A Card That Makes Building Credit Doubly Rewarding
Secured credit cards are designed to help those who either have no credit history or a poor credit score. They help you build credit or repair damaged credit. This is done by paying a refundable security deposit for the card. With the Discover it® Secured, you can submit a deposit between $200 and $2,500. While you cannot go over $2,500, your maximum limit will be determined by your income and ability to pay.
In turn, your security deposit will determine your credit limit on the card. So if you provide a deposit of $500, you will only be able to spend $500 on the card. That way, the card company like Discover can back you up in case you default on a payment. It can also help keep you in check, too, to avoid overspending.
Discover it® Secured helps you build your credit score with responsible use. The card can also build up your savings through cashback rewards. This card is unique in that it is one of a few secured credit cards that offers rewards. With this card, you can earn 2% cashback at restaurants and gas stations on up to $1,000 in purchases each quarter. Everything else you buy on the card earns 1% cash back. Discover will even match the amount that you’ve earned within your first year. Turns out you can have your cake and eat it too.
Luckily, the Discover it® Secured does not come with an annual fee. That way, you can focus on using your card responsibly and not another pesky fee. The card also doesn’t have a foreign transaction fee. So if you find yourself traveling abroad while you have this card, you won’t have to worry about getting another credit card to avoid the fee.
As a secured card, it does see some higher rates. For one, the purchase APR stands at 24.49% Variable. The same goes for balance transfers, although it comes with an intro APR of 10.99% for the first 6 months. Cash advances see an even higher APR at 26.49% Variable. Luckily, Discover won’t invoke a penalty APR in case you make any faulty payments.
No annual fee - No annual fee on a secured card is a huge plus. You don’t have to worry about an added cost to use the card, which means you can focus on your spending and your credit.
No foreign transaction fee - This allows you to use your card no matter where you go! You won’t have to get or use an entirely separate credit card when you go abroad just to avoid the foreign transaction fee. This card already has you covered.
No penalty APR - Since your credit is in need of some repair, chances are you make mistakes when it comes to money. Luckily, Discover won’t penalize you with a high APR should you make a faulty payment.
Cashback rewards - Basically unheard of when talking about secured credit cards, Discover’s secured card offers cardholders cash back rewards. You can earn 2% on restaurant and gas station purchases up to the quarterly max and 1% on everything else.
FICO® credit score free - Discover will provide you with your FICO® credit score for free on your monthly statements, as well as through your online account.
Who It Benefits
As a secured card, this card from Discover stands to benefit those whose credit history is in need of a boost. If you’re just graduating from college and have no credit history, you could consider this card. It would especially help if you’re unsure about your ability to be responsible with your credit card. The security deposit will help with that.
If your credit is in need of repair due to previous bad financial choices, this card could help you out as well. The security deposit and set low credit limit will prevent you from spending more than you can actually handle. Pair that with your FICO® score free and you can keep an eye on your progress and improve your fiscal habits.
The cash back rewards are certainly a huge perk that come with this secured card. Keep in mind though that if you’re looking for a cash back card, but don’t need the discipline of a secured credit card, you should be looking elsewhere.
How It Works
To begin using your Discover it® Secured, you will need to pay a security deposit. This deposit can range anywhere from $200 to $2,500. Whatever amount you pay for the deposit will be the same amount for your credit limit. Your credit limit cannot exceed $2,500, and how much you can deposit is determined by your income and ability to pay.
You can get that security deposit back. You will have to pay your balances in full and on time, though. Discover reviews your account starting at 8 months to make sure you’re using your card responsibly. They will also be checking on your other credit limits and loans. Many secured card issuers return the deposit once you close the card or switch to an unsecured card. Discover will also do that, but they could choose to return your deposit to you while you still have the card if you prove to be responsible enough.
You can also earn cash back rewards with this Discover it® Secured. You earn 2% back on purchases at restaurants and gas stations, up to $1,000 each quarter. All other purchases earn 1% back. You can redeem these rewards at any time, nor do they expire. You can use your rewards directly on Amazon.com with an option at checkout. You can also choose to redeem rewards for gift cards or eCertificates from partners, for at least $20.
Purchases you make with your Discover it® Secured will be subject to a 24.49% Variable APR. Balance transfers will carry the same APR as purchases, although only after the first six months. Within the first six months, the balance transfer APR is 10.99%. Balance transfers also come with a fee of 3% of the transaction amount. If you want to make a cash advance, you will see a fee of $10 or 5% of the transaction amount. The APR for cash advances is 26.49% Variable.
Whats the Catch
The good thing about secured credit cards is that they are usually pretty straightforward. Discover it® Secured is no different. If anything, its cashback rewards are the opposite of a catch to the card.
It is important to note, however, that you’re not meant to have a secured credit card forever. For one, you won’t want to hold on to a card with such a high purchase APR. These cards are meant to stabilize your credit history. So once you’ve done that, it’s best to move on. Either upgrade your card to an unsecured one, or close the card and find an unsecured card elsewhere.
Just the Math Please
You earn 2% cash back on purchases at restaurants and gas stations. This is limited to a combined $1,000 spent each quarter. All other purchases earn 1% cash back with no limits. Discover will match all the rewards you earned in your first year at the end of the year.
For balance transfers made within your first six months of having the card, a 10.99% APR will apply. After those 6 months, a 24.49% Variable APR applies. Balance transfers will also trigger a fee of 3% of the transaction amount.
Rates and Fees
Annual Percentage Rate (APR) for Purchases
24.49% Variable, will vary with the market based on the Prime Rate.
APR for Balance Transfers
10.99% Intro APR for first 6 months, then 24.49% Variable. The rate will vary with the market based on the Prime Rate.
APR for Cash Advances
26.49% Variable, will vary with the market based on the Prime Rate.
Penalty APR and When it Applies
How to Avoid Paying Interest on Purchases
Your due date is at least 25 days after the closing of each billing period.
You will not be charged interest if you pay your entire balance by the due date each month.
- Balance Transfer 3% of the transaction amount
- Cash Advance $10 or 5% of the transaction amount, whichever is greater
- Foreign Purchase Transaction None
- Late Payment Up to $37, none for your first late payment
- Returned Payment Up to $37
How It Stacks Up
When looking at other secured credit cards, the Discover it® Secured certainly stands out due to its cash back rewards system. It also stands above most because of its lack of an annual fee, a feature that not many secured cards have. One card that does forgo an annual fee is the Capital One® Secured Mastercard®. When it comes to the security deposit, you will make a deposit of $49, $99 or $200, depending on your creditworthiness. Either way, your credit limit will be $200, at least at the start. If you make your first five payments on time, your credit limit can be increased without an extra deposit. To qualify for this Capital One® card, you do have to have a checking or savings account.
Another solid secured credit card without an annual fee is the Citi® Secured Mastercard®. You submit a deposit between $200 and $2,500 to determine your credit limit. Citi will hold that deposit in a Collateral Holding account for 18 months where it doesn’t earn interest. Citi will look at your credit history, income and debts to make sure you’re eligible for this card. If you do get this card, you have a number of travel perks and protections automatically available to you, although you could get hit with a 3% foreign transaction fee.
Lastly, you might want to check out the Digital Federal Credit Union Visa® Platinum Secured Credit Card. First off, you do have to be a member of the credit union to be able to get this card. However, it’s easy to join and the card might just be worth it. Besides having no annual fee, the card impresses with a variable, but incredibly low purchase APR of 9.50% to 18.00% variable. Even its penalty APR is a low, variable 18%. There are no cash advance or balance transfer fees. While you still have to make a security deposit to establish your credit limit, Digital Federal Credit Union doesn’t have a limit for the amount.
It seems that when you’re looking for a secured card, you will find most of the same things. This includes high rates, high fees and a security deposit. The Discover it® Secured, however, provides an alternative to the strictness of most secured credit cards. You won’t get hit with an annual fee, a foreign transaction fee or even a penalty APR. This makes it easier for you to focus on responsible spending. It also won’t set you back even further if you make a mistake.
Not only does this Discover card provide you with some pretty beneficial numbers, but it also offers cash back rewards as well. This is the only card available to the general public that offers such a deal. You can easily earn cash back too, with 2% back on restaurant and gas station purchases and 1% back everywhere else. Just because you need a secured card, doesn’t mean you don’t deserve the fun credit card rewards!
This is certainly a solid card for people who need some help with their credit. Discover allows people to increase their credit limits and build credit history, without making it too hard. As always, be sure to make your payments on time and as in full as possible. That way you won’t need to hold on to the secured card for very long and you can move on to bigger and better credit cards.