Discover the Best Online Savings Account

Summary

  • Among the highest APR (Currently 1.15% as of Sept 2017)
  • No minimum opening deposit.
  • No minimum balance to waive monthly fee – in fact there is no monthly fee.
  • Interest is compounded daily and paid monthly
  • Easy online transfers to your other banks and financial accounts
  • Great customer service

We have been banking with Discover Bank for its Savings Account continuously since 2009. We have recommended our children to open a savings account with Discover. There is no testimonial or recommendation that is more honest than that. We have reviewed other bank’s savings accounts offerings (e.g., Ally), and tried other bank’s savings accounts (Capital One) briefly, but we have always moved those funds back to Discover Bank.

I researched Ally Bank a few years ago, but found that it was fraught in customer service issues. Meanwhile reviews for Discover Bank were positive, consistent with my first hand experiences over the years.

Comparison
Comparison from Discover.com web site
Here are some facts you should know

Discover Bank is purely an online bank. It has no physical or local offices that you can visit and talk to a banking specialist or “teller”. There are no drive-through windows either. Customer service via toll-free call is delightful and productive.

Savings Account Limits the Number of Withdrawals Per Month. As required by U.S. banking regulations, Discover Bank limits your withdrawals to six each calendar month. It’s a soft limit, as your transfers will still go through, but you will be accessed a $15 as a service fee for “excess withdrawals”. We called in once to ask them for consideration and credit back what was then $45, they graciously agreed. Just one of many testimonials to the great customer service over the years for us.

A work-around is to open multiple savings accounts. Each Savings account would have three withdrawals per month, and these accounts can be linked with each other with a single login.

ACH Transfers to Other Banks Take Up to Three Days. It is easy within Discover.com online account to establish linkages with your other accounts. I use the trial deposit method to link with my other accounts, instead of providing my login information for other financial institutions. This is where Discover Bank would temporarily make two small deposits (each less than $1) into your other financial institution. You login the other institution to find out what those two amounts are and enter that into Discover.com to prove that you own the other account. (BTW, Discover Bank does take back the trial deposits.) Once your account linkage is established, it takes about three business/banking days to transfer money to/from your other financial accounts. We use this every month to move our “savings” each month into our Discover Bank Savings account. That’s the whole purpose of a savings account, right?

Deposits Are Easy with Mobile App. Download the Discover Bank app (available for iOS, Android) to your smartphone and use the “Deposit” feature to snap a photo of the front and back of your endorsed check. Easy peasy.

Other Fees. Discover Bank’s fees are few and low for what they do charge versus other banks.

Discover Bank fees
Discover Bank fees (per Discover.com as of Sept 2017)

Over the years, we have used official bank checks (aka “cashier’s check”) to pay for car purchase down payments, etc. And Discover Bank would expedite its delivery for free. Nice, right? And if you should be unlucky enough to get a check bounce on deposit, the charge for “deposit item returned” is only $15. Other banks can charge up to $50!

What Do You Need to Provide To Open An Account? Standard information like your address, phone, email and social security number – so they can report your “windfall” interest payments to the IRS. 😉

Here’s What We Recommend
  1. Establish a checking account, either local or online. For checking accounts, we recommend the Schwab Checking account. More on this in a future article.
  2. After you have established a checking account, consider opening a Discover Savings account when you have accumulated a few thousand dollars of “savings”. That is funds that you do not need access on a daily basis.
  3. Establish a link to your checking account from your Discover Bank savings account, as we outlined above. And other banks/credit unions that you have.
  4. Transfer your “savings” at the end of each calendar month into your Discover Savings account. If you reliably save the same amount each month, you can even setup recurring deposits where Discover Bank automatically pull the same dollar amount form your other financial institution on the same date each calendar month.

This would be a great start to your financial future. Mull this over but don’t wait too long to take action. Good luck.

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