Discover it® Secured Credit Card Review: Earn Rewards While Building Credit

Quick Review

The Discover it® Secured credit card is one of the best credit cards for people with low credit scores and those who are new to credit. Here’s why:

• No annual fee: Many subprime credit cards take advantage of borrowers’ limited options and charge high fees (e.g., annual, monthly, and setup fees) just to use the card. Luckily, the Discover it® Secured card has no annual fee or maintenance fees. The only cost you’ll need to cover is the security deposit, which can be as low as $200 and is fully refundable.
• Rewards: It’s rare for a no-credit or bad-credit card to offer rewards. The Discover it® Secured card offers not only 2% back on gas and dining and 1% on everything else but also a first-year cashback match. That means you’re actually earning 2%–4% cash back on purchases made by the end of the year.
• Card graduation: This is a card made for building credit quickly so you can move on to better borrowing options. Once you’ve proven yourself to be a responsible borrower, Discover may graduate you to an unsecured credit card and refund your security deposit in full.

Pros & Cons

Who Is the Discover it® Secured Best For?

The Discover it® Secured will best serve the following types of borrowers:

• New borrowers not in school: The Discover it® Secured is a great starter credit card for new borrowers who haven’t established a credit history. However, current students should instead consider a student credit card—these types of cards also don’t require borrowing histories and generally don’t require security deposits.
• Casual commuters: While the 2% gas and restaurant rewards rate maxes out at $1,000 each quarter, you can still earn $80 back in a year at that rate, and still more at the 1% rate. If you drive a lot, these rewards can add up quickly, cutting some of your gas costs.
• Credit builders: If you have no credit history or a low credit score, the Discover it® Secured offers a chance to work toward achieving good credit. With its flexible security deposit and comprehensive credit reporting, it can help improve your credit score quickly (assuming you use your card responsibly).

What the Crowd Says

The Discover it® Secured card is widely considered one of the best secured credit cards currently on the market. Critics rave about the card’s generous perks, and cardholders attest to its reliability as a good rewards card for establishing or rebuilding credit.

What Major Publications Say

The Discover it® Secured credit card has earned deep respect among credit card experts because it offers virtually everything—cashback rewards, a welcome bonus, and the potential to upgrade to an unsecured credit card—all with no annual fee.

These reviewers don’t claim that the card is perfect; they point out that it has a higher APR than other secured cards, has less flexible credit limits, and is on a less popular network (Discover still isn’t as widely accepted as Visa or Mastercard). Nevertheless, they all agree that it’s one of the best credit-builder cards you can get.

What Cardholders Say

People who actually have the Discover it® Secured credit card generally have good things to say about it. The card lives up to its high reputation by offering people with limited or damaged credit the opportunity to improve their credit scores, earn cash back, and even get an unsecured credit line at no added cost.

With that said, some cardholders express frustration with some of the card issuer’s policies, especially the mandatory tax reviews and lack of transparency about what you need to do to qualify for a card upgrade. Additionally, some cardholders are disappointed that many merchants still don’t accept Discover cards.

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Rates & Fees

Fees

• Annual fee: $0
• Foreign transaction fee: None
• Cash advance fee: 5% or $10 (whichever is greater)
• Balance transfer fee: 5%
• Intro balance transfer fee: 3%
• Late payment fee: Up to $41 (first late payment fee waived)

Interest Rates

• Purchase APR: 27.24% (variable)
• Balance transfer APR: 27.24% (variable)
• Intro balance transfer APR: 10.99% for 6 months
• Cash advance APR: 29.24% (variable)
• Penalty APR: None

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Rewards

Here’s how the rewards program on the Discover it® Secured credit card works:

• 2% cash back on gas and restaurant purchases (up to $1,000 in combined spending each quarter, then down to 1% back)
• 1% cash back on all other purchases

While the quarterly cap limits how much you can earn in the 2% category, any rewards are a major benefit on a credit card for building credit.

What You Could Earn

Using real-life data, we’ve estimated how much the average spender can earn using the Discover it® Secured credit card. Here’s an summary of our estimates:

This is just an idea of what you can earn based on spending data for the average American. If the numbers seem high or low compared to your own spending, adjust accordingly to better assess what kind of rewards you can expect. If you’re a high spender in the gas and dining categories, remember that your quarterly earnings max out at $20 at the 2% cashback rate.

How to Redeem Points

You can redeem your cashback rewards in any of the following ways:

• As statement credit
• As an electronic deposit to a checking or savings account
• As a charitable donation
• To pay for purchases with select merchants
• As gift cards (starting at $5)

Welcome Bonus

As with all new Discover credit card accounts, you’ll get a cashback match welcome bonus at the end of your first year as a Discover it® Secured cardholder.

With this bonus, all of your rewards earnings in the first year of borrowing will double. For example, if you earn the $94.92 estimated above, that will double to $189.84 at the end of the first year.

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Benefits

The Discover it® Secured card offers the following privacy and liability protections:

Card Graduation

One of the best perks of the Discover it® Secured credit card is the potential it gives you to graduate to an unsecured credit card and have your security deposit refunded in full. To qualify for card graduation, you’ll need to meet the following requirements:

• Pay your bills on time consistently for 6 months
• Keep your Discover card active and in good standing (i.e., not closed, revoked, suspended, subject to a tax levy or garnishment, lost or stolen, or under fraud investigation)
• Keep all your other credit accounts in good standing (no new derogatory marks added to your credit report in the last 6 months)

Discover will start automatically reviewing your account for graduation after you’ve had the card for 7 months.

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How to Get a Discover it® Secured Credit Card

Credit Score Required

We recommend borrowers with credit scores between 300–669 apply for the Discover it® Secured credit card.

Discover advertises the Discover it® Secured as a credit card for people new to credit or who are trying to rebuild their credit scores. This means you can qualify even with a low credit score or limited credit history, including a score in the “bad” range (a FICO score under 580).

Application Requirements

To qualify for the Discover it® Secured credit card, you must meet the following requirements:

• Be 18 years of age or older
• Have a Social Security number
• Have a US address
• Have a US bank account

Discover advises you to have your bank account number and bank routing number on hand when you apply so you can transfer the funds for your security deposit.

Pre-approval

Discover offers pre-approval for the Discover it® Secured card. Unlike an official application, the pre-approval process won’t impact your credit score. However, it will give you an idea of how likely you are to qualify for the card and what terms you may be offered.

We strongly recommend going through the pre-approval process before submitting a formal application. Once you apply, Discover will perform a hard inquiry, which will take several points off your score. If you aren’t pre-approved for the card, we recommend seeking other options instead of risking unnecessary damage to your credit score.

How to Apply

You can apply for the Discover it® Secured credit card online. You’ll need to fill in the required information and potentially pay your security deposit through an online bank transfer.

If you have questions about the card or the application process, you can call this number: (800) 315-1776

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Building Credit

The Discover it® Secured is a great option for new borrowers and those with damaged credit scores who want to build credit because the card issuer reports account details to the major credit bureaus and offers a flexible security deposit.

Security Deposit

To get the Discover it® Secured card, you’ll need to put down a security deposit. The deposit can be anywhere in the range of $200–$2,500, and you’ll get an equivalent credit limit on your credit card.

Having a higher credit limit isn’t just more convenient for making purchases—it also helps keep your credit utilization down, which is key to improving your credit score.

Discover will also let you apply for credit limit increases. If your increase request is approved, you can add funds to your security deposit for a higher limit. 1

Credit Reporting

Every month, Discover will report your borrowing activity to the three major credit bureaus—Equifax, Experian, and TransUnion. They report on the last day of the billing cycle, which is your statement closing date.

Tips for Building Credit

To build credit with the Discover it® Secured card, follow these steps:

1. Put down a healthy deposit: Luckily, the Discover it® Secured offers a flexible security deposit range of $200–$2,500. You want to put down a deposit high enough to accommodate your spending and limit your risk of maxing out your card. Of course, if you put down a very large deposit and receive a high limit, make sure that you don’t accidentally spend more on your card than you can pay back.
2. Use your card responsibly: A factor that determines your credit score is your credit utilization rate, which is essentially how much of your available credit you’re using. If you use too much of your credit line, your utilization rate will be high and will make building a good credit score more difficult. Try to spend well under your credit limit.
3. Pay on time: The most important part of building credit is paying back your debts on time. Always make your credit card payments by the due date, and consider paying your balance off to raise your credit score even faster. Discover reports your account details on your statement closing date, so having a low balance on that day will reflect well on your credit report.

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FAQs

What’s the credit limit on the Discover it® Secured card?

The Discover it® Secured card’s credit limit is between $200–$2,500. You’ll need to put down a security deposit within this range. You’ll receive an equivalent credit limit on the card.

Can you get a cash advance on the Discover it® Secured card?

You can take out cash advances with a Discover it® Secured card, meaning you can withdraw money from the card at an ATM. Each cash advance will be subject to a fee of $10 or 5% of the advance amount. What you withdraw will also begin accumulating interest immediately at an APR of 29.24% (variable).

Cash advances are very expensive, so we recommend only making them in case of an emergency.

Does the Discover it® Secured card allow balance transfers?

You use your Discover it® Secured to perform a balance transfer, which is a common approach to consolidating debts. The card offers a reduced introductory APR for balance transfers of 10.99% for 6 months after the date of your first transfer. After the intro period expires, your balance will be subject to an APR of 27.24% (variable).

There’s also a reduced balance transfer fee of 3% of the transferred amount. Given the reduced fee and rate, this card may be useful for moving debt from another credit card—so long as you have a high enough credit limit and can pay off the debt within 6 months.

Can you add an authorized user to the Discover it® Secured card?

To add an authorized user to a Discover credit card, you can submit an application online. The user must be at least 15 years old. Discover will not charge an authorized user fee or extra card fee.

Remember that it’s the primary cardholder’s responsibility to pay the card’s bill each month, so only add an authorized user you trust.