Discover it® Secured card review: A strong card for building credit

Man using a phone to check his Discover it Secured Credit Card balance Image: Man using a phone to check his Discover it Secured Credit Card balance

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Pros Cons
No annual fee Paying the minimum security deposit might not be possible for everyone
More features than many cards meant for building credit A low credit line might slow your ability to build credit
Potential path to graduate to an unsecured account High regular purchase APR could cost you in interest
Rewards program adds extra value
No penalty APR and first late payment fee is waived

What you need to know about the Discover it® Secured card

Paying the security deposit on a secured card might not appeal to everyone at first, but the Discover it® Secured card could be one of your best options for building or rebuilding your credit. It reports to the three major consumer credit bureaus and offers plenty of useful features, all with no annual fee.

Refundable security deposit sets your credit limit

Like all secured credit cards, the Discover it® Secured card requires a refundable security deposit to open your account. The amount of your security deposit sets your credit limit, and the minimum deposit is $200. But Discover also caps the maximum credit limit at $2,500, so you may be able to go higher than $200, depending on your income and ability to pay.

Your card’s credit limit determines your spending power, but it’s also an important factor in the calculation of your credit scores. Most models consider your credit utilization rate, or the amount of your available credit you use, as one of the biggest factors in your scores. Most experts recommend aiming to use less than 30% of your available credit, so every bit you can afford to put down as part of your deposit can make a difference to your scores.

There’s a path to unsecured credit

While the security deposit might cost you upfront, Discover thankfully offers the opportunity to get that money back after less than a year of card membership. The issuer promises automatic monthly reviews for a potential transition to an unsecured account after eight months. If you qualify, Discover will return your security deposit in full and no longer require a deposit on your account.

While Discover doesn’t specify how it determines which cardholders are eligible for an unsecured card, it notes on its website that making on-time monthly payments for at least the minimum amount due, maintaining healthy credit scores, staying within your deposit limit, and paying down other accounts and bills on time can help put you in the best position.

The ability to graduate to an unsecured card is not a standard offering from secured credit cards, and it’s one of the biggest reasons why we like the Discover it® Secured card for those looking to build or rebuild credit. A security deposit can be a hassle, and getting a clear timeline on when you could have that money returned to you helps set this card apart from the competition.

Rewards offer value beyond building credit

We don’t consider a rewards program to be an essential component of a card meant for building credit, but that doesn’t mean the extra value isn’t meaningful. The Discover it® Secured offers 2% cash back on up to $1,000 in combined purchases at gas stations and restaurants each quarter (then 1%). All other purchases earn 1% cash back, too.

Plus, Discover’s Cashback Match feature will match all the cash back you earn at the end of your first year of account membership. So if you earned $20 in cash back over the course of the year, you’d get another $20 in your account even if you’d already redeemed all your available rewards.

The potential value of your total cash back might not be super high if your card’s credit limit is the $200 minimum, but we know that every little bit helps. And most secured credit cards don’t come with any rewards at all, so this extra value is another reason to recommend the Discover it® Secured card.

Other features of the Discover it® Secured card

These features of the card are also worth considering as you decide whether to apply.

  • Free FICO® credit score to help track your credit — Discover provides a resource to those focusing on their credit with a free FICO score. While this score is just one of many that lenders may consider, it’s another tool to help guide you.
  • Interest rates could cost you — If you need to carry a balance from month to month, the card’s high variable purchase APR of 22.99% might cost you. At the same time, this APR is in line with what you can expect to see from many secured credit cards, so it shouldn’t be a dealbreaker.
  • No penalty APR — If you miss a payment or pay late, Discover won’t penalize you with a higher ongoing purchase APR.
  • Late-payment waiver — Discover also won’t penalize you with a fee for your first late payment. But keep in mind that other missed payments will trigger a fee of up to $40, plus the possibility that your missed payment will be reported to the credit bureaus.

Who this card is good for

The Discover it® Secured card could be a great option if you’re looking to build credit and have the ability to cover the $200 minimum security deposit. While not everyone wants to pay a deposit and the card’s initial credit limit could be low, few options meant for building credit offer the range of features and terms found on this card. Plus, the path for graduating to an unsecured card means you might be able to get your security deposit back in as few as eight months.

This card is probably better for those who are looking to rebuild credit rather than for those who are trying to build a credit history from scratch. If you’re new to credit entirely, it might be worth considering some unsecured cards or student cards first.

Not sure this is the card for you? Consider these alternatives.


About the author: Eric Freeman is a writer and editor at Credit Karma, specializing in credit cards and credit scores and reports. He strives to make personal finance relatable for readers and to ground c… Read more.