Discover it Balance Transfer Card Review

If you have good credit and are ready to pay down your credit card debt, the Discover it Balance Transfer is a solid option for initially saving on interest and then getting some decent cash back over the longer haul.

That said, rewards and paying down debt don’t usually mix, so it’s best to take advantage of this card in two distinct stages. Focus on paying down your transferred balance first, so you don’t spiral into further debt.

Pros Explained

• Lengthy interest-free offer on balance transfers: The balance transfer offer on this card is longer than the 15 months many cards on the market extend. That said, there are a few cards with even longer periods. 
• Solid cash-back rewards: The quarterly rewards categories tend to be popular ones (like gas, rideshares, and wholesale clubs), and 5% is the standard rate for a card with rotating categories, so it’s a competitive offer.
• No foreign transaction fee: Discover doesn’t charge foreign transaction fees, giving this card a leg up against many cash-back and balance transfer competitors. 

Cons Explained

• Earning cap on bonus reward rate: The 5% cash-back rate is only available on the first $1,500 you spend each quarter, combined, in the selected categories. That means you won’t earn more than $75 a quarter, or $300 per year, at the higher rate. Of course, there’s no limit to the amount you can earn at the 1% cash-back level, but that’s much less lucrative.
• Rewards may tempt you to spend more: If you’re trying to pay down your credit card debt, always be wary of cards that incentivize you to spend with a purchase rewards program. Your best course is to transfer your high-interest balances, pay off as much debt as you can during the promotional period, and refrain from using credit cards until you’re debt-free.
• Interest snag on purchases after six months: While the balance-transfer promotion lasts for 18 months, you’ll only get six months with no interest to make purchases. That means that anyone still taking advantage of the balance transfer offer after six months will be charged interest on their new purchases even if they pay them off each month. This is yet another reason you’ll want to pay down your debt entirely before considering the rewards on this card.

Bonus for New Cardholders

While this card has an unusual and potentially valuable sign-up bonus, it runs at cross purposes if you are looking to pay down higher-rate credit card balances. Instead of offering a lump sum for meeting a certain spending requirement in your first three months, Discover will double all the cash back you've earned at the end of your first year as a cardholder. 

But we wouldn’t recommend trying to take advantage of this offer until you’ve paid off your balance. Balances transferred don’t earn rewards, and running up your credit card balance will only drag out your debt repayment schedule, and potentially dig you into a deeper hole, especially if you’ve still got a balance when your promotional period is over. 

That said, the bonus can be worth quite a bit in its own right, should you be looking at this card strictly for the rewards. Based on our estimates of average U.S. household spending ($24,297 in 2018, according to data from the Bureau of Labor Statistics) we estimate you’d earn about $377 in rewards each year with this card. That means the first-year cash-back match could be worth $377 too. For perspective, other comparable no annual fee cards have sign-up bonuses worth $150-$250.

Earning Points & Rewards

This card’s earning structure is easy to understand. You’ll earn 5% cash back on up to $1,500 spent in bonus categories each quarter, plus 1% cash back on all other purchases. The 1%—including in the bonus categories after you’ve spent $1,500—is unlimited and these rewards never expire.

Redeeming Rewards

The Discover it Balance Transfer Card offers plenty of flexibility when it comes to redeeming your cash back. You can:

• Get a credit on your card statement 
• Buy physical or electronic gift cards starting at $20
• Make charitable donations
• Transfer your cash to a bank account
• Use your cash right at the Amazon.com checkout or to make purchases with PayPal

How to Get the Most Out Of This Card

Think of this card as two different cards: A worthwhile contender if you are looking to reduce your interest expenses and pay off your credit card debt, or a decent cash-back card with a potentially great first-year bonus and plenty of convenient redemption options.

Sequence your approach to make the most of the card’s features. If you have a balance to transfer, first do some math to make sure the promotional balance transfer fee of 3% (after the introductory period, it kicks up to 5%) amounts to less than what you’ll save in interest. Once you’ve determined it is, work at paying off your debt completely before using this card for any new purchases. Only when you’re in the clear, consider the rewards and first-year bonus (if you’re still in your first year.) 

Other Features

• No late fee for your first late payment 

Customer Experience

J.D. Power ranked Discover No. 1 in its 2019 Credit Card Satisfaction Study, which relied on responses from more than 24,000 credit card customers nationwide. Discover promises access to U.S.-based customer service representatives 24/7 and provides a free FICO score. 

Security Features

Discover lets you activate free social security and credit alerts. The company’s Freeze it program gives you the ability to freeze your credit card when you want to prevent new activity for any reason.

Fees 

While the balance transfer fee on this card is only 3% for the first few months, it jumps up to 5% for balances transferred after the introductory period ends. Notably, there is no foreign transaction fee.