Looking for a card to help you build your credit? The Discover ‘it’ family offers a secured version of its popular reward cards. If your less-than-stellar credit places Discover’s regular credit card offerings out of reach, the Discover it Secured Credit Card (with no annual fee) may be worth pursuing. But before you apply, make sure you know all the details.
If you’re not familiar with secured credit cards, they’re products designed specifically for consumers who want to rebuild their credit. If you’re approved for the card, instead of getting an unsecured line of credit (as you would with a regular card), you have to put down a deposit upon approval to secure your line of credit.
For the Discover it Secured card, here’s how it works:
- First, you’ll apply and, if you’re approved, you’ll put down a security deposit. Your credit line will be equal to that deposit. For example, if you deposit $500, you’ll have a $500 line of credit. The minimum required deposit is $200, and the highest you can go is $2,500. Discover will determine your limit based on your income and ability to pay.
- Then, use your card (responsibly) to build credit. That means paying on time and keeping your credit usage well below your limit.
- Discover will review your account monthly (starting at the one-year mark) to see if you qualify for a security-deposit refund. If you’re eligible for a refund, that would essentially turn your card into a regular Discover rewards card.
Unlike some other secured cards on the market, this card has no annual fee.
The rewards and perks
Unlike most secured cards, the Discover it Secured Card offers rewards:
- 1 percent cash back on all eligible purchases
- 2 percent back at restaurants and gas stations (on up to $1,000 in combined purchases each quarter)
- Rewards-matching the first year (for new cardholders only). However much cash back you earn in Year One, Discover will double it automatically at the end of your first year.
Plus, as with Discover’s other products, you get the following benefits:
- Free FICO score access: You can see your TransUnion FICO score for free on your statements or via online banking.
- Freeze-it: Freeze-it lets you temporarily block purchases, cash advances and balance transfers via an app if you misplace your card. This buys you some time to search for it and determine it’s really missing before you contact customer service for a replacement.
Is it a good option for rebuilders?
For something as important as rebuilding your credit, you’ll need to make sure you have the right card – and there are other cards for rebuilders to consider.
- The Capital One Secured MasterCard is a no-annual-fee secured card with a unique security-deposit structure; your credit limit may be higher than the deposited amount. Your security deposit will be $49, $99 or $200. A $49 deposit gets you a $200 credit limit, and, if you deposit one of the higher amounts, you could get a limit of up to $3,000 (depending on your credit history). In other words, you may get a higher limit with this card for less money up front. The drawback? Unlike the Discover it Secured Card, you won’t earn rewards.
- The Cash Back Rewards Card from Credit One Bank is designed for rebuilders, too, although it’s not a secured card (meaning no deposit). It also offers rewards (an unlimited 1 percent back on groceries and gas). However, this card comes with an annual fee of $0 to $75 the first year and $0 to $99 thereafter. It’s also worth noting that Credit One doesn’t have any prime cards in its portfolio. After you’ve built up your credit, you’ll have to close your card and move on to another issuer.
The Discover it Secured card is a well-rounded and compelling option. While we usually advise consumers to put rewards on the back burner while they’re rebuilding credit, the rewards on this card are a nice perk (especially because there’s no annual fee). Because your (likely low) limit will keep you out of too much trouble, overspending to earn rewards is less of a concern.
More importantly, perhaps, is that Discover may refund your deposit and allow you to keep the card and its benefits. Discover states on its application page that it will automatically review your payment behavior on the account (and any other accounts or loans) starting at Month 7 and determine whether you’re ready to have your security deposit refunded and keep the account’s benefits. That basically turns your card into the Discover it Chrome card. There’s no guarantee Discover will raise your limit (which will be relatively low to start with). But even if it doesn’t, you can rest assured that you have a card with competitive rewards and benefits (and no annual fee) – and good enough credit to go for one of Discover’s prime products or for a prime product from another issuer.
Why we gave it 4/5 stars
This card’s rating was based on our standards for secured credit cards.
|Low fees: This card charges no annual fee and no maintenance fees.|
|Ability to graduate: Discover has a stated review process for graduating cardholders to non-secured products. It will begin monitoring your account after 7 months to see if your behavior warrants a refund of the security deposit, which essentially graduates you to the non-secured Discover it Chrome card.|
|Ability to get higher credit line than deposit: This card’s credit limit will match your deposit.|
|Rewards: This card offers rewards on spending.|
|Unique perks: Discover’s Freeze-It feature and free FICO-score access help the secured card earn this star. Also, the rewards are unique, as very few secured products offer rewards on spending.|
Updated May 19, 2017