Discover Credit Cards: Advantages and Disadvantages

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Discover Credit Cards: Advantages and Disadvantages

Visa and Mastercard are the world’s two biggest credit card businesses, so it’s no wonder that when most people think of credit cards, these two names spring to mind. When it comes to purchasing transactions, these two networks account for more than 75% of the worldwide credit card industry. Another prominent card network, American Express, comes in at slightly under 3%. 1

While these three companies have historically controlled the credit card market, other, smaller competitors compete. The Discover credit card is one of these names. Although it is not as well-known as the others, it does offer cardholders some of the same advantages and privileges as its competitors—as well as a few of its own. Continue reading to find out more about Discover and how it works.

Key Takeaways

  • Although Visa and Mastercard dominate the credit card network sector, smaller competitors such as Discover also have a stake.
  • In 1986, Discover introduced its credit card with cashback benefits and no annual fees.
  • Its payback rates continue to be among the highest in the business.
  • Today, the corporation provides eight main credit cards, each with its own set of rules and prices.
  • Among credit card issuers, Discover has routinely scored well in terms of customer service and satisfaction.

History of Discover Card

Dean Witter Financial Services Group, a Sears company, created and tested the Discovery card in the mid-1980s. It was first presented to customers in a nationwide advertising campaign during Super Bowl XX in 1986, and it was formally launched the following year. 2

One of the Discover card’s primary aims was to differentiate itself from the competition at a time when the market was crowded with credit cards. Cardholders took advantage of a no-annual-fee option, which was unusual at the time. 3 Discover also introduced a novel new benefit to cardholders: cashback incentives, or the promise of returning a tiny portion of every purchase amount in actual money to their accounts. 4

Consumers were drawn to Discover’s cashback benefits, but businesses were slow to adopt them. In actuality, the card was only recognized by major airlines, rental car providers, and large merchants such as Sears. Agreements with international payment networks, such as Japan’s JCB and China’s UnionPay, dramatically extended its use overseas in the mid-2000s. 2 Discover has over 57 million members in 2021, making it the world’s fifth-largest card network. 15

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The firm differs from network behemoths Visa and Mastercard in that it does not issue its goods via banks or financial institutions. Discover, like American Express, has its own issuer and network. Discover Bank, a subsidiary of Discover Financial Services founded via a series of mergers and reorganizations, issues cards. 62

What Does Discover Card Offer?

The Discover “it” card, as it was rebranded in 2013, is available in seven basic variants (along with a corporate credit card), including:

  • The flagship Cash Back card
  • Student Chrome
  • Student Cash Back
  • Travel
  • Secured
  • Gas & Restaurants
  • NHL78

The card maintains its origins by charging no yearly fee and no international transaction fees. Discover will also not charge a late fee for the first missing or late payment. 9 Each of your monthly bills will also include a free FICO score. 10 You are not liable for fraudulent transactions, as you are with all credit cards.

The features of each card differ. The flagship Discover Cash Back card gives 5% cashback earnings in rotating categories throughout the year. It also pledges to match every cashback received at the conclusion of the first year. For the first 14 months, the flagship Cash Back, Gas & Restaurants, and NHL cards offer a 0% annual percentage rate (APR) on purchases and debt transfers. The initial 0% APR on student cards is valid for six months and applies solely to purchases. 7

Customer service is also a corporate strength. Discover promotes that its customer support specialists may be accessible by phone or online at any time. 11 In its 2021 U.S. Credit Card Happiness Study, J.D. Power rated Discover second in total customer satisfaction, behind only American Express. Capital One was third. 12

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Discover Bank currently operates like an online bank, delivering conventional financial services in addition to lending. Checking and savings accounts, certificates of deposit (CDs), bill payment, and other services are available. Customers may get cash from 60,000 Discover no-fee ATMs around the United States.131415

Discover Card Rewards

Discover credit card rewards differ based on the card. For example, the Cash Back card offers 5% payback on quarterly rotating categories such as petrol, grocery shops, and Amazon. In addition, you will get 1% cashback on all other transactions. Cashback never expires and may be deposited into your bank account, applied to your Discover card balance, or spent at Amazon or Paypal checkout. 7

For obtaining a GPA of 3.0 or above for the year, the Student Cash Back and Student Chrome cards provide 5% and 2% cashback, respectively, as well as a $20 statement credit for up to five years. Discover will also match the cashback benefits you earn on the Cash Back, Student and Student Chrome, and Secured cards for the first 12 months you hold your card. 7

You’ll get 1.5 miles for every dollar you spend on the Travel Card, and your first year’s miles will be matched mile for mile. The Business card gives 1.5% reward on all transactions, with no spending limit. In addition to earning cashback, the NHL card will save you 10% when you purchase at and will give you a discount on an NHLTV subscription if you pay with your card. 16

Discover Card Annual Percentage Rate (APR)

The conditions of your Discover card, like those of other credit cards, are entirely dependent on your credit score. Customers with poor credit may be given an APR of 22.99% on non-student cards, while those with excellent credit may be offered an APR of 11.99%. The student cards provide an initial 0% APR on purchases for the first six months, after which the APR ranges from 12.99% to 21.99%. For all cards, the APR for cash advances is 24.99%, with a charge of $10 or 5% of the amount, whichever is greater. 7

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Transferring a debt may come with a 0% APR introductory rate, but there is a 3% charge for each transfer, which is normal for most credit cards. 7

Despite the fact that other cards have gotten on the cashback bandwagon, the Discover it card’s 5% cashback benefit remains one of the most generous available, as does the company’s matching policy. Unlike some other cards, though, you must keep track of the qualified categories for each quarter. There’s also a limit on how much you may spend while still earning incentives, which is now $1,500 every quarter. Every other purchase earns you 1%. 717

The Bottom Line

Discover first appeared on the market in 1986 as a customer-friendly credit card choice. It still has those characteristics, but the perks that set the brand unique years ago are now quite typical in the business. Before applying, carefully read the terms on each of its cards. Two cards may seem similar yet have quite distinct terms. In addition to the 5% cashback cards, there are 1.5% to 2% cashback cards (Business, Gas & Restaurants, Secured, Student Chrome). 7 Compare any offers you get in the mail to those on the Discover website. And if you keep a balance on a regular basis, the benefits may not be enough to offset the interest payments, particularly if you wind up with one of the higher interest rates.

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