Credit Cards

The Discover IT Miles Card

If you’re an existing Discover IT 5% card holder or new to credit cards, the Discover it Miles card can be of great value to you thanks to it’s mile matching ability.

The basics

The Discover IT Miles card is marketed as a travel rewards card by Discover but it really isn’t like the more premium tier cards such as the Chase Sapphire Preferred or Amex Gold card. It does NOT have an Annual Fee and earns you 1.5x “miles” per dollar spent.

After first year of card membership, you receive a Match offer which basically matches all the points you’ve collected. For example, in the first card membership year you earned 1500 miles by spending $1000, you will receive an additional 1500 miles for a grand total of 3000 miles.

The Redemption

The way redemption of these points works is that you buy a plane ticket or a hotel stay or book a car rental using the card. The charges once posted to your card may paid off using these miles. Every 100 miles is redeemed for $1 so 3000 miles will effectively cover $30 of expenses.

Image result for discover it miles

The great thing is that the “match” does not have a limit on it so if you spend $20,000 in the first year (hypothetical) you will effectively receive 60,000 miles which is $600.

There are no transfer partners offered unlike Chase or American Express so that’s certainly a bummer.

The Strategy

The only reason to get this card is that if you don’t wish to deal with the rotating 5% categories or feel like you spend mostly out of those categories and wish to have a no nuisance card.

Given that it basically gives you 3x back in your first year, its very similar to the Chase Freedom Unlimited card (but not as good). Let’s consider examples of where you come out ahead or fall behind when choosing this card for year 1 over the Discover IT 5% cashback card.

Case A: Miles card earns lesser than Cashback card.

CaseGrocery Store QuarterRestaurants QuarterAmazon QuarterGas Stations QuarterGeneral Expenses Total SpendNet Cashback
5% Cashback Card$450$150$100$150$500$1350$95
Miles Cardmoved to general moved to general moved to general moved to general $1350$1350$81

Case B: Miles card earns more than Cashback card.

CaseGrocery Store QuarterRestaurants QuarterAmazon QuarterGas Stations QuarterGeneral Expenses Total SpendNet Cashback
5% Cashback Card$450$150$100$150$1000$1850$105
Miles Cardmoved to general moved to general moved to general moved to general $1350 $1850 $111

Here, taking base numbers we can see on each of the total spends (in the first year) how the effective cashback received plays differently in each case.

If you spend $150 every month on groceries at HEB, Kroger, Aldi’s, etc…, you will only earn 5% cashback in one quarter while you earn 1% during the other quarters if you were to use the Discover IT Cashback card. However, you’d a consistent 1.5% back on the Miles card (ONLY for year one). Both will be doubled at the end so 5% -> 10%, 1% -> 2% and 1.5% -> 3%.

If that logic makes sense to you, then you have an idea of how to compare both the credit cards and deciding which one to initially get as your first (starter) credit card.

In your year two however, the Discover IT Cashback card will still continue to earn you 5% (but no cashback match) and then Miles card 1.5% (with no match). At this point it no longer makes sense to keep the miles card as it earns less than the standard 2% earned by the Citi Double Cash card.

Hence the strategy for year two will be to product change it to the regular Discover IT Cashback Card.

Existing users

Image result for discover it miles match

If you run the numbers and realize you can gain more in the first year of card membership because you’re spending outside the categories of the Cashback card, I’d recommend product change to the Miles card by calling in Discover. You will keep the same card.

If you feel you’re maximizing your spends in the categories then do not product change to the Miles card. In either case, for year two, the required move should be to product change to the Cashback card.

The Miles/Cashback

Don’t worry, you do not lose the miles/cashback when you product change, they simply convert to the appropriate metric although both are essentially just redeemable cashback either as statement credit or for gift-cards at great discounts.

Product Change

Image result for discover it product change

As far as Discover is concerned, you can product change as many times as you like in the lifetime of the card because the history of the card remains untouched (as far as your credit score factors are concerned). Just don’t do it too often as it may flag your account – once in 3-4 months would be the advisable although personally, I’d just decide on what I’d want and stick to it until the end of year one.

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