|Highlights||Credit Card Feature|
|Things We Like||Earn cash back on every purchase|
|Our Least Favorite||High ongoing APR|
|Our Verdict||Great card to build your credit with no annual fee|
Discover it® Secured Credit Card - No Annual Fee is Discover's take on a secured credit card, and if you've had to endure nasty annual fees, terrible rates and few benefits just because you have bad credit, this card will give you something to get excited about.
Even if your credit is excellent, you may prefer to live within your means or avoid credit all together. A secured credit card lets you do this because you place a deposit to cover the credit you use, just in case you can't pay. At the same time, it's a real credit card, not a debit card or prepaid card. You can use it for any payments which require a credit card.
We've reviewed a lot of secured credit cards, and in our opinion Discover it® Secured Credit Card - No Annual Fee is in a class of its own. In this Discover it Secured card review, we'll tell you why we are sold on this secured solution from Discover, compare it (apples-with-apples) against other top secured cards, and also take an in-depth look at the downsides of this card.
Things We Like About Discover it® Secured Credit Card - No Annual Fee
You earn 2% cash back at restaurants and gas stations, on up to $1,000 in combined purchases in these categories each quarter. Discover has never been one to skimp on rewards, even where most other issuers do (Discover's student credit cards are a good example of this). The same holds true for Discover it® Secured Credit Card - No Annual Fee. This is one of the few secured credit cards that gives you any kind of rewards at all. But 2% cash back on up to $1,000 spent on combined purchases at gas stations and restaurants each quarter is the kind of cash back you would normally see on a card for people with excellent credit.
You earn 1% cash back on all your other purchases. Every purchase you charge to this card earns 1% cash back! If you use this card to pay for most of your expenses, that 1% cash back can add up to a decent amount every year.
This card has no annual fee! Many issuers are happy to take advantage of people in a bad credit situation, and slap mean annual fees onto their secured credit cards. But not Discover. Like Discover's other stellar cash back credit cards, this card has no annual fee.
The bonus offer. As if earning cash back on a secured credit card was not a strange enough phenomenon, Discover will automatically give you a dollar-for-dollar match of all the cash back you've earned at the end of your first year. This welcome offer is for new cardmembers only.
You can shop through Discover Deals to earn more cash back. Discover Deals is an online portal and a mobile app which lets you see special deals and discounts which merchants offer Discover cardholders. Discounts are applied automatically any time you use your Discover card to pay at a store offering a discount. You also get coupons which can be redeemed at many merchants when you pay with your Discover it® Secured Credit Card - No Annual Fee. But the biggest perk is that you can earn generous cash back at many popular outlets, both brick and mortar locations like restaurants and shops, and online stores. You can earn 10% cash back on your purchases at some big-name stores when you pay with this card.
Discover reports to the 3 major credit bureaus, which means that making your payments by the due date every month and using your card responsibly will help you build (or rebuild) your credit history and credit score.
You can see your FICO® Credit Score for free, both online and on your monthly statements. This is a nice perk, especially if you are trying to repair your credit, because you can keep a close check on your progress by checking your credit score regularly.
You may get your security deposit back. The monthly reviews start after 7 months, Discover will begin monthly reviews of your creditworthiness to see if you qualify to get your security deposit back. If you do qualify to get your deposit back, you will continue to enjoy all your card benefits. That's a pretty nice perk, because the benefits you get with this card are actually as good as what most credit cards for average credit give you, which makes this a good card to hang onto even after your credit improves. If you get your deposit back, you can use that money as you choose (put it in an interest bearing savings account, invest it, etc.).
You choose your credit line. The amount of money you place in your security deposit (minimum $200) will dictate the size of your credit line, up to the amount which Discover can approve. So if you place $500 in your security deposit, you will have a $500 credit line. If you want a larger credit line, make a larger deposit when opening your account. When you close your account, you will get this deposit back, as long as you pay your balance in full (it may take up to 2 billing cycles plus an extra 10 days after account closure to receive your deposit).
Track your recent FICO® Credit Scores for free in a single, easy-to-read chart on your monthly statements and online. Being able to follow your credit score can help you track progress and gives you a good idea of where your credit stands. Your FICO® Credit Score is based on data from TransUnion and may be different from other credit scores (from Experian or Equifax, for example), but it is used by many lenders so it gives you a pretty good idea of whether or not you will be accepted for credit.
You can freeze your account any time. The Freeze It℠ on/off switch on mobile or online lets you prevent anyone from making new purchases, balance transfers or getting cash advances with your card. This is a very useful feature that can save the day if your card is lost or stolen because you can quickly freeze it and then quickly un-freeze it when you find your card.
No late fee on first late payment. If you make a late payment on this card, you won't get a penalty APR. Most other cards bump up your APR to around 30% for 6 months on average. With Discover it® Secured Credit Card - No Annual Fee you also won't be charged a late payment fee the first time you pay late. After that first time, you will have to pay a $35 late payment fee every additional time you pay late. We highly recommend that you never make a late payment, as doing so will damage your credit score. With this card you have up until midnight (Eastern Time) on your due date to pay your bill by phone or online.
No foreign transaction fee. If you ever travel outside of the U.S. on vacation or for any other reason, this can save you money. When you use this card to pay in a foreign currency, you won't be charged a foreign transaction fee. Most cards charge 3% of each transaction.
You are not responsible for unauthorized purchases. Discover includes their $0 Fraud Liability on this card, which means you are never responsible for any unauthorized purchases charged to your credit card.
Use your cash back to shop at Amazon.com checkout. If you do a lot if shopping on Amazon.com, you may like the option of using your Cashback Bonus to pay directly at the checkout.
You get 100% U.S. live service, which can save you many unpleasant "lost in translation" experiences.
No overlimit fee. If for some reason a payment you make causes you to go over the limits of your credit line, you won't have to pay a penalty (many other cards charge you for this).
Our Least Favorite Things About Discover it® Secured Credit Card - No Annual Fee
It has a high APR. The 23.49% variable APR is nothing to be sneezed at, but the fact is, most credit cards for bad credit come with this kind of APR (or worse). There is an intro APR of 10.99% intro APR on balance transfers for 6 months, but we don't advise you to make balance transfers to this card unless it's a last resort to ditch a much worse APR on another card. This secured card will reward you well if you do not carry a balance at all, by making your payments in full by the due date every billing period. That way you will avoid paying anything at all to use this card, while still enjoying the cash back and other perks.
How Other Cards Compare With Discover it® Secured Credit Card - No Annual Fee
Capital One® Secured MasterCard® is one of the few other secured credit cards which we actually recommend. It does not let you earn any kind of rewards at all, but it does have no annual fee and gives you decent card benefits. You get free access to your credit score, plus the Capital One® Credit Tracker helps you learn how everyday decisions can affect your credit score. It reports to all 3 major credit bureaus and your deposit (minimum $200) is FDIC insured. You get a 24.99% variable APR, which is similar to what Discover it® Secured Credit Card - No Annual Fee has (23.49% variable APR). The main benefit of this card over Discover it® Secured Credit Card - No Annual Fee is that with Capital One® Secured MasterCard® you can get a credit line of up to $3,000 (compared to a maximum credit line of $2,500 with Discover it® Secured Credit Card - No Annual Fee). If getting a bigger credit line possible is priority to you, then this card from Capital one is a good choice. But Discover it® Secured Credit Card - No Annual Fee lets you earn cash back, gives you most of the benefits you get with this card (and more), and you may get your deposit back once you build enough credit.
Discover it® Secured Credit Card - No Annual Fee is one of the best secured credit cards available in the US, although there are other secured cards which may offer higher credit lines. Daniel Dreier
If you don't use more than $2,500 of credit, and are able to make your payments in full every month instead of carrying a balance, Discover it® Secured Credit Card - No Annual Fee is one of the best secured credit cards you can get. It rewards you with a high rate of cash back of 2% on up to $1,000 in combined purchases at restaurants and gas stations each quarter and 1% cash back on all other purchases charged to it, plus the option of earning cash back with Discover Deals. This is probably the first secured credit card in history which comes with a welcome bonus offer that's worth anything. It also helps you build credit with reporting to all 3 major credit bureaus and free access to your FICO® Credit Score online or on your monthly statements. It looks and feels just like a regular Discover credit card, so you won't get any funny looks when using this card. The best thing is, if you use it right it won't cost you a thing because it has a no annual fee, no foreign transaction fee and even no overlimit fee or penalty APR.
All in all, we give Discover a thumbs-up for creating a credit card that we actually really like, and making it available to the many Americans that have bad credit. If you make your payments in full every month and are looking for a good cash back credit card, but for some reason you have bad credit or haven't built up a credit history, it hardly gets better than this.
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