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

The Discover it® Secured Credit Card is a terrific option if you're looking for a credit card that will help you build credit while still earning rewards. With the Discover it® Secured Credit Card, you can earn rewards on purchases in common categories — plus you can have a higher-than-usual credit limit based on what you put down as a security deposit. 

There are also a low number of fees, so if you're just starting out or need to restore your credit, you more than likely don't have to worry about common charges such as penalty APR or foreign transaction fees becoming a burden. Furthermore, this card comes with a one-of-a-kind welcome bonus, whereas Discover will double the rewards you earn at the end of your first year.

Welcome offer: Gives the unique opportunity to earn double on rewards

The Discover it® Secured Credit Card comes with the same welcome offer as the rest of the issuer's cards: Discover will match all the cash back you earn at the end of 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: Decent rate on gas and restaurants

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.

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.

You can also 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

Credit limit: A high $2,500 maximum starting point

The card is an excellent choice for people looking for a secured credit card with a high starting deposit. Your credit limit will be equivalent to the amount you put toward a security deposit, so with a $200 minimum and a $2,500 maximum, you have the ability to kick off with a rather large credit limit, especially when compared to some secured cards, which may only allow you to put down up to $500 to $1,000 as an initial deposit.

Fees: Limited compared to similar cards

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.

Though the Discover it® Secured Credit Card allows you to earn cash back on purchases, there are only two spending categories that earn elevated rewards, and there is also a spending limit on these categories, so your earning potential is severely restricted if you start out with a decent credit limit. 

Also, the interest rate is a bit steep, so you would have to pay more back on new purchases since the intro APR offer only extends to balance transfers. And besides a few credit-building features, there aren’t many standout perks that would make this card a top contender amongst other cards.

Rewards: Limitations on spending

You may only spend a set amount on gas and restaurant purchases each quarter before you are subject to a spending restriction. Your high cash back rate in these two categories is slashed in half, limiting how much you can earn in the long term. However, if you begin with a low credit limit as a result of making the minimal deposit, this may not have much of an impact on you in this particular situation. If you want to earn infinite points on purchases with no restrictions, this may be insufficient for you.

In quick comparison, the Capital One Quicksilver Secured Cash Rewards Credit Card allows you to earn unlimited cash back on all purchases, but on the flip side, you would be subjected to a higher APR than with the Discover it® Secured Credit Card, so your rewards are still limited, albeit in a different way. (See Capital One Quicksilver Secured Cash Rewards Credit Card's Rates and Fees). 

Security deposit: Average compared to similar cards

Though this card’s $200 minimum security deposit and $2,500 maximum deposit offer an accessible entry point and a decent credit limit if you decide to max out your deposit, it’s fairly average and not necessarily a standout feature when it comes to most secured credit cards. There are other similar cards that offer a higher credit limit to applicants, such as the OpenSky® Secured Visa® Credit Card, which allows you to put down a deposit of up to $3,000 — noticeably higher than the Discover it® Secured Credit Card. Still, you would have to sacrifice having no rewards program and pay an annual fee in order to obtain the potentially higher credit limit with the Open Sky Secured Card. 

Overall, you have options if you rather have a higher credit limit, but you would have to weigh the pros and cons of having rewards and no annual fee versus the opposite scenario. 

APR: A bit steep compared to similar cards

Unfortunately, the card’s 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.

And although the card’s intro APR on balance transfers 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 28.24 percent variable APR; 3 percent intro balance transfer fee, up to 5 percent after the date listed in your application), you can’t use this offer toward new purchases. That’s quite a disadvantage, especially when you can only earn rewards on purchases and not have time to pay them off without interest. Also, 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.

Perks: Unnoteworthy besides credit-building features

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 — both of which are big assets credit builders — but other than that, there isn’t anything remarkable about the Discover it® Secured Credit Card’s benefits.