The Discover it Cash Back is a good option for anyone who wants to earn cash back on their day-to-day purchases. Bonus categories rotate every quarter, and in 2020 include purchases at grocery stores, gas stations, restaurants, rideshare companies, and some online retailers. Consumers who spend in those categories are positioned to earn plenty of cash back.
But keeping on top of those categories requires some work. You have to sign up for bonus categories each quarter and perhaps remember to use this card instead of another card on purchases in those categories. So, the card is best for people who don’t mind going the extra mile to maximize their rewards.
Strong rewards potential
Good introductory interest offer
Excellent customer service
Rewards require work
No cardholder perks
- Strong rewards potential: While you’ll only earn 1% back on your regular spending, we like the fact this card gives you 5% back on the first $1,500 every quarter that you spend in the rotating categories. Discover’s 5% categories tend to be ones consumers can benefit from, making it easy to strategically max them out. Also note that Discover will match all your rewards the first year.
- Good introductory interest offer: You’ll get 14 months of 0% interest on purchases and balance transfers. Balance transfers need to be executed before Oct. 10, 2020. During that time you’ll also get a break on the balance transfer fee—it’s 3% instead of the usual 5%. Only a few competing cash-back cards offer longer 0% interest promotions on both purchases and balance transfers.
- Excellent customer service: Discover consistently ranks high in customer satisfaction studies and takes several steps to earn, and keep, that reputation.
- Rewards require work: Some cash-back cards let you rack up bonus rewards just for using your card, but the Discover it Cash Back requires you to “activate” your card to earn 5% in bonus categories each quarter. If you fail to activate within the specified time, you’ll miss out on the bonus rewards-earning rate.
- Rewards-earning caps: The Discover it Cash Back returns 5% back on up to $1,500 spent every quarter in bonus categories, but you only earn 1% in those categories once you surpass that threshold. This means you can only earn $75 in bonus cash back each quarter.
- No cardholder perks: This card has none of the perks similar cards offer, such as extended warranties, rental car collision insurance, or purchase protection.
Discover it Cash Back Bonus
Discover gives its cards a unique take on the familiar new-cardholder bonus. Instead of basing it on a fixed amount of spending in a limited amount of time (say, $500 in the first 90 days to earn $150 cash back), Discover matches all the cash back you’ve earned in your first year with a lump sum after the end of that year. Although you’ll have to wait longer to get it, you could easily earn twice as much as a traditional new-cardholder bonus.
Based on our calculations and average household spending in the U.S. ($24,297 in 2018, per the Bureau of Labor Statistics), you’ll earn about $376 in rewards each year you have the card. That would make your first-year cash-back match worth $376, too.
Earning Points & Rewards
You’ll earn 5% back on up to $1,500 spent in the bonus categories for any given quarter, and then 1%. The categories rotate and must be activated each quarter to earn the bonus cash. You’ll also earn 1% back on all of your other spending, and none of your cash back expires.
|Discover it 5% Cash-Back Calendar For 2020|
|Period||5% Cash-Back Rewards Categories||When to Enroll|
|Q1 (Jan.-March)||Grocery stores, Walgreens, and CVS||Expired|
|Q2 (April-June)||Gas stations, Uber, Lyft, and wholesale clubs||Expired|
|Q3 (July-Sept.)||Restaurants and PayPal||Expired|
|Q4 (Oct.-Dec.)||Amazon.com, Walmart.com, Target.com, and Best Buy||Now|
While $376 is our estimate of your annual cash-back potential based on average household spending (according to the BLS), you’re certainly not limited to that. That level of spending works out to an effective cash-back rate of 1.5%. (In other words, it’s the same as if you earned 1.5% back on everything you bought). But if you were to max out each quarter’s 5% bonus category, you’d earn $300 a year just for those purchases, plus 1% on everything else, so your total earnings could be much more than $376.
Rewards earned with the Discover it Cash Back can be redeemed any time and for any amount. Redemption options include:
- Gift cards or e-certificates starting at $20
- Charitable donations starting at 1 cent
- Statement credits to your Discover account starting at 1 cent
- Transfers to a bank account starting at 1 cent
- Purchases made via PayPal or at Amazon.com starting at 1 cent
How to Get the Most Out of This Card
Make sure to activate your bonus categories each quarter and use the card to the best of your ability, perhaps planning big-ticket purchases in advance. Also charge as many other purchases as you can to the card, since all your cash back will be matched after the first 12 months. You might want to set alerts on your phone or mark your calendar to remind you to activate your categories every quarter.
Since your cash-back rewards are worth exactly 1 cent a piece no matter how you use them, cash them in however you want.
You might also take advantage of the 14 months of 0% interest on purchases and balance transfers. You could make a big household purchase and pay it off, interest free, over the following 14 months. Or, you could move high-interest credit card debt to your new Discover card and pay it off over the next year and change.
A balance transfer can be a smart way to reduce your debt burden, but be aware of a couple of catches. First, you’ll pay a fee on the amount transferred (3% or 5% with this card, depending on when you make the transfer). Second, most issuers will treat transferred balances as regular balances when it comes to factoring the grace period for avoiding interest charges on regular purchases. That generally means you’ll pay interest on purchases from the date of the transaction—even if you pay your new balances off every month. Fortunately, because this card features 0% interest for both purchases and balance transfers, new cardholders won’t be caught by this catch.
Discover offers U.S.-based customer service that is available any time of the day or night, which is likely part of the reason it ranked No. 1 among major credit card issuers in J.D. Power’s 2019 Credit Card Satisfaction Study.
Like many of its competitors, Discover also provides its customers with access to their FICO credit scores and other key credit information.
Discover provides industry standard security features including zero liability for fraudulent purchases, and account monitoring and alerts.
Discover it Cash Back’s Fees That Stand Out
Most of the card’s fees are in line with industry standards for cash-back cards, but note the lack of foreign transaction fee. Another nice fee feature? The first time you miss a payment you won’t be charged a late fee and you won’t see your interest rate balloon to the penalty APR.