Introduction

Navigating the world of credit cards as a student can feel like learning an entirely new language. It’s easy to get lost among APRs, credit scores, and cashback percentages. But luckily, Discover has made this journey easier for us with their Discover it® Student Cash Back card. As a student who has actually used this card, I can share firsthand why I think this card deserves a spot in your wallet.

By Kent, UC Grad Student in Economics

As a graduate student in Economics at a UC (University of California) campus, I often find myself at the intersection of theory and practice. It’s one thing to sit in a classroom and talk about consumer choice theory, marginal utility, or the time value of money. It’s quite another to apply these concepts to everyday life, especially in a world where economic uncertainty often headlines the news. Today, I want to discuss a financial tool that has been immensely helpful to me in my journey towards financial literacy and stability—the Discover it® Student Cash Back credit card.

A Tool for Modern Economic Realities

In the modern economy, the narrative is ever-changing. Yes, there’s unpredictability—trade wars, inflation rates, and job market uncertainties, to name a few. But there are also opportunities—advances in technology, new job sectors, and a burgeoning digital economy. As an economics student and an optimist, I can tell you that the key to success in any economy is adaptability. This is why I love the Discover it® Student Cash Back card. It allows for flexibility with its rotating 5% cashback categories, enabling cardholders to adapt their spending habits according to the most profitable categories. This concept aligns well with the principle of rational choice theory, where consumers aim to maximize utility given their budget constraints.

Emphasizing the Marginal Utility of Money

Economics teaches us that the marginal utility of money decreases as we have more of it. Essentially, each additional dollar is worth slightly less to us than the one before. This is why I appreciate the cashback feature so much. Every dollar I earn back through cashback has a higher marginal utility for me as a student with limited income, as opposed to someone who already has considerable wealth. And let’s not forget the cashback match at the end of the first year—it’s like doubling my utility for no additional effort.

The Time Value of Money

One of the fundamental principles of economics is the time value of money—the idea that money available today is worth more than the same amount in the future. Discover understands this implicitly with its rewards program. The cash back is available almost as soon as the transaction clears, and it can be redeemed in various ways including direct deposit, thus amplifying its present value.

Addressing the Opportunity Cost

When choosing a credit card, one must consider the opportunity cost—the value of the best alternative forgone. As a student, I don’t have a high opportunity cost when it comes to credit options. Many cards with richer benefits require a robust credit history, higher income, or even an annual fee. This card requires none of that, making it an excellent choice for students.

Responsible Borrowing and Liquidity Constraints

Let’s talk about the APR for a moment. While the card offers a competitive APR, especially for students, it is essential to remember that borrowing comes at a cost. In economics, we call this a liquidity constraint, which refers to the limitations on access to money. Although the card offers an introductory APR, that rate will eventually go up. I see this as an educational aspect—it teaches us to be responsible and disciplined borrowers, as any good economics student should be.

Conclusion: An Optimistic Economic Choice

In a volatile economy, the Discover it® Student Cash Back card is an optimistic choice. It integrates some of the fundamental principles of economics into its design, making it not just a payment tool but also an educational one. With this card, I feel like I’m not just spending; I’m also learning how to maximize my utility, minimize my opportunity cost, and adapt to economic challenges and opportunities. And for a graduate student in economics, that’s just about as good as it gets.

By Kent, UC Grad Student in Economics

The Basics

The Discover it® Student Cash Back card is designed with students in mind. You get 5% cash back on rotating categories every quarter, like Amazon.com, grocery stores, or gas stations. For all other purchases, you’ll earn 1% cash back. Plus, Discover will match all the cash back you’ve earned at the end of your first year. The card has a $0 annual fee, and a pretty forgiving APR for those inevitable mistakes we all make while learning how to manage credit.

Pros

1. No Annual Fee

Let’s be honest; students aren’t exactly rolling in cash. With textbooks, rent, and those late-night food runs, it’s nice not to have to worry about an annual fee eating into your budget.

2. Cash Back Rewards

The 5% cash back on rotating categories and 1% on everything else is a really sweet deal. You can redeem your rewards for credit statement, direct deposit, or even as a charitable donation.

3. First Year Cash Back Match

Discover will match all the cash back you earn in your first year. It’s like doubling your rewards with no extra effort on your part.

4. No Credit History Required

Discover is one of the few companies willing to take a chance on students who don’t have an established credit history. It’s an excellent way to get your foot in the door of the credit world.

5. User-Friendly Mobile App

The Discover mobile app is straightforward and easy to use. With real-time updates, it’s great for tracking your spending, rewards, and even your credit score.

6. Freeze it® On/Off Switch

If you’re the forgetful type and frequently misplace your card, you can freeze your account using the mobile app. This ensures that no new purchases, cash advances, or balance transfers occur until you unfreeze it.

7. Free FICO® Credit Score

Getting access to your credit score is a massive win. It’s a useful tool for tracking your financial health and understanding how your spending habits impact your credit score.

Cons

1. Rotating Categories

While the 5% cash back is a great perk, the categories rotate every three months, requiring you to activate them each time. If you forget, you’ll miss out on those extra rewards.

2. Foreign Transaction Fees

If you’re a student who travels internationally or studies abroad, the 3% foreign transaction fee can be a drawback.

3. APR

While the card offers a 0% introductory APR for the first six months, it then jumps to a variable APR, which can be high if you carry a balance. But let’s face it, we’re students; we shouldn’t be carrying a balance anyway.

4. Limited Merchant Acceptance

Discover cards aren’t as widely accepted as Visa or Mastercard, especially outside the United States. It’s always a good idea to have a backup.

Benefits You Might Not Know About

1. Good Grade Reward

Discover will give you a $20 statement credit each school year if your GPA is 3.0 or higher for up to the next 5 years. It’s a small but nice pat on the back for doing well academically.

2. Referral Bonus

You get a $50 statement credit for each friend who becomes a cardmember, up to $500 a year. That’s not chump change for a student!

3. Customer Service

Discover’s customer service is U.S.-based and available 24/7. I’ve only had to call them a couple of times, but my experience was stress-free and pleasant.

Conclusion

As someone who is still learning the ropes of personal finance and credit management, I find the Discover it® Student Cash Back card to be a great option for students. The pros undoubtedly outweigh the cons, especially when you factor in the lack of an annual fee and the robust rewards program. However, like any financial tool, it requires responsibility. If you’re diligent about paying off your balance in full each month and keen to earn some rewards while you’re at it, this card could be a perfect fit for you.