Do you have less-than-stellar credit that needs a boost? Do you have no credit and want to prove you’re trustworthy so you can get a loan or rent an apartment? A secured credit card can help you solve these problems, and the Discover It® Secured credit card is a particularly good choice.
You’ll need a checking account and a security deposit to get approved, and the card’s annual percentage rate is high. But unlike some card issuers that cater to consumers who have trouble getting credit, the Discover It® Secured card doesn’t charge an application fee — or an annual fee. This card even offers cash back rewards. What’s more, cardholders can graduate to an unsecured Discover card in as few as eight months with regular, automatic reviews.
Discover It® Secured Benefits
Discover reports your payment history to all three credit bureaus — a must-have feature for any secured card. That makes it a real credit card that will help you build your credit when you pay your bill on time. Prepaid cards and debit cards can’t do that.
It’s easy to keep tabs on your credit score: Discover provides a free credit score from TransUnion every month on your statement. To get a complete picture of your credit, you’ll also need your scores from the other two major credit bureaus, Experian and Equifax.
Discover does monitor your Experian credit report, however, and will alert you when a new account appears on it. It also monitors dark web sites to see if personal information such as your Social Security number is being bought and sold illegally. These alerts, which you must sign up for, might help you catch identity theft before it blows up.
This card has no foreign transaction fees, which can be helpful if you buy anything from an overseas merchant. If you travel abroad, be aware that other brands are accepted more often than Discover.
Use the card responsibly and you could actually make money. It’s harder to get a rewards card when you don’t have good credit, but Discover bucks the trend. It offers meaningful rewards on the It® Secured card: 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter, a maximum of $80 per year.
You’ll also earn 1% back on all other purchases, including gas and restaurant purchases above the quarterly cap. At the end of your first year as a cardholder, Discover will match all the cash back you’ve earned. Unsecured cards may offer sign-up bonuses that you can earn faster, but secured cards rarely do.
The best redemption options are a credit toward your account balance — there’s no redemption minimum — or a gift card, for which there’s a $20 minimum. However, gift card redemptions come with bonuses. For example, you can redeem $20 for a $25 gift card to Banana Republic or Bed Bath and Beyond.
Refundable Security Deposit
It can be hard to get a job when you don’t have experience or a past employer has fired you. It can also be hard to get a credit card when you have no credit history or you couldn’t keep up with your bills at some point. But life is full of opportunities to improve your situation.
Can you spare $200 to $2,500 for a refundable security deposit? If so, Discover will likely give you an opportunity to establish or rebuild your credit. You must make your deposit when you apply, and you’ll need a checking account to do it. If you aren’t approved, you’ll get your deposit back. If you are, your deposit will equal your credit line.
Your security deposit is fully refundable. You’ll get it back when you close your paid-in-full account, though it could take up to two billing cycles plus 10 days. You’ll also get it back if you graduate to an unsecured Discover card. Users have reported that refunds occur within 5 to 7 business days this way. The only way you won’t get it back is if you rack up a balance, then don’t pay your bill.
Unhappy with your initial credit line? Request a review after 31 days and you may see an increase.
Interest Rates and Fees
The card has variable purchase APR and cash advance APR. Both vary with the market based on the prime rate. Cash advances also come with a fee of $10 or 5% of the amount advanced, whichever is greater.
Balance transfers have an introductory APR for 6 months and an introductory fee of 3% of the amount transferred. After that, the balance transfer APR is variable and the transfer fee is 5%. The 6 month introductory offer applies to balance transfers that post to your account by October 10, 2019. Other cards may offer a 0% intro APR on balance transfers, but you may not qualify for those cards.
As for costs the Discover It® Secured card doesn’t have, there’s no penalty APR and there’s no late payment fee for your first slip-up. But subsequent mistakes and all returned payments will cost you $39 a pop.
Reasons Discover Might not Approve You
Even with a security deposit, Discover won’t approve your application if you have a pending non-chapter 7 bankruptcy or you don’t meet the company’s income and debt requirements.
In a chapter 13 bankruptcy, you must put all your disposable income toward repaying your existing creditors. If you don’t have any income, creditors will assume you can’t repay purchases charged to a card. And if your debt is high, paying it down and making timely payments will be the quickest path to better credit. Don’t have any of these problems? Your Discover It® Secured card approval odds look good, even with bad credit.
The Discover It® Secured credit card is best for people who need to establish credit or rebuild their FICO score. You must be at least 18 years old and have a Social Security number. You’ll also need a U.S. address and a U.S. bank account. With responsible use, this card can help you take control of your finances. With no annual fee, cash back rewards, and a clear path to earning an unsecured card, the Discover It® Secured card could be a great addition to your financial toolkit.