The Discover it: A 5% Contender?

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The Discover it® offers some pretty enticing terms: 5% cash back, no interest on purchases or balance transfers for a time, no annual fee and access to the 5-20% discounts available on the ShopDiscover mall. As an everyday card, it’s up against a tough slate of competitors. But it does have its virtues, mostly for online shopping and especially during the holiday season.

At a glance
Annual fees None
0% APR promotions 14 months of 0% APR on purchases and transfers, OR
18 months of 0% APR on transfers and 6 months on purchases
Balance transfer fee 3% of the amount transferred
Rewards program Cash back
Signup bonus None (the standard for cash back cards is $100)
Verdict: It’s a good card, but the 5% cash back field is very competitive.
Good for:
  • Access to the ShopDiscover bonus mall
  • Use during the holiday shopping season
  • People who fit the card’s bonus categories
Bad for:
  • Someone who has a large amount of credit card debt
  • Someone looking for the best 5% cash-back credit card
  • Making a big purchase and paying it off over time

In this article:

The Discover it® basics
When to use the Discover it®
Discover vs. cash-back credit cards
Discover vs. low APR credit cards

The Discover it® basics

The Discover it® offers 5% cash back in rotating bonus categories, up to $1,500 spent per quarter. Here are the bonus categories for 2014:

  • January-March: Restaurants and movies
  • April-June: “Fresh for Spring” (last year, home improvement)
  • July-September: “Summer Break” (last year, gas)
  • October-December: “Holiday shopping” (last year, online purchases)

There are two versions of the card: one with 14 months of 0% APR on purchases and balance transfers, the other with 18 months of 0% APR on transfers and 6 months of 0% APR on purchases. Both versions come with:

  • No foreign transaction fee or over-the-limit fee
  • No penalty APR
  • Free FICO scores
  • Waived first late-payment fee

Discover it®Discover it®
Discover It Credit Card
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on Discover's
secure website

starstarstarstarhalfstar
Discover It Credit Card
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on Discover's
secure website

starstarstarstarstar
Signing Promo
Earn 5% cash back at Home Improvement Stores, Furniture Stores and Bed Bath & Beyond® on up to $1,500 in purchases from April through June 2014.*Earn 5% cash back at Home Improvement Stores, Furniture Stores and Bed Bath & Beyond® on up to $1,500 in purchases from April through June 2014.*
Intro APR Promo
0% intro APR on purchases and balance transfers for 14 months.0% Intro APR for 18 months on balance transfers. 0% Intro APR for 6 months on purchases.
Annual fee
$0$0
Details
  • Fair. No annual fee. No overlimit fee. No foreign transaction fee. Pay up to midnight ET online or by phone on your due date without a fee. Plus, paying late won't raise your APR.*
  • Generous. 5% cash back at Home Improvement Stores, Furniture Stores and Bed Bath & Beyond® on up to $1,500 in purchases from April through June 2014.*
  • Human. 100% U.S.-based customer service available any time.
  • Safe. Because you're never responsible for unauthorized charges with our $0 Fraud Liability Guarantee.
  • Plus, free FICO® Credit Score on your monthly statement to help you stay on top of your credit.*
  • 0% Intro APR* on purchases and balance transfers for 14 months. Then the variable purchase APR applies, currently 10.99% - 22.99%. A fee of 3% applies for each balance transferred.
  • *Click "Apply" to see rates, rewards, and free FICO® Credit Score terms and other information.
  • Fair. No annual fee. No overlimit fee. No foreign transaction fee. Pay up to midnight ET online or by phone on your due date without a fee. Plus, paying late won't raise your APR.*
  • Generous. 5% cash back at Home Improvement Stores, Furniture Stores and Bed Bath & Beyond® on up to $1,500 in purchases from April through June 2014.*
  • Human. 100% U.S.-based customer service available any time.
  • Safe. Because you're never responsible for unauthorized charges with our $0 Fraud Liability Guarantee.
  • Plus, free FICO® Credit Score on your monthly statement to help you stay on top of your credit.*
  • 0% Intro APR* on balance transfers for 18 months. Then the variable purchase APR applies, currently 10.99% - 22.99%. A fee of 3% applies for each balance transferred.
  • 0% Intro APR* on purchases for 6 months. Then the variable purchase APR applies, currently 10.99% - 22.99%.
  • * Click "Apply" to see rates, rewards, and free FICO® Credit Score terms and other information.

All right, got the basics? Now let’s compare it to other cards out there.

When to use the Discover it®

Arguably the best part of the Discover it® is that it grants access to the ShopDiscover online bonus mall, which gives 5-20% cash back on popular online retailers, from Marriott (5%) to Restaurant.com (20%). In our comparison of online rewards malls, Discover trumps Chase’s Ultimate Rewards Mall and Citi’s Bonus Cash Center.

The next-best part of the Discover it® is the bonus category for the fourth quarter. Historically, it includes online shopping—indeed, in 2013 the bonus category was online shopping, excluding travel, government (read: taxes), tuition payments and utilities. Basically, it’s geared toward holiday shopping—stocking up on presents and decorating the house with festive cheer. If you stack this on top of ShopDiscover promotions, you get quite a deal. For example, you can get 10% off at Macy’s (5% from ShopDiscover and 5% from the bonus category).

And finally, the Discover it® gives you free access to your FICO score and prints it on your monthly statement. Unlike some free credit monitoring services, Discover gives you your credit score—and it’s your FICO score, not an approximation. In a time of data breaches, identity theft and increasing weight given to that three-digit number, having this service is a big feather in the card’s cap.

Discover vs. cash-back credit cards

Looking beyond the fourth-quarter bonus categories, the Discover it® is up against a series of 5% cash back heavyweights: the Chase Freedom, Citi Dividend Platinum Select and US Bank Cash+.

US Bank Cash+(TM) Visa Signature(R) Card Credit Card
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on US Bank's
secure website

The US Bank Cash+ is a special case. You get to choose two 5% bonus categories from a slate that includes airfare, department stores and restaurants, and you earn rewards up to $2,000 spent per quarter. You also get an unlimited 2% cash back on gas, groceries or drugstores (your choice), and once a year you can redeem $100 worth of cash back for $125. Like the Discover it®, the Cash+ doesn’t have a sign-up bonus. The Cash+ wins out, but there’s a catch: You can only apply in a US Bank branch. If you live near one, the Cash+ is a fantastic card to have.

The Citi Dividend Platinum Select and Chase Freedom are a bit more traditional. They both offer sign-up bonuses (unlike the Discover it®) and their 5% bonus categories change quarterly. Here’s the 2014 bonus schedule:

Chase Freedom Citi Dividend Platinum Select
 
Chase Freedom - $100 Cash Back Credit Card
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on Chase's
secure website

 
Citibank Dividend Platinum Select Visa Card Credit Card
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on Citibank's
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Rewards limit 5% rewards capped at $1,500 per quarter Total rewards capped at $300 per year
Jan-Mar Gas, movie theaters, Starbucks Zappos, fitness clubs, drugstores
Apr-Jun Restaurants and Lowe’s “Celebrate Spring” (last year: home furnishing and home and garden stores)
Jul-Sep Gas and Kohl’s “Summer Fun” (last year: Hilton, car rentals and theme parks)
Oct-Dec Amazon, Zappos and select department stores* “Holiday Shopping” (last year: Best Buy, department stores, Toys ‘R’ Us)

*Includes Macy’s, Bloomingdales and Kohl’s; excludes Target and Walmart. See the full 2013 list here.

Citi Platinum Select vs. Chase Freedom, in brief

If you think you’ll spend heavily in one of the Citicard’s bonus categories—say, $3,000 or more—you might get good value out of the annual, rather than quarterly, limit. Purely mathematically, however, the Freedom allows you to earn more each year than the Citi because it doesn’t cap overall rewards, and the bonus categories are broader and generally more applicable.

Chase Freedom vs. Discover it®

Chase Freedom - $100 Cash Back Credit Card
Apply Now

on Chase's
secure website

In terms of the fourth-quarter 5% bonus categories, there’s a case to be made for both the Chase Freedom and the Discover it®. The Discover offers bonus rewards on most online shopping, whereas the Freedom has a more limited selection but gives bonus rewards on physical locations as well as online. It’s a tossup based on your spending habits. I make my purchases mostly on Amazon.com, so it’s a moot point for me. But the answer might be different for you.

However, I’d argue that the Discover it®‘s bonus categories in quarters 1-3 of this year have been worse than the Freedom’s. And what’s more, there’s the Freedom’s bonus: Earn a $100 Bonus after you make $500 in purchases in your first 3 months from account opening.

Verdict: If you can have only one card, don’t get the Discover it®.

If it’s an option, I’d get both the Freedom and the Discover it®. I’d use them both heavily during the fourth quarter of 2013 for holiday shopping, and after that, lean on the Freedom for everyday use and pull out the Discover card for ShopDiscover mall access. If you can only get one, though, the Freedom’s better bonus categories and sign-up bonus put it ahead.

Discover vs. low APR credit cards

Citibank Simplicity Credit Card
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on Citibank's
secure website

If you’re looking purely for a low-interest credit card, the Discover it® again is a jack of all trades. The title of longest-running 0% APR period is the Citi Simplicity® Card, which offers 18 months of zero interest on both purchases and transfers. It also has no penalty APR and no late fees, ever. The Discover it® does earn rewards, which the Simplicity doesn’t, but generally speaking, you’ll pay more in interest than you will in rewards. If you carry a balance, try to minimize the number of months that you’ll be hit with finance charges.

Chase Slate Elite Credit Card
Apply Now

on Chase's
secure website

If you want a balance transfer credit card, you might be better off with the Chase Slate®. The Slate has 15 months of 0% APR on purchases and balance transfers. Plus, it has no balance transfer fee, compared to the Discover card’s 3%; that saving can easily make up for the shorter period or potentially even the rewards earned on the Discover card. Let’s say you transfer $10,000 and pay off $600 every month—enough to have it paid down in 18 months. This would cost you $10,300 with the Discover it® and $10,033 with the Slate’s minimum APR; you save $267 with the Slate. That’s probably more than you’d earn in cash back, considering bonus rewards are capped at $75 back per quarter and most people don’t reach that cap.

Even if you want a combination of 0% purchase APR and cash back, the Freedom is a better deal: It offers 15 months of zero APR on purchases and transfers to the Discover card’s 14.

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  • BigD

    Hey Nerdwallet, glad you got your act together and are writing articles more professionally. Kudos!

  • disqus_bOdq3A9HUV

    In comparing the It with the Forward, how in the world is some sign up bonus a tie with no sign up bonus??? That literally makes no sense whatsoever. Those 10,000 points can be worth up to $100, depending on how they’re redeemed.

  • http://twitter.com/_ArcTic_FiRe Tom@L

    true. Citi forward’s 10,000 thank you points is equal to $100 signup bonus.

  • stanolshefski

    As of September 2012, the Cii Forward no longer has a cap on points per year.

    • http://www.nerdwallet.com/ NerdWallet

      Hi there,

      The Citi Forward card still shows a 75,000 annual ThankYou Points cap – check out the terms here: https://www.citicards.com/cards/wv/cardDetail.do?screenID=960&contentId=BV46EZG .

      Thanks for using our site!

      • stanolshefski

        I have the card and I can tell you that the terms have changed. Many Fatwallet members are reporting the sme change in terms.

        • http://www.nerdwallet.com/ NerdWallet

          Hey Stan,

          You’re completely right. We obtained a copy of a Citi Forward cardholder agreement, which states:

          Earn at least 1 ThankYou Point for every $1 spent on all eligible purchases.

          Earn, on average, 4 extra points for every $1 you spend when you shop through the ThankYou® Bonus Center, a network of your favorite retailers, at thankyou.com.

          There is no limit to the amount of points you can earn.

          We’ll be sure to update our info on the blog – it’s a shame it’s no longer being offered, but we hope it’ll find its way back soon.

          Thanks again for the tip,
          The Nerds

          • stanolshefski
          • http://www.nerdwallet.com/ NerdWallet

            Hi Stan,

            Unfortunately, the only version available is the one you mentioned here – the college student version. While still a good option for students (you earn 5 points per $1 on fast food and bars, after all), the Citi Forward for Students is a step down from the no-longer-available adult version. It doesn’t earn 5x rewards on bookstores – which means it doesn’t earn 5x rewards on Amazon.

            It’s a shame – the adult Forward used to be one of the better cards out there for urbanites, and we hope it’ll return.

            Cheers,
            Team NerdWallet

          • stanolshefski

            It says bookstores on that page:

            “5 ThankYou Points for every $1 spent on purchases at restaurants (including fast food), bookstores, music stores, video rental stores and movie theaters; 1 ThankYou Point for every $1 spent on all other purchases2″

          • Alex’s Experiences

            Yes it gets the 5x on bookstores, I have a student and a regular (don’t ask…) both get the reward.

  • http://Techderp.net/ Moscato SugarRush

    I know this is a dated post, but it’s missing something really critical

    The biggest advantage the Discover card has, is access to cashdiscover, which by a longshot is the best cashback shopping mall, period.

    The chase freedom does have a nice signup bonus, but in the longrun, if you use shopdiscover, discover can winout.