You can get 3% cash on everything you buy, at least for the first year.
We don’t get too excited about new credit cards around these parts. So the fact that I’ve personally already signed up for Discover it Miles should tell you something about this card.
The new addition to Discover’s “it” platform, announced late last month, is geared toward consumers who want to earn travel rewards without having to participate in specific airline loyalty programs. To that end, it’s joining into a competitive pool that already includes the Capital One Venture, the Barclaycard Arrival Plus World Elite and others.
Discover it Miles rewards program is unusually generous, but not in the way it’s marketed. According to my analysis, this travel rewards card can actually provide the best cash back value of any card on the market. At least for a year.
What “it” Offers
Discover it Miles is positioned in the non-branded travel rewards credit card space. That means that rather than earning miles for, say, United or American’s loyalty programs, customers instead rack up miles on their card that they can then transfer as a statement credit for travel purchases.
Such cards typically offer better value for your charging dollar, since airline programs have been devaluing miles and making it harder to redeem for tickets.
With Discover it Miles, cardholders earn 1.5 miles for every dollar spent, no cap. Every mile earned is worth one penny, so $10,000 spent equates to $100 in rewards.
Most travel cards offer some kind of signup bonus as an incentive. For example, if you spend $3,000 in three months on the Capital One Venture, you’ll receive 40,000 miles.
But Discover it Miles doesn’t do this. Instead, the card doubles all of the miles you’ve earned at the end of the first 12 months. So $10,000 in spending translates to 30,000 miles, or $300, after a year.
Other perks include no annual fee, no foreign transaction fee, and up to $30 in credit for in-flight Wi-Fi charges. Discover also waives late-fee charges on your first missed payment.
How “it” Compares as a Travel Card
To be fair, the Discover it Miles offers better terms than other no-fee travel cards.
But if you’re someone who spends at least $475 a year, and you’re looking for travel rewards, you’re generally better off going with Barclaycard World Arrival Plus Elite, one of MONEY’s Best Credit Cards.
While Barclaycard holders endure an $89 annual fee after the first year, they also receive a 40,000 signup bonus, two miles for every dollar spent, and a 10% rebate when miles are used for a travel credit. The signup bonus alone is worth $440 if used for travel purchases.
So $10,000 spent on the Barclaycard would net you 60,000 miles (including the signup bonus), which equates to $600 off on travel statement credits. Throw in the 10% rebate, and you’re looking at $660 for that first year. That’s far more than what you can get by using the it Miles as a travel card.
How “It” Compares as a Cash Card
But you shouldn’t think of Discover’s new card as a travel-rewards product. Think of it instead as a cash-back card that nets you 3% (!) on all purchases for the first year.
How? Besides letting you redeem the miles on your statements for travel purchases, the Discover it Miles lets you claim them as a direct deposit into your bank account. So if you accrue 30,000 miles, you get $300 or 3%.
This is a major boon for consumers looking for cash back. Right now, the highest flat-rate uncapped rewards comes from the likes of Citi Double Cash and Fidelity Investment Rewards American Express Card, which offer 2% for all purchases. The Discover it Miles is a full percentage point better.
That’s a big deal. For $10,000 in spending, the Discover it Miles earns you $300 vs. $200 for the 2% cash back cards.
There are mutual funds on our MONEY 50 list that haven’t returned 3% over the past year!
The doubling miles feature is only good for the first year, so the card is less valuable than other products after the first 12 months. After that, you’d be better off using Citi Double Cash. But since there’s no annual fee on the Discover It Miles, there’s no harm in getting the card, using it as your primary for a year, then holding onto it.
You might actually see your credit score improve, especially if you keep your spending at the same level: A lower credit-utilization ratio is a major plus in the FICO scoring formula.
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