Discover it® Secured Credit Card: A Comprehensive Guide

The Discover it® Secured Credit Card is an excellent option for individuals looking to build or rebuild their credit. This secured credit card, issued by Discover, offers a compelling mix of rewards, benefits, and opportunities to improve your credit score. In this article, we will delve into the key features of the Discover it® Secured Credit Card, its advantages and disadvantages, and the application process, helping you decide if this card fits your financial needs.

What is a Secured Credit Card?

Before exploring the specifics of the Discover it® Secured Credit Card, it’s essential to understand what a secured credit card is. Unlike traditional credit cards, a secured credit card requires a cash deposit as collateral. This deposit typically matches the credit limit of the card. For example, if you deposit $500, your credit limit will likely be $500. This deposit protects the issuer in case you default on your payments, making it a safer option for those with low or no credit history.

Secured credit cards are an effective tool for building or rebuilding credit. They report your payment activity to the major credit bureaus—Experian, Equifax, and TransUnion—which helps establish or improve your credit score over time, provided you make payments on time and keep your balance low.

Key Features of the Discover it® Secured Credit Card

The Discover it® Secured Credit Card stands out among other secured credit cards due to its unique features and benefits:

1. Cashback Rewards Program: One of the most notable aspects of this card is its rewards program, which is uncommon for secured credit cards. You earn 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter. Additionally, you earn 1% cash back on all other purchases. At the end of your first year, Discover will match all the cash back you’ve earned, effectively doubling your rewards.
2. No Annual Fee: The Discover it® Secured Credit Card does not charge an annual fee, which is a significant advantage over some other secured cards that may have high fees. This makes it an affordable option for those looking to build credit without incurring extra costs.
3. Automatic Account Reviews: Discover begins reviewing your account starting at eight months to determine if you’re eligible to transition to an unsecured credit card. If you qualify, you’ll get your security deposit back, and your credit line may be increased, all without the need to close your account or apply for a new card.
4. FICO® Credit Score for Free: As a cardholder, you receive free access to your FICO® Credit Score. This is a valuable tool for tracking your credit progress over time and understanding how your credit-building efforts are paying off.
5. Security Deposit Flexibility: The minimum security deposit required is $200, but you can choose to deposit up to $2,500. Your credit limit will be equal to the amount you deposit, giving you control over your spending limit based on what you can afford.
6. No Foreign Transaction Fees: If you plan to travel internationally, this card could be a good choice because it does not charge any fees for foreign transactions, allowing you to use it abroad without additional costs.
7. Fraud Protection: Discover offers $0 fraud liability, meaning you are not responsible for unauthorized charges if your card is lost or stolen. This provides peace of mind when using the card.
8. U.S.-Based Customer Service: Discover is known for its excellent customer service, which is available 24/7. Their representatives are based in the U.S., ensuring clear communication and prompt assistance.

Advantages of the Discover it® Secured Credit Card

1. Build or Rebuild Credit: The primary benefit of the Discover it® Secured Credit Card is its ability to help you build or rebuild your credit. By making on-time payments and keeping your balance low, you can improve your credit score over time.
2. Cashback Rewards: The cash back rewards program is a rare feature among secured credit cards. Earning 2% cash back on gas and dining, along with 1% on other purchases, provides tangible value, especially for a secured card.
3. First-Year Cashback Match: Discover’s Cashback Match at the end of your first year is a significant perk. It effectively doubles the rewards you’ve earned during your first year as a cardholder, maximizing your cash back potential.
4. No Annual Fee: The absence of an annual fee makes this card a cost-effective option for credit building. You won’t have to worry about an additional yearly charge, which is particularly important for those just starting on their credit journey.
5. Potential to Graduate to an Unsecured Card: The opportunity to transition to an unsecured credit card after just eight months, and get your deposit back, is a significant advantage. This provides a clear path to moving beyond a secured card while continuing to build credit.

Disadvantages of the Discover it® Secured Credit Card

1. Security Deposit Requirement: While the security deposit is refundable, it can still be a barrier for some people who may not have $200 or more available to secure the card. This upfront cost is necessary to open the account.
2. Limited High Spending Rewards: Although the 2% cash back on gas and dining is attractive, it’s capped at $1,000 in combined purchases per quarter. For those who spend more in these categories, the rewards may feel limited.
3. Credit Limit Tied to Deposit: Your credit limit is directly tied to your deposit, meaning you may need to deposit a larger amount to secure a higher credit limit. This can be restrictive for those who cannot afford a large upfront deposit.
4. Not Ideal for Large Purchases: Because the credit limit is tied to the deposit, it may not be suitable for those who need a higher credit limit for larger purchases. This can limit the card’s usefulness in some situations.

How to Apply for the Discover it® Secured Credit Card

Applying for the Discover it® Secured Credit Card is a straightforward process, and you can complete it online in a few simple steps:

1. Visit the Discover Website: Go to the Discover website and navigate to the secured credit card section.
2. Complete the Application: You’ll need to fill out an application form with your personal information, including your name, address, Social Security number, and income. Discover will use this information to determine your eligibility.
3. Choose Your Deposit Amount: During the application process, you’ll be asked to select your security deposit amount. The minimum deposit is $200, and you can choose up to $2,500. This deposit will become your credit limit.
4. Submit Your Application: Once you’ve completed the application and selected your deposit amount, you can submit it online. Discover may perform a credit check as part of the approval process.
5. Receive Approval and Make Your Deposit: If your application is approved, you’ll need to make your security deposit. This can usually be done via an electronic funds transfer from a bank account. Once Discover receives your deposit, they will issue your card.
6. Start Using Your Card: After your card arrives in the mail, you can begin using it to make purchases. Remember to use the card responsibly by paying your balance in full each month and keeping your utilization low to build your credit.

Final Thoughts

The Discover it® Secured Credit Card is an excellent tool for anyone looking to establish or rebuild their credit. With no annual fee, a rewarding cash back program, and the potential to graduate to an unsecured card, it offers a robust package for those starting their credit journey. However, the requirement for a security deposit and the credit limit tied to that deposit may be drawbacks for some. Overall, if you are committed to improving your credit and can manage the deposit, this card is one of the best options available in the secured credit card market.