Until recently, the Discover it Secured Credit Card seemed more like an urban legend than a reality. You had to apply for the unsecured version, and then if you got denied, hope that the customer service rep would offer you the secured version. If it wasn’t offered, you’d have to ask and hope for the best.
I’m happy to say that the Discover it Secured Credit Card now lives online! It even has its own page.
Before I update this review, let me thank Dave for mentioning this in the Comments section below. And on Twitter, I got a heads-up from Diana. You guys are the best!
Here’s the new process for obtaining this card: Go to The Discover it Secured Credit Card and apply. That’s it.
If you qualify, you have a chance to establish or rebuild your credit with this card. After 12 months, Discover will conduct automatic monthly reviews of your payment history to see if you are ready to graduate to an unsecured Discover it Card. If you do, your deposit will be returned to you. I’ve heard from many folks who started with the secured card and graduated to the unsecured Discover it Card. In the comment section below, several folks have said they graduated after just seven months. That’s awesome!
This card used to be reported as unsecured to the major credit bureaus. But now Discover is reporting it as a secured card. I know y’all worry about this, but in my opinion, it’s not a deal breaker. Sure, it’s possible that if a potential lender sees this on your reports, you might be denied new credit. But it’s also possible the lender might see this as a sign that you’re working hard to rebuild credit. That’s impressive and it shows character.
You can at least rest easy knowing that being reported as secured has no impact on your credit score. Yep, none. For more details about how FICO scores treat secured credit cards, check out my post: Does the FICO Score Treat Secured Credit Cards Differently? Trust me. You’ll feel better after you read it!
There have been some changes to the rewards program for this card, so read this carefully. With the Discover it Secured Credit Card, you get 1 percent cash back on every purchase. You also earn 2 percent cash back at restaurants and gas stations on up to $1,000 in combined purchases each quarter. Once you exceed the $1,000 cap, you earn 1 percent.
You can redeem your Cashback Bonus in any amount for a credit to your account, deposit directly to your bank account, charitable donations, online shopping at select retailers, and more. You can redeem for gift cards starting at $20.
Here’s something that I really like: After your account has been open for 12 billing periods (and is in good standing), Discover will double the Cashback Bonus you’ve earned. Ka-ching!
Rates and fees
The Discover it Secured Credit Card has a fairly high APR, but not unusually high for this category. And there’s an intro rate for balance transfers, which you don’t see often with a secured card.
APR: You get a variable 23.24 percent APR. This has gone up just a smidgeon. It’s not ideal, but it won’t matter if you don’t carry a balance, right? Make a vow that you’ll pay your balance in full by the due date.
Balance transfers: You get a variable intro APR of 10.99 percent for six months for transfers posted by May 10, 2016. After that, you get a variable 23.24 percent APR. The transfer fee is 3 percent.
APR for cash advances: You get a variable 25.24 percent and there’s a 5 percent transaction fee. Did you know that interest on a cash advance starts ticking right away? Just say no to a cash advance!
Annual fee: None.
Foreign transaction fees: None.
Late payment fee: None the first time you pay late, but after that, you could pay up to $35. But let’s be clear about this. You do not want to make any late payments. Your job right now is to rebuild or establish credit and you’ve got to pay all of your bills on time. Do this, and keep low balances, and you’ll be on your way to good credit.
Security deposit: You must make a minimum deposit of $200. The maximum amount allowed is $2,500. But your maximum amount will be determined by Discover based on your income and ability to pay. Your credit limit will equal your deposit.
The bottom line
The Discover it Secured Credit Card is an excellent secured card. It’s not often you find a secured credit card that offers rewards and has no annual fee. The APR is high, but as long as you don’t become a revolver (one who makes minimum payments and then wastes money paying compound interest), you can keep the cost of this card at zero. Hey, you’ll actually make a profit because your getting rewards!
You also get to see your TransUnion FICO score when you get your statement. This is a nice benefit, but remember that your FICO score can differ based on the bureau and on timing issues. But it’s a nice opportunity to check your credit health based on the information from TransUnion.
When you start approaching your one-year anniversary, keep an eye on things. If you’re doing well (and I know you will!), but haven’t heard a peep about graduation, check in with Discover. The fine print says that once you’re approved to graduate, your deposit will be returned. It’s not speedy, though. Expect about two billing cycles plus 10 days to get your deposit returned.
Note: Credit card agreements change frequently, so read all the disclosure statements carefully. My review is based on my opinion as an expert and on the information that I believed to be in effect today.