Discover it® Secured Credit Card review: Earn cash back and build your credit
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Discover it® Secured Credit Card Overview
If you have a bank account but limited or poor credit history, the Discover it Secured Credit Card offer is a terrific choice to help build credit history with the three major credit bureaus and earn cash back rewards, too.
You can also quickly graduate to an unsecured Discover card with just seven months of good payment behavior.
What are the pros and cons?
- If you don’t have access to a traditional bank account you won’t qualify for this card.
- Discover is not as widely accepted as some other issuer’s cards. It might be more difficult to use the card overseas or with some merchants in the U.S.
- This card has a high APR, but that’s typical of secured credit cards, so you’ll pay more in interest if you carry a balance.
A deeper look into the current card offer
- Rewards rate: Earn 2 percent cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter, then 1 percent. Earn unlimited 1 percent cash back on all other purchases—automatically.
- 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 6 months
- Regular APR: 23.24 percent variable
Current welcome offer
With Discover’s Cashback Match, cash back you’ve earned in your first year with the card will essentially double. There are no minimum spending requirements or maximums and Discover will match exactly what you earned, dollar for dollar. This means if you earn $200 in cash back in your first year, you’ll actually get $400.
This is the only secured credit card on the market that offers cash back rewards—and generous ones at that. This card earns 2 percent cash back at gas stations and restaurants on up to $1,000 in combined spending per quarter (then 1 percent) and unlimited 1 percent on everything else.
How to redeem
You can redeem your cash back rewards in any denomination at any time. There’s no minimum for redemption and your cash back doesn’t expire.
Other cardholder perks
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
Cardholders get free access to their FICO score through the Discover app, among other credit education resources.
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. With a higher credit limit, cardholders have the opportunity to keep their credit utilization low, thereby helping their credit scores.
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.
Rates and Fees
You won’t pay an annual fee with this card and like other secured cards, the Discover it Secured requires a refundable security deposit. That deposit becomes your credit line. The minimum deposit is $200 and the maximum credit limit is $2,500.
Also like other secured cards, the annual percentage rate on the Discover it Secured Credit Card is quite high (balance transfers sit at 10.99 percent variable APR for the first six months, and the regular ongoing APR for purchases sits at 23.24 percent). Make sure to pay your balance off entirely each month—or else you’ll pay big finance charges and lose the value of the earned rewards.
How the Discover it Secured compares to other secured cards
The Discover it Secured card stands out among the best secured credit cards. Unlike some of its competitors, you can upgrade directly to an unsecured credit card and get your security deposit back when your credit improves. It comes with no annual fee, similar to many secured credit cards, but unlike many secured cards, it earns a decent cash back rate so you can earn rewards while building your credit.
It does require a $200 security deposit, which is middle-of-the-road for secured card deposits. Cardholders should be aware of balance transfer fees, 3 percent of the balance transfer amount for the first six months and 5 percent of the total balance transfer amount after that. Overall the Discover it Secured is a cost-effective tool for building credit.
The Discover it Secured card vs. the Capital One Platinum Secured Credit Card
The Capital One Platinum Secured Credit Card could be another no annual fee option for people improving their credit scores. The Discover it Secured and the Platinum Secured both come with the usual secured credit card features, though you might prefer the Platinum Secured card if you travel abroad frequently. The Capital One Platinum Secured card runs on the widely accepted Mastercard network (which is accepted more often than Discover cards overseas) and has no foreign transaction fees.
While the Capital One Platinum Secured Credit Card has potential, the Discover it Secured comes out ahead because of its rewards for people who can afford it. Discover it Secured cardholders will earn 2 percent cash back at restaurants and gas stations (on up to $1,000 in combined purchases per quarter, then 1 percent) and 1 percent cash back on all other purchases, while Capital One Platinum Secured cardholders will forgo earning rewards. For people without the cash for Discover it Secured’s minimum security deposit, the lower minimum security deposit for the Platinum Secured—only $49 compared to the Discover it’s $200 minimum deposit—might make forgoing rewards worth it.
The more lucrative rewards structure and lower APR ultimately make the Discover it Secured a better option if you can afford its minimum deposit.
The Discover it Secured card vs. the Capital One Quicksilver Secured Cash Rewards Credit Card
The Capital One Quicksilver Secured Credit Card comes in a close second to the Discover it Secured Credit Card when it comes to rewards value, especially for cardholders who find themselves spending more eating out and at the gas pump. However, the Quicksilver Secured earns unlimited 1.5 percent cash back on every purchase, whereas the Discover it Secured earns 2 percent cash back at gas stations and restaurants. But that 2 percent back comes with a $1,000 quarterly earning cap, then the earning rate drops to 1 percent. If you spend $1,000 a quarter ($4,000 a year) in the 2 percent earning categories each quarter, you can earn $80 in cash back, plus another $80 ($160 total) at the end of your first year with the card with Cashback Match. With the Quicksilver Secured, the same $4,000 a year earns just $60 in cash back.
Sitting at 26.99 percent variable—compared to the Discover it’s 23.24 percent variable—the Quicksilver Secured’s higher APR makes carrying a balance month to month slightly more costly. Coupled with its higher potential credit limit helping you to keep your credit utilization in check, you’ll find the Discover it Secured the frontrunner as a lucrative credit-building tool.
Bankrate’s Take: Is the Discover it Secured card worth it?
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 on-time payments will help improve your credit score.
The best way to gain value from this card is to use it responsibly and build your credit history.
After seven months Discover will automatically review your payment history and let you know if you qualify to graduate to an unsecured credit card, which means you don’t need a security deposit as collateral.
Discover also supplies free access to your FICO credit score on your monthly statements. This can help you track your progress toward improving your credit.
If you’re looking for a zero percent introductory offer, this likely isn’t the card for you. You’ll pay a 3 percent intro balance transfer fee, up to 5 percent fee on future balance transfers (see terms)*, but keep in mind that eats into your credit limit, which is determined by your deposit. The intro balance transfer APR is 10.99 percent for six months from the date of the first transfer, after which you’ll pay a variable 23.24 percent ongoing APR. This is in line—or better than—other many secured credit cards.