In this Discover Bank Review, we’re going to cover the pros and cons of Discover’s four main banking products:
- Online Savings Account
- Cash Back Checking
- Certificates of Deposit (CDs)
- Money Market Account (MMA)
I don’t ask for much in a bank.
Basically, I want my money to be safe, and I’d prefer not to have to pay exorbitant monthly fees to access my cash.
It’d also be helpful if I could get some cash back or earn more interest than a mere $0.02 per statement (or less).
You’d think that what I’m asking for would be commonplace, but the big banks’ towering skyscrapers and 7 and 8 figure executive salaries don’t pay themselves.
As a result, they squeeze their account holders for every last dime, and they make it seem like they’re doing us a favor by holding onto our cash for us.
I realized not long ago that if I wanted fair treatment, I had to ditch the brick and mortar banking establishments and look elsewhere.
Online banks are the way to go, but I kissed a few frogs before I opened an account with Discover. And now, I won’t bank anywhere else.
Despite what is about to be an overall glowing review, Discover Bank is not without its flaws. So, I’ll be honest, and in this review, I’ll tell you where I think they’re doing an excellent job for their customers, and where they could use some improvement.
Is Discover Safe?
What I appreciate most about Discover is that I know my money is safe with them. In the early 2000s, a lot of suspicious-looking banks opened their virtual doors, and the Internet was a Wild, Wild West of scammers and Nigerian princes.
Since Discover is an established institution with a history of serving credit card customers since 1985, there’s a sense of security when you store your money with them.
If you are wondering what bank owns Discover, it’s Discover Financial Services, Inc. This is the same for many card companies. For example, the “real” AmEx cards are backed by American Express Centurion Bank.
Is Discover Bank Federally Insured?
While they are relative newcomers to the banking industry, you can rest assured that your funds are FDIC-insured up to the maximum allowed by law, which at the time of this publication is $250,000.
But, before you get too excited about the security of your money, FDIC insurance (Federal Deposit Insurance Corporation) only kicks in if the bank goes under.
It’s most relevant during extreme financial crises like The Great Depression and the 2008 Financial Crisis. In 2008, 25 banks failed. However, it doesn’t apply to theft or hackers.
What About Hackers?
Knowing that Discover Bank isn’t likely to fail, the biggest concern in my mind is what happens if there’s a security breach and hackers steal my money. This isn’t just me being paranoid, either.
Hacking and digital theft are on the rise, and many major corporations have had their customers’ information compromised. Fortunately, Discover Bank has private insurance if unscrupulous computer thieves steal your information and cash.
In this Discover Bank review, I’ll discuss four of their main banking products, and share what I think about each one.
Discover Bank BBB Rating
Discover Bank holds an A+ rating with the Better Business Bureau (BBB) with 58 years of continuous business served.
Online Discover Bank Savings Account
Discover’s savings account was named one of our best savings accounts for 2019, and it’s easy to see why. Discover stays ahead of other companies with their lack of fees and high APY (annual percentage yield). It’s important to have a good understanding of how APY works if you don’t already.
Discover has one of the highest APYs in the online banking world, which is a huge perk. Brick and mortar banks typically give about 0.01% to 0.05% APY, but with the low overhead of an online bank, those savings get passed onto the consumer.
Interest rates fluctuate regularly, so it’s best to check Discover’s website for the most up to date figure.
No Maintenance Fees or Minimum Balance Requirements
To me, not having to pay for the privilege of storing my money is even more important than the interest rate.
We’ve all had a financial emergency at one time or another. Whether it’s a significant car repair, an unexpected medical expense, a tuition hike, or an irresistible pair of Jimmy Choo’s, a temporary dip in the bank account is normal.
What’s not normal is being punished for it. As the saying goes, life isn’t fair, but I still think maintenance fees and requirements for a minimum balance stink.
This is another reason that I love Discover Bank. No monthly maintenance fee or minimum deposit makes it easy for anyone to open and maintain an account.
Discover Bank Savings Account Bonus
If you have a large amount of money you want to deposit in a Discover Bank savings account, their savings account bonus puts them ahead of most other options.
Although Discover does not have a minimum you must deposit for opening a savings account, you do have a minimum you must deposit in order to get the Discover savings account bonus. This offer varies, so check out Discover’s online savings account for current bonus opportunities.
Discover Bank Locations and ATMs
One of the significant tradeoffs of Internet banking is not having access to an ATM since there are no physical branches.
Discover technically has one branch in Delaware, and that happens to be the only place you can deposit cash into your account. So, unless you happen to live near that office, you won’t be able to put cash directly into your account. Because there are no Discover Bank locations outside of the one in Delaware, you’ll be limited to check deposits or wire transfers only. If you run a cash-based business, this may be a deal breaker for you.
However, you still have access to 415,000 ATMs. Watch out for fees, though. The average transaction fee is $2.77, and only 60,000 of the ATMs in Discover’s network waive the fee. There’s also a limit of six withdrawals per month, but that’s universal across all online savings accounts, not just Discover’s. If you exceed the withdrawal frequency, you’ll have to pay for each incident over the limit.
There’s another way to get cash back without paying for it. If you open a checking account and get a debit card, you’ll get cash back with no transaction fees on some purchases.
As of June 16th, 2019, Discover’s online savings accounts, checking accounts, and money market accounts have all converted to fee-free structures.
This means no fees for stop-orders on checks, no overdraft fees, and no minimum balance fees.
With such fees typically ranging from $15 to $30, Discover has taken the industry lead in eliminating pesky fees that otherwise plague consumer balances.
To sum up: If you’re actively trying to save money, then Discover Bank is the clear winner for a high-interest online savings account. You get some of the highest interest rates around, and you never have to worry about paying fees to store your cash.
Checking accounts with consumer-friendly policies are even harder to come by than savings accounts. This is because banks know that checking accounts are likely to have lower balances and more activity than a savings account.
You’re paying bills from this account and potentially using a debit card. All that activity can be expensive to track.
In my opinion, the checking account department is where Discover Bank really shines. Here’s why:
Cash Back on Debit Card Purchases
I think many of us like to take advantage of ways to make money fast.
With cash back bonuses, you’re not going to get rich. However, only a handful of banks offer rewards on debit card purchases, so this makes Discover stand out.
No Monthly Fees or Minimum Deposits
Again, if it’s the end of the month and my balance is low until my next paycheck gets deposited, I don’t have to pay a “maintenance” fee. There’s no denying that having a checking account is a convenience, so it’s refreshing not to have to pay for the privilege.
No Fees for Bank Checks
Also known as cashier’s checks.
At my last greedy bank, I had to pay $8. It’s not something you need every day, but it seems insane to charge that much.
No Fees for Returned Deposits
If you’ve ever cashed a check somewhere and had it bounce, you might have been charged $15 to $35 for something that you have no control over and isn’t your fault.
If you’re on a tight budget, that could also lead to an overdraft, which is another fee. That’s why I appreciate Discover because there’s no fee for someone else’s check bouncing.
Ease of Getting Started
Have you ever opened a checking account in person? It’s a long process that feels like a mix of an invasive doctor’s appointment and a trip to the DMV.
There’s a lot of paperwork, questions to answer and tons of waiting. And whenever I’m sitting in a bank, I begin second guessing every single one of my financial decisions.
When you open a bank account online, there’s no judgment about how much you plan to fund your account with. It’s three easy (and painless) steps.
Excellent Discover Bank App
Other online banking apps have been a nightmare to use. One app crashed every time I tried to deposit a check. And, more often than not, it would tell me that it couldn’t read the sum I deposited, even though it was typed out and not scrawled in illegible ink.
The Discover Banking app has a 4.8 rating and a whopping 1.66 million reviews. To say it works like it’s supposed to is an understatement.
It is expected that the Discover Mobile App will remain excellent and up-to-date since there is only one Discover Bank location. Most transactions are meant to be completed online or on your smartphone and therefore the company relies on a top quality banking app.
To sum up: Unless you’re in a situation with your checking account physically handcuffed to other assets that make closing it down impossible, I highly recommend using Discover for your checking and debit card needs.
Certificates of Deposit (CDs)
If you know you won’t need to touch your money for a while, a CD is a safe way to collect a higher interest rate than a bank account.
Discover Bank CD Rates
At the time of this publication, only a couple of banks came close to paying what a Discover Bank CD rate paid. Some factors that play into what kind of CD rate you can get include:
- The length of time before your CD rate matures
- The current interest rate environment
- How much your bank anticipates they can make with the money you deposited
I love CDs because when I have extra cash, I can put it to work with zero risks because the funds are FDIC-insured.
Let’s say I have a summer European vacation planned next year, and I’d like to have an extra $1,000 on hand to take along. I can use Discover’s online calculator to figure out exactly how much money I’d have to set aside, and how long it would take to reach my goal.
What’s most useful about Discover’s CDs is that I don’t even have to plan far in advance to benefit.
For example, you already know that a bank account can pay over 1.5% interest. But keeping that same amount secure in a CD for just 12 months, I can earn a higher rate. It’s like having free money, and there’s virtually no risk.
To sum up: If you have even a little bit of extra cash that you know you don’t need immediately, a CD is a no-brainer. If only I had discovered these financial instruments sooner… Like when I was five. Like the checking account, you can also open a Discover CD online in three easy steps.
Money Market Account (MMA)
Our Discover Bank review would not be complete without talking about Discover MMAs. A money market account is nearly identical to a bank account with a few exceptions:
- First, the best money market accounts generally have high interest rates.
- Second, it generally requires a higher minimum deposit to open.
With Discover, the minimum opening amount is $2,500. There’s no fee for dropping below that point, but you’ll need at least that much cash on hand to get started.
Here’s where things get a bit odd, though. There are two listed APYs for money market accounts (one for balances under $100,000 and one for balances over $100,000), but both rates are less than the regular online savings account.
I found there’s no discernible difference other than the money market account being more restrictive and paying less interest, which means there may be better options out there if you are specifically looking for a money market account.