Discover it Balance Transfer Review

The Discover it Balance Transfer is a solid option for two different types of consumers: those who want to earn cash back with no annual fee, and those who want to pay down debt interest-free. 

Still, rewards and balance transfers generally don’t mix. While the Discover it Balance Transfer is a great cash-back credit card in its own right, trying to earn cash back while you pay down a transferred balance could mean spiraling into further debt.

• No annual fee: No annual fee is always a plus, but this is pretty standard for cash-back and balance transfer cards. 
• High-value cash-back rewards: The quarterly rewards categories tend to be popular ones (like gas, groceries, and dining out). You also get 1% back on all your regular purchases, which can add up. And Discover will double all the rewards you’ve earned after your first year as a cardholder.
• 0% APR offer on purchases and balance transfers: The balance transfer offer is more generous than the 15-month zero-interest period many cards on the market provide, but you may find cards with even longer introductory offers. The zero-interest purchase period is short but nice to have if you’re getting the card for its rewards.
• No foreign transaction fee: Discover doesn’t charge foreign transaction fees, which is one of its only benefits for frequent travelers. 

• Bonus rewards require signing up: You don’t automatically earn 5% in the quarterly categories—you have to opt in. You can set up alerts for Discover to remind you to sign up, and it’s easy to activate rewards online or in the app, but it’s still an extra step.
• Earning limits in bonus categories: Cash-back rewards at the 5% level are only available on the first $1,500 you spend in select categories each quarter. That means the most cash back you can earn per quarter in the 5% bonus categories is $75, or $300 per year. There’s no limit to the amount you can earn at the 1% cash-back level.
• Rewards may tempt you to spend more: If you use a balance transfer card to pay down debt, be wary of cards that incentivize spending with a rewards program. If you want to use this card to get out of debt, the best course is to transfer high-interest balances, pay off as much debt as you can during your card’s introductory period, and refrain from using credit cards until you’re debt-free. 

This card has an unusual and potentially valuable sign-up bonus. 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. There’s no limit to how much cash back you can earn in that first year or how much Discover will match. 

This structure makes the value of the offer less clear before you get the card, and you do have to wait a year to get it, but the bonus may be worth quite a bit.

Based on average U.S. household spending ($24,297 in 2018, according to the Bureau of Labor Statistics) we estimate you’ll earn about $377 in rewards each year with this card. That means the first-year cash-back match can be worth $377 too. For perspective, comparable cards without an annual fee have sign-up bonuses worth $150-$300. 

This card’s earning structure is easy to understand. You’ll earn 5% back on up to $1,500 spent in bonus categories each quarter, plus 1% back on all other purchases and a match on all the rewards you earn the first year. The 1% back you earn is unlimited and your rewards will never expire.

There are two different ways to use this card for maximum impact: strategically earning rewards in the bonus categories, or paying off debt during the zero-interest period. 

To take advantage of both, you can sequence your approach to make the most of the card’s features. For example, you could transfer a balance during the card’s 0% APR period, pay off your debt completely, then use the card for purchases to earn cash back for each dollar you spend. This strategy requires a plan to pay your credit card bill in full each month so you avoid going into debt again. 

• No late fee for your first late payment 

J.D. Power ranked Discover No. 1 in its 2019 Credit Card Satisfaction Study, which compared credit card issuers using various customer service metrics and responses from more than 24,000 credit card customers nationwide. Discover received 842 out of a possible 1,000 points in this study. The industry average was 806. 

Discover promises U.S.-based customer service representatives that can help address your problems on the phone or online 24 hours a day 7 days a week. The company also offers a mobile app and free access to your FICO credit score.

Discover lets you activate free social security and credit alerts. They also offer their Freeze it® program which lets you freeze your credit card when you want to prevent new purchases, balance transfers, or cash advances from going through.

The balance transfer fee on this card is 3% of the transaction amount for transfers made by Feb. 10, 2020, and then it jumps up to 5%.