gas and restaurants to earn the higher cash back rate, which limits long-term earnings. This may not matter if you start with a low credit limit, but it's something to keep in mind. If you want unlimited rewards with no restrictions, you might need to look elsewhere.

For comparison, the Capital One Quicksilver Secured Cash Rewards Credit Card offers unlimited cash back on all purchases, but might have a higher APR than the Discover it® Secured Credit Card.

  • Security Deposit: Average compared to similar cards.

While the $200 minimum and $2,500 maximum security deposit offer accessible entry and a decent credit limit, it's not unique. Other cards, like the OpenSky® Secured Visa® Credit Card, let you deposit up to $3,000. However, the OpenSky card comes with an annual fee. You'll need to weigh the benefit of a potentially higher credit limit against the cost of an annual fee.

  • APR: A bit steep compared to similar cards.

The card's APR is higher than average. If you anticipate carrying a balance, consider other secured cards with lower rates.

The card offers an intro APR on balance transfers (10.99% intro APR for six months, then 26.49% Variable APR; 3% intro balance transfer fee, up to 5% after the date listed in your application), which is uncommon for credit-building cards. However, this offer doesn't apply to new purchases. Also, transferring a balance to a secured card isn't always the best move – depending on your balance and APR, you might be better off using your deposit money to pay down existing debt.

  • Perks: Standard credit-building features.

This card has limited extra perks. It offers standard secured card features like $0 fraud liability and credit education resources, which are helpful, but nothing really stands out.

Expert Opinions

Christina Ly, a credit card expert at The Points Guy, still recommends considering the Discover it® Secured Credit Card as a first credit card.

Bankrate Staff Insights

The Discover it® Secured Credit Card can seem basic, but that's because it's designed as a good starter card. People with poor or no credit history have a good chance of approval. Plus, the card has no annual fee and offers 2% cash back at gas stations and restaurants (up to $1,000 in combined purchases per quarter) and unlimited 1% cash back on everything else. It's not every day you find a secured card that lets you earn rewards with no annual fee! is my first card, and I have it to thank for the many reward cards in my wallet today. You can also potentially upgrade to one of Discover's unsecured cards.

Comparison to Other Secured Cards

The Discover it® Secured Credit Card has fewer fees than many of its competitors, and its cash back and welcome offer allow you to earn rewards while building credit.

However, depending on how much effort you put into earning rewards, your spending habits, and the size of your deposit, other secured cards might be better choices.

Is the Discover it® Secured Credit Card Right for You?

The Discover it® Secured Credit Card is a solid option among secured credit cards, especially if you're a:

  • Credit card newbie: Great for building credit without complex rewards or lots of fees.
  • Credit builder or rebuilder: Discover reports your payments and offers resources to help you stay on track. You could graduate to an unsecured card in as little as seven months of responsible use.
  • Road-warrior foodie: Earn rewards on gas and dining, but spending is capped each quarter.

By the time you upgrade, this card's rewards, low fees, and welcome offer may have provided more value than other cards. While other secured cards may offer better rewards rates, deposit options, or credit limits, the Discover it® Secured Credit Card is a good all-around choice for establishing credit.

Alternative Options

If you're looking to build credit without a security deposit, consider these unsecured alternatives:

  • Chase Freedom Rise®
```

Comments

Post a Comment