Discover it® Secured Credit Card Review
The Discover it® Secured Credit Card is a secured credit card with no annual fee and a cash back rewards program that’s fairly generous by secured credit card standards. It earns 2% cash back on gas station and restaurant purchases, up to $1,000 in combined quarterly spending, and unlimited 1% cash back on all other purchases. If that sounds familiar, it’s because it’s the same cash back rewards terms as Discover it Chrome, a popular non-secured credit card that’s (understandably) known as the “Discover Gas and Restaurants Card” in some quarters.
Despite its solid rewards program, Discover it Secured Credit Card is designed to help people with below average credit get back on track and rebuild their credit. Discover reports timely payment patterns and responsible credit usage to the three major credit bureaus, and offers the opportunity to graduate to a non-secured credit card after at least a year of responsible use. If you’re in the market for a credit-building tool, Discover it Secured Credit Card is definitely worth your attention.
The Discover it Secured Credit Card requires a minimum security deposit of $200 and a maximum deposit of $2,500. Your deposit amount is always equal to your credit limit, provided Discover deems your creditworthiness and income sufficient to handle your chosen limit. Your deposit does not earn interest.
Once 7 months have passed, Discover automatically reviews your account on a monthly basis to determine whether you qualify for an upgrade to an unsecured Discover credit card, such as Discover it or Discover it Chrome. If you do qualify for an upgrade, Discover refunds your deposit within two months.
If you wish to raise your credit limit, you can formally apply for an increase. If your application is approved, you’re required to make another security deposit equal to the amount of the increase. Your credit limit can’t exceed $2,500 at any time.
This card earns 2% cash back on restaurant and gas station spending, up to $1,000 in combined quarterly spending across both categories. All other purchases, including restaurant and gas station purchases above the $1,000 cap, earn unlimited 1% cash back.
You can redeem your accumulated cash back at any time and in any amount for account statement credits, electronic bank account deposits, and direct purchases with select online retailers. You can redeem for Discover-branded or third-party gift cards in $20 increments. If there is no account activity for 18 months, discover automatically redeems the cash back you’ve accumulated up until that point.
Though Discover it Secured Credit Card doesn’t have a traditional sign-up bonus, it does double all cash back earned within the first 12 billing cycles. For instance, if you earn $50 during your first year as a cardholder, you actually end the year with $100 in cash back rewards. This feature is known as Cashback Match, and it’s super popular with new cardholders.
Every billing cycle, Discover reports your payment patterns (including nonpayments) to all three major credit reporting bureaus. Regular reporting rewards responsible credit utilization and timely bill payments. If you meet those standards, your credit score will rise over time.
Each monthly statement comes with a free FICO credit score, which lets you see how your credit has changed (hopefully for the better) since the previous month. You can also access your FICO score through your Discover.com account at any time.
Discover’s Freeze It feature lets you suspend your card’s purchasing, cash advance, and balance transfer privileges on an indefinite basis. Previously scheduled transactions, recurring payments, interest, account fees, and certain other debits continue as usual when Freeze It is activated. This feature is useful if you lose your card or otherwise suspect that it is in danger of being used fraudulently.
Balance transfers accrue interest at 10.99% APR for the first 6 months from the transfer date, provided you make the transfer within 3 months of account opening. There is no corresponding purchase APR promotion.
Once the introductory period comes to a close, the balance transfer APR rises to 24.49%. The purchase APR is 24.49% from the day you open your account. The cash advance APR is 26.49%.
There is no annual fee or foreign transaction fee. The balance transfer fee is 3% of the transferred amount, with no minimum. The cash advance fee is the greater of $10 or 5% of the advanced amount, while the late and returned payment fees are both $37.
This card is designed for people with below average credit. A recent bankruptcy could pose problems for your application, but most other credit history blemishes are not likely to affect you.
Most secured credit cards are decidedly no-frills. They’re designed to help struggling consumers rebuild their credit and get back on their financial feet, not bask in the glory of generous cash back rewards or travel perks.
The Discover it Secured Credit Card is a little different. While it’s not the most generous rewards credit card on the market by any stretch, its cash back program actually isn’t half bad, even by non-secured card standards. If you want a card that pays you back as you rebuild your credit, you could do worse than this one.
The Discover it Secured Credit Card is ideal for discerning consumers who wish to rebuild their credit and earn real cash back rewards in the process – without an annual fee to cut into their earning power. With no foreign transaction fee and a monthly account review after seven months, it’s also great for frequent travelers and cardholders seeking a clear path to non-secured status. That said, Discover it Secured Credit Card is not meant for cardholders with very heavy spending needs, nor those unable to afford a $200 initial deposit.
The Discover it Secured Credit Card‘s key benefits include its lack of an annual fee, fairly generous and flexible cash back rewards program, double cash back in the first year (Cashback Match), the unusual balance transfer promotion for new cardholders, the lack of a foreign transaction fee, the lack of a penalty APR, and automatic account upgrade reviews after seven months.
Its main drawbacks include the relatively low credit limit, somewhat high initial deposit requirement, and interest-free deposits.
Overall, this is a very attractive secured credit card for consumers looking to rebuild their credit.
Editorial Note: The editorial content on this page is not provided by any bank, credit card issuer, airline, or hotel chain, and has not been reviewed, approved, or otherwise endorsed by any of these entities. Opinions expressed here are the author’s alone, not those of the bank, credit card issuer, airline, or hotel chain, and have not been reviewed, approved, or otherwise endorsed by any of these entities.
Brian Martucci writes about frugal living, entrepreneurship, and innovative ideas. When he’s not interviewing small business owners or investigating time- and money-saving strategies for Money Crashers readers, he’s probably out exploring a new trail or sampling a novel cuisine. Find him on Twitter @Brian_Martucci.
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Discover it® Secured Credit Card Review
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