Discover it® Secured Credit Card review: Earn cash back and build your credit

The Discover it® Secured Credit Card stands at the top of the pack when it comes to building credit and earning cash back with bad credit or no credit history. Few secured credit cards offer rewards rates on par with traditional credit cards, and Discover’s secured card does so with fewer fees than the competition. You won’t have to worry about an annual fee, foreign transaction fees, a penalty APR or a fee on your first late payment (up to $41 after that).

Although rival secured cards with more robust rewards rates have emerged over the past few years, the Discover it® Secured Credit Card is still perhaps the most valuable option thanks to its first-year bonus. Secured cards typically don’t provide welcome offers, but Discover will match all cash back you earn in your first 12 months with the Discover it® Secured Credit Card.

Read on to learn more about where the Discover it® Secured Credit Card shines, where it may fall short and whether it makes sense as part of your credit-building journey.

Quick highlights

• Rewards rate: 2 percent cash back at gas stations and restaurants (on up to $1,000 in combined purchases each quarter, then 1 percent) plus 1 percent back on all other purchases
• Welcome offer: Discover will match all the cash back you’ve earned at the end of your first year.
• Annual fee: $0
• Purchase intro APR: N/A
• Balance transfer intro APR: 10.99 percent for six months 
• Regular APR: 27.99 percent variable

Current welcome offer

The Discover it® Secured Credit Card provides the same welcome offer the issuer’s other cards carry: Discover will match all the cash back you earn in your first year. There are no minimum spending requirements or maximums and Discover will match exactly what you earned, dollar for dollar. This means if you spent $1,000 on restaurants each quarter, you’d earn a total of $160 at the end of your first year ($80 via the card’s rewards rate and $80 via the welcome bonus).

Very few cards available with limited credit provide welcome offers, and Discover’s cash back match means you could earn more rewards in a shorter time than you would with competing cards.

Rewards rate

Secured cards aren’t known for strong rewards rates, so it’s impressive that the Discover it® Secured Credit Card offers the same full-fledged Discover cash back rewards you’d get with the Discover it® chrome — a card that requires good-to-excellent credit.

How you earn

You’ll earn 2 percent cash back on the first $1,000 you spend at gas stations and restaurants each quarter (1 percent back after that). You’ll also earn 1 percent back on all other purchases.

This isn’t the most competitive rewards rate you’ll find on a secured card, but it’s nothing to sneeze at either. It’s a step up from the typical 1 to 1.5 percent, flat-rate cash back rate some credit-building cards carry. In fact, many secured cards don’t even earn rewards.

How to redeem

You can redeem your cash back rewards in any denomination at any time, except in the case of gift cards, which require you to redeem in $5 increments for a gift card of up to $200.

Your rewards can be redeemed for:

• Cash back, in the form of a statement credit or a bank account direct deposit
• Gift cards
• Purchases via Amazon
• Purchases via Paypal
• Charitable donations

Determining the value of your rewards with this card is pretty simple: You’ll earn 2 percent back on each dollar spent at restaurants and gas stations (2 cents per dollar) up to your quarterly spending limit and 1 percent back (1 cent per dollar) on everything else.

Depending on how you plan to use your cash back, redeeming rewards for a gift card could be a valuable option. Depending on the merchant, Discover can add 5 percent to 20 percent more value to your gift card balance — a great deal if you know where you’re spending your cash back.

For a card that’s designed for cardholders with limited or damaged credit, it shouldn’t come as a surprise that its extra perks are limited. It does have the standard secured card features, like $0 fraud liability and credit education resources that are an asset for credit-builders.

FICO Credit Score access

For a card that’s designed for cardholders with limited or damaged credit, it shouldn’t come as a surprise that its extra perks are limited. It does have the standard secured card features, like $0 fraud liability and credit education resources that are an asset for credit-builders. Other features include:

Discover® Identity Alerts

Discover Bank offers free identity alert services that are available only online, and currently include:

1. Daily monitoring of your Experian® credit report, as well as alerts when a new inquiry or account is listed.
2. Daily monitoring of thousands of Dark Web sites known to leak personal information as well as an alert if your Social Security number is detected.

In order to utilize this service, the primary cardmember must agree online to receive identity alerts.

Free overnight card replacement

If you lose or misplace your card, you can conveniently get a replacement shipped to you at no additional cost. However, the free overnight shipping offer does not apply to P.O. boxes or addresses located outside of the U.S.

It’s important to note that this offer may be subject to carrier overnight shipping limitations, which could impact delivery times.

Online privacy protection

The Discover Bank mobile app offers Online Privacy Protection at no cost. Your online personal information will be scanned approximately every 90 days and opt-out requests will be submitted on your behalf via 10 select people search sites. The types of personal information that can be found on these sites will vary.

Freeze it®

The Freeze it feature acts as an on-and-off switch for your card. When activated from the online portal or app, it blocks new purchases, cash advances or balance transfers. This provides peace of mind if your card goes missing or is stolen.

The Discover it® Secured Credit Card offers a selective range of helpful features that can help you build your credit score and qualify for better rates on other credit cards in the future. These include:

Credit reporting

As long as you use Discover responsibly, it can help you build your credit — as it shares your credit history with the three major credit bureaus (Equifax, Experian, and TransUnion). If you pay your credit card bill on time and keep your balance below 30 percent of your total available credit, you may see improvements to your credit score over time.

FICO Credit Scorecard access

Cardholders get free access to their FICO score through the Discover app, among other credit education resources. This can help users track their credit score and see changes as a result of their credit habits.

The FICO Credit Scorecard also includes information on what may be helping or hurting your credit score and provides handy explanations on what each factor means. For example, if you have a short credit history, Discover explains how the age of your accounts is considered when factoring your FICO score.

Automatic account reviews

Discover will review your account after seven months to determine if you’re eligible for an upgrade to an unsecured credit card. If you qualify, Discover will refund your security deposit and potentially give you a higher credit limit. With a higher limit, it can be easier to keep your credit utilization ratio low, thereby helping improve your credit score.

As far as automatic review periods go, the Discover it® Secured Credit Card's is one of the best. But if you need to get your security deposit back as soon as possible, secured Capital One credit cards may review your account and return your deposit after only six months.

The Discover it® Secured Credit Card has remarkably few fees compared to most cards for people with bad or limited credit. You won’t have to deal with an annual fee, foreign transaction fees, a penalty APR or a fee on your first late payment (up to $41 after that). Together, these waived fees keep costs down and make learning the ropes a bit more comfortable if you’re new to credit cards.

Unfortunately, the card’s 27.99 percent variable APR is well above the current average interest rate. You can find other secured cards with slightly higher rates, but there are also a few lower-interest credit cards to consider if you think you may need to carry a balance.

This card’s $200 minimum security deposit and $2,500 maximum deposit is about average, offering an accessible entry point and a decent credit limit if you decide to max out your deposit.

However, the card’s intro APR is much less common among credit-building cards. You’ll get a 10.99 percent intro APR on balance transfers for your first six months, then 27.99 percent variable APR (with a 3 percent intro balance transfer fee, 5 percent after the date listed in your application). That said, transferring a balance to a secured card may not always be the best strategy. Depending on the size of your balance and your APR, you may be better off using the money you would have used to cover your deposit to pay down debt instead.

The Discover it® Secured Credit Card stands out among the best secured credit cards. It poses far fewer fees than its rivals and its cash back and first-year offer allow you to earn competitive rewards while building credit.

On the other hand, several secured cards may be stronger alternatives depending on how much effort you want to put into earning rewards, your spending habits and how much you can put down as a deposit.

The Discover it® Secured Credit Card vs. the Capital One Platinum Secured Credit Card

The Capital One Platinum Secured Credit Card is another no-annual-fee option worth considering if you’re trying to improve your credit score and quickly upgrade to an unsecured card.

If you qualify, the Platinum Secured carries perhaps the lowest security deposit requirement out there. You only need to put down $49 but you can still get a $200 minimum starting credit limit. If you don’t qualify for the $49 deposit, you may qualify for a $99 or $200 minimum deposit instead. In any case, you may get your security deposit back quickly since Capital One offers an automatic account review period after only six months (versus seven with the Discover card).

You also might prefer the Platinum Secured card if you’ll be traveling abroad. The Capital One Platinum Secured card runs on the widely accepted Mastercard network (which is accepted more widely overseas than Discover cards) and has no foreign transaction fees.

However, these advantages may not outweigh the value offered by the Discover it® Secured Credit Card’s lower rates and fees, first-year offer and cash back rewards. The Discover it® Secured Credit Card may also be a better credit-building option if you can afford a higher deposit: The Platinum Secured’s maximum credit limit is just $1,000, versus $2,500 (with a matching deposit) with the Discover it® Secured Credit Card. A lower limit can make it harder to keep your credit utilization ratio low.

The Discover it® Secured Credit Card vs. the Capital One Quicksilver Secured Cash Rewards Credit Card

The Capital One Quicksilver Secured Credit Card is another no-annual-fee leader among secured rewards cards, earning unlimited 1.5 percent cash back on all purchases and 5 percent back on hotels and rental cars booked through the Capital One Travel portal. What’s more, you can choose to redeem your cash back automatically on a set date or at a certain rewards balance. This feature makes it a simpler rewards experience than the Discover it® Secured Credit Card.

The Quicksilver Secured also carries the same automatic account review period as the Platinum Secured, but it loses some of that card’s accessibility because of its $200 minimum security deposit. This is on par with the Discover it® Secured Credit Card’s entry-level deposit. Fortunately, you may be eligible for an up to $3,000 maximum security deposit/credit limit (surpassing the Discover it® Secured Credit Card's $2,500 maximum).

The Quicksilver Secured card’s potentially higher credit limit may seem like a better deal, but you’re not guaranteed to qualify. Similarly, you may have a harder time earning rewards in your first year with the Quicksilver Secured than the Discover card thanks to the latter’s bonus categories and first-year cash back match. For example, if you spend $1,000 per quarter ($4,000 a year) in the Discover it® Secured Credit Card’s 2 percent categories, you can earn $80 in cash back, plus another $80 ($160 total) at the end of your first year with the card with the card’s Cashback Match offer. With the Quicksilver Secured, the same $4,000 in first-year spending earns just $60 in cash back.

Best cards to pair with this card

Holding just one card is probably best if you’re rebuilding your credit score or learning your way around credit cards. Once you’ve obtained a good or excellent credit score and you’re eligible for full-fledged rewards credit cards, it’ll be easier to craft your optimum card pairings and rewards strategies.

Still, a second card could help improve your credit score by increasing your available credit (which may make it easier to keep your credit utilization low). If you decide to get a second card, you’ll want to pair the Discover it® Secured Credit Card with a card that rewards your other big expenses.

A flat-rate rewards card like the Capital One Quicksilver Secured could be a good catch-all card for purchases outside your dining and gas categories. You might also want to consider a card with complimentary bonus categories, like the Bank of America® Customized Cash Rewards Secured.

The Discover it® Secured Credit Card offer is ideal if you’re just starting to build a credit profile or if you’re trying to rebuild your credit. Discover reports your payments to all three major credit bureaus — Equifax, Experian and TransUnion — and you could graduate to an unsecured credit line after just seven months of responsible card use. By the time you upgrade, this card’s rewards, low fees and issuer-exclusive welcome offer may have delivered more value than competing cards would in that timeframe.

Other secured cards may offer better rewards rates, more accessible security deposits or higher credit limits, but the Discover it® Secured Credit Card is still one of the best all-around credit-building cards.