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|
|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.|
In this article:
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” (home improvement stores, furniture stores, Bed Bath & Beyond)
- July-September: “Summer Break” (last year, gas)
- October-December: “Holiday shopping” (last year, online purchases)
There are two versions of the card we offer: 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®|
|Generous. 5% cash back at gas stations on up to $1,500 in purchases from July through September 2014 when you sign up*. And 1% cash back on all other purchases.*||Generous. 5% cash back at gas stations on up to $1,500 in purchases from July through September 2014 when you sign up*. And 1% cash back on all other purchases.*|
|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.|
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 as of April 2014.
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
The Discover it® is up against a series of 5% cash back heavyweights: the Chase Freedom, Citi Dividend Platinum Select and US Bank Cash+.
on US Bank's
on US Bank's
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|
|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” (Home Depot, 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)|
*See the full 2014 list of participating department stores 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®
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 slightly worse than the Freedom’s. And what’s more, there’s the Freedom’s bonus: Earn a $100 Bonus after you spend $500 on 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 acceptance, bonus categories and sign-up bonus put it ahead.
Discover vs. low APR credit cards
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.