Discover it Secured vs. Capital One Secured Mastercard
Secured credit cards are ideal for consumers with a poor credit history or those who are looking for a first credit card. These two cards offer some unique opportunities for those in need of credit card repair.
The Discover secured card offers a cash back rewards program that could earn you some extra cash while you’re building your credit. Capital One, on the other hand, focuses on offering customers a credit limit higher than the deposit requirement as they establish trust.
Here’s a quick look at how the two cards stack up in some key categories:
|Card Specs||Discover it Secured||Capital One Secured Mastercard|
|Security Deposit Required||$200||$49, $99 or $200|
|Minimum Credit Limit||$200||$200|
|Maximum Credit Limit||$2,500||$1,000|
|$0 Fraud Liability||Yes||Yes|
|Foreign Transaction Fees||None||None|
|Free Credit Report Access||Yes||Yes|
|Cash Back Rewards||2% on gas and restaurants; 1% for all other purchases||None|
|Reports To Three Major Credit Bureaus||Yes||Yes|
|Path To Traditional Credit Card||Begins automatic monthly evaluation to remove secured status after 8 billing cycles||Will bump credit limit after five on-time payments as part of path to evaluating for unsecured card|
Team Clark has spent hours reviewing both the Discover it Secured card and the Secured MasterCard® from Capital One. We have come to the conclusion that these are two of the top secured cards available, and this article is intended to help consumers choose between the two.
Table of Contents
- Do You Want Cash Back Rewards?
- How Important is the Security Deposit?
- How High Do You Need Your Credit Limit To Be?
- Where Will You Be Making Purchases?
- Will You Be Using This Card for Travel?
1. Do You Want Cash Back Rewards From a Secured Credit Card?
It’s rare to get cash back rewards with a secured card, but Discover is one of the few companies to offer it.
Discover pays 2% cash back on purchases at gas stations and restaurants and 1% for all other purchases made with the secured card. Capital One does not offer any cash back rewards.
Here’s a look at the difference the Discover cash back rewards can make based on a quarterly spending:
|Quarterly Spend||2% Cashback Category|
(Drops to 1% after $1,000 in purchases)
|1% Cashback Category|
But wait, there’s more! After your first 12 billing cycles, Discover will match the total of cash back rewards you’ve earned in your first year as a cardholder. So if you earned $200 through the first 12 months, you’ll automatically get a statement credit for an additional $200.
This is a one-time bonus for new cardmembers only. Since the goal is to spend as little time as possible with a secured card, the fact that it’s a one-time offer shouldn’t be a letdown. Hopefully you’ll be ready to move to an unsecured card by the time year two rolls around anyway.
2. How Important Is the Security Deposit Requirement?
If cash flow is a concern, the amount of cash required for a deposit may factor into your decision when trying to pick between the two cards.
While Discover’s minimum deposit for a secured card is set at $200, Capital One offers the potential for a lower deposit requirement.
Based on the results of a review of your application, Capital One offers three tiers for initial deposits. You’ll be asked to deposit either $49, $99 or $200. All three options will net you an initial credit limit of $200.
It’s worth noting that both cards offer the option to make an additional deposit to up your credit limit. But if getting into the secured card as cheaply as possible is the goal, you might do best checking with Capital One to see if you qualify for the $49 or $99 deposit tier.
3. How High Do You Need Your Credit Limit to Be?
The minimum credit limit for each card will be $200. If you need a higher limit, the path to getting there is different with Discover than it is with Capital One.
Pending approval after you submit your application, Discover is going to let you have a credit limit up to $2,500. But to get there, you’re going to have to make a dollar-for-dollar security deposit. In other words, if you want that $2,500 limit you’re going to have to give Discover $2,500 to hold as collateral.
Capital One, on the other hand, offers an opportunity to expand your credit limit without putting down additional deposit money. You’ll be require to deposit either $49, $99 or $200 (depending on Capital One’s review of your application) for the initial $200 credit limit. From there, you’ll be able to earn up to a $1,000 credit limit by simply making on-time payments for your first five billing cycles.
For optimal results, money expert Clark Howard suggests that you keep your utilization of a secured credit card under 30% and pay the bill in full each month.
4. Where Will You Be Making the Bulk of Your Purchases?
There are two reasons to consider where you’ll be making the majority of your purchases when choosing between these two cards.
First, Discover isn’t an option everywhere. The company says it is accepted at “more than 95 percent” of the merchants that accept credit cards in the United States. While that’s likely to get the job done most of the time, it still shuts you out of paying with plastic at 5% of the country’s merchants.
According to Experian, this ranks Discover third among the nation’s top four networks in acceptance behind both Mastercard and Visa. That means you should give the slight edge to the Capital One card for its Mastercard branding if you’re going to be purchasing from merchants that may not accept Discover.
There will be some rare occurrences where both of these cards are unusable. For instance, a company like Costco (which only accepts Visa cards) would not accept payment with either card.
Cash Back Opportunities
Next, we should probably revisit Discover’s cash back rewards when considering the type of purchases you’ll be making. If you are planning to spend at gas stations and restaurants, Discover’s 2% cash back reward at those locations could make a difference. Remember, Capital One’s card will not be giving you any cash back on those purchases.
5. Do You Plan to Use Your Secured Card While Traveling?
If you’re the kind of consumer who is in Los Angeles one day and London the next, you may want to consider the travel protections and benefits of these secured cards.
Capital One really shines in this area. Here’s a look at five of the key benefits it offers with the secured card:
- Travel Accident Insurance
- No foreign transaction fees
- 24-hour travel assistance services (lost card help and cash advance access)
- Auto rental collision damage waiver
Discover does offer some options that travelers will find handy, like no foreign transaction fees, the ability to freeze a card in real time and overnight a replacement within the United States, but Capital One is a notch or two ahead with travel perks.
Both of these cards offer many of the basics you’ll want from a secured credit card. There are no annual fees, reasonable deposit requirements and a clear path to unsecured credit if you exhibit good borrowing behavior.
If you’re looking for cash back opportunities, the Discover card is probably your best option. On the other hand, if you’re a frequent traveler or are looking for a low-deposit option, you may be happier with Capital One’s offering.
Team Clark suggests you weigh what is most important to you and choose accordingly.
If you are looking for more in-depth advice on picking the right secured credit card, be sure to check out the four red flags money expert Clark Howard wants you to watch for during your search.