Discover Bank Review

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Discover Bank

Overall Rating

9.2

Bottom Line

If you’d like an easy online bank to work with that also offers a wide range of other services such as credit cards, student loans, and CDs, then Discover Bank might be right up your alley.

Checking

8.9

Savings

9.8

CDs

9.0

MMAs

8.9

You’re already familiar with Discover credit cards which offer 5% cash back at restaurants, supermarkets, and gas stations.

In fact, Discover is one of the most popular credit cards in the U.S. with over 44 million cardholders.

But did you know Discover has an online bank which offers savings and checking accounts, debit cards, and CDs to account holders across the U.S.?

Today, I’m going to conduct a thorough review of Discover Bank to help you decide whether to open this bank account.

Who Is Discover Bank Owned By?

Discover Bank is owned by Discover Financial Services, which is headquartered in Riverwoods, Illinois. Both the Discover card and the online bank were launched decades ago by Sears Roebuck & Co., a huge retailer back in the day.

Now Discover Financial Services is its own company, employing over 16,000 people and processing a whopping $376 billion in transactions annually. This financial institution also owns the following major brands:

  • Discover Network is a global financial payments network.
  • Diners Club International is a travel-focused brand that offers credit cards, access to airport lounges, and discounts at signature hotels.
  • The PULSE ATM network offers credit card and debit payment services to businesses; this division also provides access to over 2 million ATMs throughout the world.

But enough about the financial services company. Let’s focus on Discover Bank which offers its financial products online.

What Does Discover Bank Offer?

Discover Bank is an online bank that offers:

Discover Checking

Unlike some online banks, Discover Bank does not pay an annual percentage yield (APY) on your checking account balance.

But that doesn’t mean you can’t earn rewards with this bank account. Discover Checking offers 1% cashback on all debit card purchases up to $3,000 each month.

This is a rare feature for checking accounts. Assuming you spend $3,000 a month using your debit card, Discover Cashback Debit would credit your account an extra $30 a month for free.

Keep in mind payments through Venmo, Apple Pay, PayPal, and similar apps will not earn 1% cash back; it works only when you use your Discover debit card.

There are absolutely no monthly maintenance fees or transaction fees, regardless of your checking account balance — and cardholders have access to over 60,000 ATMs throughout the U.S. Discover does charge a fee for outgoing wire transfers ($30), but that’s about it.

Since Discover Bank has no network of retail branches you could visit, you’d need to deposit money through an ATM or on the app. (Discover Bank does have one branch, and it’s in Greenwood, Delaware.)

Facts About Discover Checking

  • Minimum Deposit to Open Account: $0
  • Minimum Balance Requirement: $0
  • Overdraft or Insufficient Funds Fee: $0
  • Monthly Fee: $0

Discover Online Savings

With the Discover Online Savings Account, you’ll earn an enticing 0.60% APY on your deposits. It’s super easy to deposit checks and transfer funds via the Discover mobile app.

Looking at the numbers, an online savings account deposit account with $10,000 in it can earn nearly $70.24 each year, without any effort whatsoever from your end.

This is exponentially higher than the $1 you’d earn on $10,000 at 0.01 APY, a typical rate at a large neighborhood bank with branches. In the current market 0.60 APY is on the higher end for online savings accounts.

Facts About Discover Online Savings

  • Minimum Deposit to Open Account: $0
  • Minimum Balance Requirement: $0
  • Monthly Fee: $0

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Money Market Accounts

Discover also offers Money Market Accounts, which allow account holders to have access to their cash while earning up to 0.50% APY (for balances over $100,000); 0.45% APY (for balances under $100,000).

You may be wondering about the difference between Discover’s Money Market Account and its regular online savings account. That’s a perfectly valid question.

The main difference is a Money Market Account gives you immediate access to your cash, whether you want to write a check or withdraw funds through Discover’s network of 60,000 ATMs. The downside is that you earn slightly less interest compared to an online savings account.

On the other hand, while your interest earnings are slightly higher with an online savings account, you’re not able to withdraw funds at an ATM. Instead, you have to transfer the funds electronically to a linked checking account — and federal law limits you to six transactions per month.

At most banks, exceeding this federal limit will result in an excessive withdrawal fee as high as $15. Discover does not charge this fee. But if you make excessive withdrawals regularly, the bank has the right to close your account.

Facts About Discover Money Market Accounts

  • Minimum Deposit to Open Account: $2,500
  • Minimum Balance Requirement: None
  • Monthly Fee: $0

Certificate of Deposit (CD)

CDs are a safe investment vehicle because they provide a guaranteed interest rate that’s relatively high at virtually no risk to the investor.

But you have to agree to leave the money in the CD account until the certificate matures. If you do access the money early you’ll pay early withdrawal penalties that negate the interest you’ve earned from the higher CD rate.

Discover’s CDs pay competitive rates. So, if you’re in the market, they’re definitely worth checking out—assuming you don’t need immediate access to the funds.

Facts About Discover CDs

  • Minimum Deposit to Open Account: $2,500
  • Minimum Balance: $2,500
  • Monthly Fee: $0
  • CD Terms: 3 to 120 months

Today’s Rates:
Discover Bank CDs

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IRA Certificate of Deposit

Discover’s IRA Certificate of Deposit (IRA CDs) offers similar returns as the bank’s traditional CDs, but with the tax benefits that come with a retirement savings account.

There are two different types of Discover IRA CDs:

  1. Traditional IRA CD: You won’t pay income taxes on money you deposit, up to $6,000 a year; you’ll have to pay taxes when you withdraw the funds during retirement.
  2. Roth IRA CD: You don’t get the tax break on deposits now, but when you withdraw funds during retirement, you won’t have to pay taxes on the money. For this reason, I recommend Roth IRAs if you anticipate you’ll be in a lower tax bracket during retirement.

For more information on the differences between the two kinds of IRAs, read our post on Roth vs. Traditional IRA’s.

Discover Personal Loans

If you need to take out a personal loan to pay for an emergency expense or to consolidate high-interest credit card debt, you might consider borrowing from Discover Personal Loans.

You’ll enjoy the benefits of no origination fees and flexible repayment terms as long as you make your payments on time.

Borrowing is subject to meeting credit requirements. Discover doesn’t publish specific guidelines for borrowers, but customers with fair credit (FICO scores in the 580 to 650 range) have secured loans.

If you have fair credit, your interest rate could be as high as 24.99% — about what you’d pay for a typical credit card. Unlike some personal loan lenders, Discover does not let borrowers co-sign on loans.

Discover Student Loans

If you need a private student loan to pay for higher education, Discover Student Loans offers both fixed and variable interest rate plans.

Student loan options at Discover include a parent loan, consolidation loans, and student loans for law degrees and medical residencies.

Variable-rate loans currently range from 1.24% – 13.87% APR; fixed rates range from 4.24% – 14.74% APR (as of 9/10/2020).

Home Equity Loans

With a Discover Home Equity Loan, you can borrow money to pay off other expenses — such as high-interest credit cards debt or a home renovation — using your home equity as collateral.

Home equity loans tend to have interest rates that are much lower than personal loans. For example, with a Discover Home Equity Loan, the APR starts at 3.99% and could range as high as 11.99% depending on your creditworthiness.

Home equity loans are a little complicated, so I don’t recommend rushing into one without doing your research.

(Of course, you need to be a homeowner with some built-up equity in your home to take a home equity loan out in the first place.) Details vary widely depending on your loan amount, equity amount, income, and credit score, among other things.

Discover Credit Cards

Discover’s credit card presence is growing rapidly in the U.S. market due to competitive cashback rewards offerings and a wide range of credit card products. Best of all, none of these cards have annual fees.

Discover it Card

The Discover it card offers 5% cash back on rotating quarterly categories.

It also offers a 100% cashback match on all the cash back you’ve accumulated during your first year.

Learn More:

Discover it Miles

The Discover it Miles Card is Discover’s travel-focused credit card offering.

This card offers unlimited 1.5x miles earned on all purchases, as well as unlimited miles earned match at the end of your first year of card ownership.

Learn More:

Discover it Chrome

The Discover it Chrome Card offers 2% cash back on gas station and restaurant spending (on up to $1,000 in spend each quarter) and 1% cashback on all other purchases.

Learn More:

Discover it Secured Card

The Discover it Secured Card is designed for those who want to rebuild their credit.

Similar to the Chrome Card, the Secured card offers 2% cash back on gas station and restaurant spending (on up to $1,000 in spend each quarter) and 1% cashback on all other purchases.

Learn More:

Discover it Student Cash Back

The Discover it Student Cash Back Card is designed for college students and offers 5% cash back on rotating categories each quarter, and 1% cashback on everything else.

What’s more, the card literally pays you to get good grades. College students who maintain a GPA of 3.0 or higher are eligible for a $20 statement credit!

Learn More:

Discover it Business Card

The Discover it Business Card is a straightforward business credit card that offers unlimited 1.5% cashback on all purchases and a 100% cash back match at the end of your first year.

Learn More:

Discover it Chrome for Students

The Discover it Chrome for Students Card is designed for college students that want to earn 2% cash back at gas stations and restaurants—similar to the standard Discover it Chrome card. This card also offers a $20 statement credit for students who achieve a 3.0 GPA or better.

NHL Discover it Card

The Discover it NHL Discover it Card is the official credit card of the NHL. Cardholders can save 10% on NHL.com and earn 5% cash back on rotating categories each quarter.

Further, diehard NHL fans will love the fact that the NHL Discover it Card comes with their favorite team’s design.

FAQs

Does Discover Card have a bank?

Yes. Discover Financial Services has a bank, which offers a wide range of financial services, including high-yield savings accounts and a checking account that pays 1% cash back on up to $3,000 a month in debit card expenses.

Is Discover a reliable bank?

Yes. Discover Bank is a reliable bank that offers checking accounts, savings accounts, certificates of deposit, money market accounts, and more.

Is Discover Bank FDIC insured?

Yes, Discover Bank is FDIC-insured. As such, deposits of up to $250,000 are protected.

Does Discover Bank offer mobile check deposits?

Yes, like most online banks, you can use the bank’s app to put money in your deposit accounts. Unlike most online banks, Discover has a network of fee-free ATMs.

Why doesn’t Discover charge overdraft fees?

Because it does not have physical branches the way a traditional brick-and-mortar bank does, Discover can afford a more customer-friendly fee structure. The bank will pull money from your savings or a credit card account to cover the checking overdraft.

But keep in mind Discover Bank can close your account if you keep your account in the negative chronically.

Is online banking really a good idea?

Originally, online banking was a great idea for high yield savings accounts. Now more and more online banks — like CIT Bank, Ally Bank, and Discover Bank — have checking accounts and can handle your everyday banking demands.

The perks of online banks still include higher APYs on savings account balances and great online customer service. However, if you like face-to-face banking, you should stick with your traditional brick-and-mortar bank.

Discover Bank, for example, has only one physical branch and it’s located in Greenwood, Delaware.

How do I waive Discover Bank’s monthly fee?

You don’t have to qualify to waive Discover’s monthly fee because the bank does not charge the fee. Many other banks do require you to make direct deposits or maintain a minimum balance requirement to waive monthly fees.

Do I have to make a minimum initial deposit to open an account?

No, you can open a Discover checking or Discover online savings account with any amount of money. To open a Money Market Account you’d need $2,500. All of Discover’s CD terms require a $2,500 minimum deposit.

What fees does Discover Bank charge?

I dug deep into the fee structure and could find only a $30 fee for outgoing wire transfers, and you could avoid this fee by using official bank checks.

Discover is unique in not charging an excessive withdrawal fee when you surpass six transactions per month in a savings or money market account.

Account-holders who abuse this fee-free environment could have their accounts closed.

Is Discover Bank Right For You?

I hope this Discover Bank review has given you enough information to make a decision. If you’d like an easy online bank to work with that also offers a wide range of services such as credit cards, student loans, and CDs, then Discover Bank might be right up your alley.

On the other hand, if you’d prefer a face-to-face relationship with a traditional brick-and-mortar bank, you’ll want to look elsewhere. Even then, you could still open an online savings account with Discover and earn 5% cashback with a Discover It credit card.

In fact, the high-yield APY on the Discover Online Savings Account may be my favorite thing about this bank. It’s great for an emergency fund, for example. And when interest rates bounce back this account should pay even more.

Of course, no savings account can compete with the gains you could make in the stock market (while also exposing yourself to the potential for losing money).

For more information on that, check out my in-depth YouTube presentation: Best Investing Strategies.

Additional Disclosures: Millennial Money has partnered with CardRatings and creditcards.com for our coverage of credit card products. Millennial Money, CardRatings and creditcards.com may receive a commission from card issuers. This site does not include all financial companies or financial offers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.

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