Discover offers a staple in the secured credit card space. Their secured product comes with no annual fee, a low minimum refundable security deposit, and the ability to earn cash back on eligible purchases. You'll be hard-pressed to find all of these perks rolled in to one secured credit card.
Before we jump in on this review, you may be asking what a secured credit card is. In short, it's a credit card that is set-up in a way to reduce the banks risk of lending you money. This may be because you are new to credit or have yet to establish any credit. In order to open a line of credit with the bank, you put down an upfront security deposit as collateral. Your line of credit will generally match the security deposit you put down. For example, Discover allows you to start with a security deposit as low as $200. This means your line of credit will be $200. If you run up a tab and opt not to pay your bill, Discover pays the bill with your security deposit and closes the account. Don't do this though. Failure to pay your bill on time will further damage your credit!
After 8 months of being a card member, Discover will automatically start reviewing your payment history to see if you can be graduated into a traditional Discover it card. At this time, it's likely that your credit line would be increased and your security deposit would be returned.
Discover makes cash back earning easy! As a Secured card holder, you'll earn 2% cash back on gas stations and restaurants, on up-to $1,000 each month. All other purchases you make will earn 1% cash back. As a thank you for being a new card member, Discover will even double the cash back you earn in your first year. That means that for the first year, you'll earn 4% cash back on restaurants and gas purchases and 2% cash back on everything else. That's better than our top unsecured pick for excellent credit, the Uber Visa. This is one of the reasons that Discover consistently ranks top in customer service. They really know how to make someone feel welcome.
In addition to the everyday cash back rewards you earn, Discover also offers some other solid benefits.
This is a solid option for someone that is building credit. The combination of rewards, no annual fee, and the ability to upgrade to an unsecured card in as little as 8 months is a great mix of features. Just make sure you're at least 18 years old, have a social security number, and a U.S. bank account. The bank account is going to be necessary to make your security deposit happen. Knowing that, have your routing and account number handy if you choose to apply.
If you have fair-good credit (think a FICO score of 660-700) you might be better off with a card like the Blue Cash Everyday, which has no annual fee and earns cash back in various categories. If you fall into this credit range and you're not sure if you would qualify for a credit card, we recommend using a tool like CardMatch. CardMatch will use your information to see if multiple banks like American Express, Chase, Bank of America, and Capital One have offers matched to your credit profile.
If you're brand new to credit, consider Petal. Petal will look at factors other than your credit profile, like history on a connected bank account, to determine if you're eligible for a line of credit.
The short answer is you might have to. There aren't a ton of options for consumers with bad credit and a security deposit might be the only way you're able to get a line of credit without paying an obnoxious annual fee. If you don't have the money for a security deposit today, check out Self Lender. Self Lender is basically a savings plan that can help you build positive credit history. When you've completed your savings plan, you'll have money for a security deposit and hopefully a slightly stronger credit score to boot. Another option is the OpenSky secured card, which allows you to make payments towards your security deposit before your account is opened. How cool is that?
If you can afford the $200 minimum security deposit and have a murky credit history, Discover it Secured might help you get back on your feet. Discover has designed this product to empower people to improve their credit standing. If you make good choices and keep up your on time payments Discover can be a really good long-term fit for your wallet.