Discover it Secured Credit Card Review

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Discover may have introduced the best secured credit card on the market, not that anything less should be expected from the credit card company that ranked "Highest in Customer Satisfaction" by J.D. Power and Associates.

The Discover it Secured Credit Card beats a lot of regular credit cards in terms of pricing and rewards. The only drawback is that it requires a security deposit. If you have trouble getting approved for a credit card, it's a great choice.

Rewards on a Secured Credit Card!

It's tough for people with bad credit to get a rewards credit card. Most credit cards for this demographic are predatory, charging high fees and interest for these financially vulnerable consumers.

The Discover it Secured pays 2% cash back on restaurant and gas purchases on up to $1,000 each quarter (maximum of $20 per quarter) and 1% on all other purchases. A secured credit card that pays rewards is rare!

New cardholders get double cash back at the end of the first year. There's no bonus cash back in the second year, but you'll still earn rewards at the regular rate. Hopefully by the time year two rolls around, you'll have improved your credit score for something better, like maybe the Discover it, which pays up to 5% on quarterly rotating categories.

Your Deposit Is Your Credit Limit

Most credit cards assign a credit limit based on income and other credit factors. Secured credit cards, on the other hand, require a security deposit for collateral against the credit limit.

With the Discover it Secured Credit Card, your security deposit is your credit limit. Pay a minimum security deposit of $200 for a $200 credit limit. You can make a deposit up to $2,500 for a bigger credit limit. Make a bigger deposit if you can afford to - it will help boost your credit score and give you more room for making purchases. 

The security deposit is only used if you default on your credit card. Otherwise, as long as you make your monthly payment on time each month and don't default, you will get your deposit back when you close your account or your card converts to an unsecured credit card.

After a year, Discover says will review your credit card each month to determine whether you qualify for an unsecured credit line. Use your credit card responsibly for the best chance to qualify.

Pricing

There's no annual fee – something that's rare for a secured credit card.

The regular purchases APR is 24.49%, which is a little high, but on par with other secured credit cards and credit cards for people with bad credit. If you pay your balance in full each month – and you should – you can avoid paying interest on your balance.

The Discover it Secured Card offers a low introductory rate on balance transfers: 10.99% for the first six months on transfers made by July 10, 2018. After that balance transfers receive a 24.49% APR. Balance transfers are charged a 3% balance transfer fee. To transfer a balance, your security deposit should be large enough to accommodate the balance and the fee. Then again, if you can afford that size security deposit, it's probably better to pay off the balance.

Cash advances are charged an APR of 26.49% and a cash advance fee the greater of $10 or 5%.

All interest rates for the Discover it Secured Card are variable based on the Prime Rate. When the Fed raises interest rates, you can expect your credit card interest rate to follow.

Late Payments Penalized Less

You should always try to make your credit card payment on time. Mistakes happen and Discover won't charge a late fee on your first late payment. Subsequent late payments (and returned payments) will be charged up to $35 late fee. 

There's no penalty APR – which means your interest rate won't go up if you fall behind on your payments by more than 60 days.

Free FICO Score

Discover is one of the few credit card issuers that make it easy to monitor your credit score. Receive a free FICO score each month on your credit card billing statement. You don't have to sign up for anything extra or pay a monthly fee. The score will automatically appear.

The free FICO score is particularly important for consumers working to rebuild their credit. As you make your payments on time and handle your credit card responsibly, you can see how your credit score improves.

Other Discover Benefits

Discover it Secured Credit Card users can also enjoy other Discover benefits like 0% fraud liability and Freeze it, the features that lets you turn your credit card on and off to prevent or allow new transactions.

The Discover it Secured Credit Card is perfect for someone who is building or rebuilding their credit score. You can apply for the card directly through Discover.com/securedcreditcard.