Debit vs. Credit: How to Earn Cash Back from Discover

Whether they prefer cold, hard cash or a thin piece of plastic, a large portion of Americans are still making purchases with some form of cash, not credit. In fact, 43% of Americans mostly use debit cards for daily purchases, while 63% of Millennials don’t even own a credit card!

This reluctance to use credit is leading some credit card issuers to now look into the world of debit card rewards. In late September, Discover launched a feature called Cashback Checking – a checking account that can earn up to $120 cash back per year.

While earning cash back on your debit card purchases may be enticing, it may not be the best decision based on your financial goals. Let’s explore the options using Discover as an example:

Discover Cashback Checking (Debit Card) Discover it® Secured Card – No Annual Fee (Credit Card) Discover it® – Cashback Match™ (Credit Card)
Earned cash back
Signup bonus
Cash back match
No annual or monthly fees
No security deposit required
Reporting to all three credit bureaus
Free monthly credit score

Discover Cashback Checking (Debit Card)

With the Discover Cashback Checking debit card, you’ll earn 10 cents per transaction on up to 100 eligible transactions per month. This means you can earn up to $120 in cash back per year by making debit card purchases, paying bills online, or writing checks.

Pros:

  • No annual or monthly fees
  • Rewards for everyday transactions
  • Only spend money you already have
  • No credit score required
  • No interest on purchases since it’s cash

Cons:

  • Cash back amount is limited
  • No reporting to credit bureaus to improve score
  • No signup bonus or cash back matching

Discover it® Secured Card – No Annual Fee (Credit Card)

The credit card is a great option for anyone who is looking to rebuild or establish credit. With the card, you’ll put down $200 to $2,500 to establish a line of credit. As a cardholder, you can take advantage of 2% cash back at restaurants and gas stations on up to $1,000 in combined purchases each quarter, plus 1% cash back on all other purchases.

Pros:

  • No annual or monthly fees
  • Rewards for everyday transactions
  • No credit score required
  • Reporting to all three credit bureaus to improve score
  • Security deposit refundable with responsible use
  • Free monthly credit score reporting

Cons:

  • Security deposit is required
  • Interest accrued on balance not paid in full
  • No signup bonus or cash back matching

Discover it® – Cashback Match (Credit Card)

If your ultimate goal is to earn rewards, then the credit card is one to consider. As a cardholder, you’ll earn 5% cash back at Amazon.com and Target now through December 2017, on up to $1,500 in purchases when you activate. Plus, 1% cash back on all other purchases. What’s even better is that Discover’s Cashback Match™ program will give you a dollar-for-dollar match of all cash back earned at the end of your first year effectively doubling your rewards!

Pros:

  • No annual or monthly fees
  • Rewards for everyday transactions
  • Dollar-for-dollar cash back match
  • 0% introductory APR for 14 months
  • Reporting to all three credit bureaus to improve score
  • Free monthly credit score reporting

Cons:

  • Credit score minimums required
  • Interest accrued on balance not paid in full after 14 months

There are a lot of options when it comes to earning cash back from Discover. If you prefer to only pay with cash (or debit), then Cashback Checking is a way to earn a small amount of rewards. If you want rewards but also want to start establishing credit, or don’t want to be tempted to overspend, a secured card is the way to go since you can set your credit limit. And if your goal is to get as many rewards as possible, you’ll want to consider a cash-back specific card.

The post Debit vs. Credit: How to Earn Cash Back from Discover appeared first on The Simple Dollar.

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