Discover it® Student Cash Back Review

One of the two Discover credit cards intended directly for college-age customers, the issuer’s Discover it® Student Cash Back even beats many “adult” cards with its bonus cash-back categories. That, combined with Discover’s double rewards in the first year, makes this potentially a high cash-back-earning card.

Up to 5% cash back -- The card earns 5% cash-back in quarterly rotating categories you activate each quarter. The first $1,500 of spending each quarter qualifies for the bonus rate, all other purchases earn 1% back.

Double rewards in the first year -- This popular Discover perk has the issuer matching 1-for-1 a cardholder’s cash-back earnings. The bonus is paid once to new cardholders, at the end of their first year of ownership.

$20 good grades credit -- Discover likes quality students. The issuer will grant $20 in statement credit every school year to cardholders enrolled in college who post a GPA of 3.0 or higher in any term during the preceding school year. Student cardholders can earn the $20 good grades Reward up to five years after the account is opened.

No annual fee -- Many students count every penny and are on very tight budgets. Fortunately for them, Discover imposes no annual fee on this card.

0% intro APR for purchases -- Want to fund something -- perhaps a semester’s worth of books -- without having to worry about paying interest? You’ll have a six months to fund such expenses with this card’s 0% intro APR on purchases; buy a costly item or several, and pay it (them) off over the intro period without incurring any interest at all. The go-to variable rate does apply after the promo expires.

FICO® Score for free -- Any person that holds a credit card needs to be aware of their credit score. Discover makes this easy by including a FICO® Score for free, which can be found in the Discover mobile app, through a customer’s account management page, or on each account statement.

Identity alerts -- The issuer’s online service monitors your Experian credit report daily, and alerts you when a new account is posted there. It also screens websites that traffic in personal data, similarly letting you know if any of your details pop up. Users must opt in to this service.

No foreign transaction fee -- Going abroad? If you use this card you won’t be dinged a foreign transaction fee.

Acceptance rate at merchants -- It’s common to see Visa, Mastercard, and (to a lesser extent) American Express decals in storefronts that accept these card brands. It’s less common to see those of Discover, particularly abroad. That reduces the utility of this card.

At the risk of stating the profoundly obvious, the main thing to consider when looking for the best student card is its lack of immediate and near-future costs. Is it friendly and forgiving on a student’s limited budget?

Besides that, there are a few other aspects to keep an eye on:

No annual fee -- With the quality of no-annual-fee student cards on the market, there’s simply no reason to apply for a card that charges one. It’s an out-of-pocket cost to likely receive an inferior card.

Credit monitoring services and other utilities -- Student cards tend to be held by first-timers. Since building a good profile should be paramount to such consumers, it’s ideal if their card also comes with utilities that help with activities such as credit monitoring and fraud prevention. Happily, this card includes both.

A low or 0% intro APR offer -- This is generally the turf of higher-end cards; to attract richer cardholders, issuers dangle 0% APR periods in front of them. Since it’s the exception rather than the rule for student cards, this card six-month 0% intro APR for purchases is a useful inclusion, despite the relatively short length of the period.

Card bonuses -- Again, these are more prevalent in cards aimed at wealthier clients. But there are enough student cards on the market to make the space competitive, so you can find numerous bonuses on this specialty plastic -- although they might be comparatively modest. Discover’s good grades credit is a banner example of this.

Discover it® Student Cash Back is designed for cardholders with no or limited credit histories. While Discover doesn’t provide formal guidance as to what kind of credit score a prospective cardholder should have, some respondents on web forums about the card report obtaining one with credit scores in the low 600s; other analyses have it that one can be granted with very limited credit -- which fits with the card’s focus on being your first credit card.

The aim of obtaining this card, of course, isn’t to hold and use it for the rest of your life. It’s too limited for that; the point is to establish or restore a solid credit profile, and develop effective card management habits.

From there, the goal should be to leverage this into mainstream and (hopefully at some point) high-end cards, with their many perks and privileges.

This is where things get complicated. Unlike the limited universe of student cards, once you rise into the mainstream market there are a great many cards to consider. These days it seems that every bank has a set of cards on offer, as do all airlines, your local bulk retailer, Aunt Jenny’s stock broker, etc. etc. etc.

Regardless, you should up your credit card game even if you don’t plan on raising your overall spending. That’s because owning new, higher-credit limit products will continue improving your credit profile. Effective management of these more “adult” cards can show potential issuers and other creditors that you understand such key concepts as how to:

Keep utilization rates low -- The utilization rate, a key determinant in many credit decisions, is simply the amount of credit you use compared to your overall limit (if I’ve spent $3,000 on a card with a $10,000 limit, my utilization rate is 30%). There’s no hard-and-fast rule here, but generally creditors like to see this number below 30% to 35% to not ding your credit score. Never carrying credit card debt (i.e. 0% credit utilization) is even better and can be done by paying your bills on time.

Pay your statements on time -- Another biggie for credit card issuers is timeliness. What lender in their right mind wants to take a chance on a debtor that’s always late?

Be a long-term cardholder -- Potential creditors also tend to be partial to those who prove that they can handle some level of debt over a long-term stretch, ideally several years or more. History matters; the thinking goes that if you’re habitually prudent, you’ll be so in the future too.

Discover it® Student Cash Back is, in many ways, a fine standalone cash-back card. Even though its elevated cash-back places are very limited, they still represent popular forms of commerce and they earn at a 5% clip. User's earn the 5% rate each quarter that they activate the rotating category, up to $1,500 in spending. All other purchases earns 1% back. It’s rare to see a card focused on young/limited option consumers with such a high rate.

All in all, this card has quite a full feature set and some very attractive bonuses. The double rewards bonus, for example, is a dynamite one-time perk. Yes, it’s probably aimed at getting you to use the card as frequently as possible but so what? Savvy cardholders who spend regularly and within their means can rack up quite a big sum after that one-year period.

Several of the Discover it® Student Cash Back benefits rival those of cards targeted at wealthier individuals. It’s the Little Card That Could, and as such would be a smart choice for those just starting out with credit cards, people with a limited credit history, or those with a score lower than they’d like.