How Does the Discover it® Secured Credit Card Work

Understanding how the Discover it® Secured Credit Card works is essential for making the most of its features and benefits. Here’s a step-by-step overview of how the card functions:

1. Application Process: To apply for the Discover it® Secured Credit Card, you’ll need to complete an application that includes providing personal and financial information. While Discover does perform a hard credit inquiry as part of the application process, the card is designed for those with limited or poor credit, so approval is generally more accessible compared to unsecured cards.
2. Make Your Security Deposit: Once approved, you’ll be required to provide a security deposit, which will typically serve as your credit limit. The deposit ranges from $200 to $2,500, depending on how much you can afford and your desired credit limit. This deposit is fully refundable when you close your account in good standing or when you’re upgraded to an unsecured card.
3. Receive Your Card and Start Earning Rewards: After making your security deposit, you’ll receive your Discover it® Secured Credit Card in the mail. You can use the card for everyday purchases, and you’ll start earning cash back rewards immediately. Remember, you’ll earn 2% cash back at gas stations and restaurants on up to $1,000 in combined purchases each quarter, and 1% cash back on all other purchases.
4. Make On-Time Payments: Making on-time payments is crucial for building or improving your credit score. The Discover it® Secured Credit Card allows you to set up automatic payments to ensure that you never miss a payment. By consistently paying on time, you’ll be able to demonstrate responsible credit use, which can lead to a higher credit score and potential eligibility for an unsecured card.
5. Monitor Your Credit Score: With free access to your FICO® Credit Score, you can track your credit score over time and monitor changes in your credit report. This feature provides valuable insights into how your credit score is calculated and offers tips for improving it.
6. Upgrade to an Unsecured Card: After eight months of responsible use, Discover will automatically review your account to determine if you’re eligible for an upgrade to an unsecured card. If you qualify, your security deposit will be refunded, and you’ll continue to enjoy the same rewards and benefits without the need for collateral.
7. Take Advantage of the Cashback Match: At the end of your first year, Discover will match all the cash back you’ve earned, effectively doubling your rewards. This is a great incentive to maximize your spending in categories that earn the highest rewards.

Benefits of Using the Discover it® Secured Credit Card

The Discover it® Secured Credit Card offers numerous benefits that make it an excellent choice for individuals focused on building or rebuilding their credit while earning rewards. These benefits include:

• Rewards Program: The cash back rewards program is a major advantage of the Discover it® Secured Credit Card. Earning 2% cash back at gas stations and restaurants, and 1% on all other purchases, is a rare feature among secured cards. Plus, the Cashback Match at the end of your first year effectively doubles your rewards, making it an even more attractive option.
• No Annual Fee: With no annual fee, the Discover it® Secured Credit Card is a cost-effective tool for building credit. You can focus on improving your credit score and earning rewards without worrying about additional costs.
• Refundable Security Deposit: Your security deposit is fully refundable when you close your account in good standing or when you’re upgraded to an unsecured card. This makes the Discover it® Secured Credit Card a low-risk option for building credit.
• Automatic Upgrade Review: After eight months of responsible use, Discover will automatically review your account to determine if you’re eligible for an upgrade to an unsecured card. This feature provides a pathway to a more traditional credit card without the need for a security deposit.
• Free FICO® Score: Access to your FICO® Credit Score allows you to monitor your credit progress and stay informed about your credit health. This feature is particularly valuable for those focused on improving their credit score.
• Credit Bureau Reporting: Discover reports your payment history and credit usage to all three major credit bureaus. Consistent reporting is essential for building a positive credit history, which is crucial for improving your credit score over time.

Potential Drawbacks of the Discover it® Secured Credit Card

While the Discover it® Secured Credit Card offers many benefits, it’s important to consider some potential drawbacks:

• Requires a Security Deposit: As with all secured credit cards, a security deposit is required. While the deposit is refundable, it can be a barrier for those who don’t have the funds available upfront. The minimum deposit is $200, which may be challenging for some individuals.
• Limited Credit Line: Your credit line is equal to the amount of your security deposit, which can limit your spending power. For those looking for a higher credit limit, this could be a constraint.
• High APR for Carrying a Balance: The Discover it® Secured Credit Card has a relatively high interest rate, which is typical for secured cards. If you carry a balance, the interest charges can add up quickly, making it more expensive to use. To avoid paying interest, it’s essential to pay off your balance in full each month.
• Limited International Acceptance: While Discover is widely accepted in the United States, it’s not as commonly accepted internationally as Visa or Mastercard. This could be a limitation for individuals who travel frequently or make purchases from international merchants.
• Rewards Cap: The 2% cash back at gas stations and restaurants is capped at $1,000 in combined purchases each quarter. For those who spend heavily in these categories, the rewards cap could limit the amount of cash back you can earn.

Who Should Consider the Discover it® Secured Credit Card?

The Discover it® Secured Credit