Discover it Credit Card Review

discover it cousin it Well, Discover has made a bold move, betting the ranch on the new Discover it card, while either terminating or ceasing to market long-time brands such as Escape, Motiva, More, and Open Road (some are still available to apply for, but none can be found listed on their main website).

Clearly Discover thinks they have a strong offering with the it card. To us, it seems like they’ve taken some DNA from the likes of Citi Simplicity, and fused it with the DNA from the Discover More or Chase Freedom card—in an attempt to appeal both to people who are focused on avoiding fees, as well as to those more concerned with earning rewards. Let’s see how the experiment panned out.

GetDebit’s Assessment Of Discover it’s Earnings Power

Unfortunately, Discover only announces the seasonal categories for the current quarter, but has not done so for any future quarters. Since the main earnings power of Discover it comes from these bonus categories, it’s hard to have full visibility into earnings power. I will say that I wasn’t overwhelmed by the Q1 2013 categories. Restaurants are excellent and highly valued, but there’s only so much you can spend at movie theaters (it’s just not a major spend category for most folks). Hopefully subsequent quarters will each contain several major categories.  Home improvement is a good category (q2) but would have liked to see 1 or 2 other categories alongside for us non home-owners.

The Discover website also indicates that you need to sign up each quarter for the Discover it rewards program. Geesh! Why do they make folks do that?

Call-Out: Bonus Caps

Consistent with the general implementation of rotating rewards cards (such as Chase Freedom or the erstwhile Discover More), the 5% earnings for each quarter are capped, after which these categories revert to 1%. The cap for the current quarter (Q1 2013) is $1,500 in spend. I wouldn’t be surprised if we saw that cap consistently for each quarter, but only time will tell.

Since the true bonus is really 4% (you’ll always earn the other 1%), the most bonus cash you can earn for a given quarter is $60 (so, $240 for the entire year). Nothing to sneeze at, if you have the ability and discipline to max it out.

Why I’m personally Not A Fan Of Rotating Spend Categories

Here are a few reasons why I’m generally down on this type of rewards scheme:

  • Managing rotating catgories requires too much mental overhead. I need to reserve some portion of my already over-taxed brain to remember which categories are in play at any given time.
  • I may end up deciding to delay certain purchases to wait for the right quarter. I’d rather have a card that doesn’t exert such behavioral influence on me. In other words, I want to buy something when i want to buy it.
  • Some people may fall victim to the “sense of urgency” issue. Since folks know the special rewards end at the end of the given quarter, they may accelerate purchases that otherwise they may never have made (in other words, over-purchase). For example, some folks may find themselves going out to more restaurants in Q1 2013 just because of the extra bonus, and wind up spending more than they would have otherwise.
  • Lastly, caps and rotating spend categories tend to go hand in hand. I dislike rewards caps in general, and it also adds another piece of mental over-head (“have I exceed my cap yet this quarter?”).

Table of Discover it Seasonal Rewards

We like to maintain a history over the years of rewards by quarter, as well as any changes in spending caps.

Discover it Rotating Spend Categories
Year Q1 Q2 Q3 Q4
2013 Restaurants, movie theaters. ($1,500 cap) Home Improvement Stores ($1,500 cap) TBD TBD

Discover it Has Some Nice Features On The Fee Side

In addition to no annual fee and no foreign transaction fee, the Discover it has some other nice benefits on this front:

  • No late fee on your first late payment (after that, $35). Frankly, if you only incur 1 or 2 late fees per year, you can usually get customer service reps to reverse the fee anyhow, but still, good to have.
  • Paying late won’t increase your APR. This is definitely a nice feature, most cards jack up the rate to a default rate (often to 29.99% or thereabouts!).

One other benefit is that their customer service reps are all based in the US. That can be a real blessing if you’ve got some complex issues to work through with the CSRs.

GetDebit’s Summary Of The Discover it Card

While I’m trying to get a fuller picture of what categories will be bonus-ed, without that information it’s quite hard to assess the value of this card at this time. So, at this point, I can’t recommend the Discover it card, though if the bonus categories end up being strong, it could be a good card to have in your portfolio if you’re not too worried about the issues I raised above related to the potential downsides of rotating category rewards cards.  It’s also a bummer that there’s no sign-up bonus.

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