Discover® Bank Review – Online Banking for Savings, Money Markets & CDs

You’ve probably heard of Discover Financial Services, a publicly traded company (NYSE: DFS) that offers consumer-friendly credit cards like the Discover it Card. According to the Nilson Report, it’s among the United States’ 10 biggest credit card issuers.

What you may not know as much about is Discover’s online-only bank: the appropriately named Discover® Bank. It offers a checking account, savings accounts, money market accounts, CDs, and retirement products, all of which are FDIC insured and charges no fees on deposit products – meaning no monthly maintenance fees, excess withdrawal fees, or insufficient funds fees, to name a few. That’s a major, and welcome, point of distinction with competitors such as Ally Bank and TIAA Bank.

With inflation high and savings rates better than they’ve been in year, this is the perfect time to focus on Discover Bank’s standout savings products. Here’s what you need to know about them — and whether they’re worth switching online banks for.

Key Features of Discover Bank Savings

Discover Bank has several savings products worth writing home about. Read on to learn more about each, and for a look at some other choice features of Discover Bank.

Discover Online Savings Account

The Discover Bank Online Savings Account is a digital savings account with a very attractive yield. There’s no minimum deposit amount and no need to maintain a minimum balance after your initial deposit.

This account currently yields 4.25% APY on all eligible balances.

Discover Bank Money Market Account

Discover Bank’s money market account have competitive yields as well, subject to change at the bank’s discretion.

The minimum opening deposit and minimum daily balance requirement are both $2,500. However, there’s no penalty for dropping below the minimum balance threshold.

Money market accounts come with free checks and a free debit card, but are subject to the same 6-withdrawal-per-period limit as savings accounts.

Discover Bank CDs

Discover Bank offers more than a dozen CDs, with terms ranging from 3 months to 10 years. All require a minimum deposit amount of $2,500.

With 30 days to go before your CD expires, you’re asked to redeem it or renew at the same rate and term. You have until 9 days after its expiration to redeem, after which the CD is automatically renewed. Yields range from 2.00% APY on the 3-month vehicle to 4.70% APY on the 12-month product. These yields are subject to change with prevailing interest rates.

Early withdrawal penalties are as follows:

Discover Bank IRA CDs

Discover Bank lets you open an IRA account (Roth or traditional) with any of its CD products. There are no monthly maintenance fees. While these accounts are advertised as tax-free, you may have to pay tax and penalties on withdrawals made before age 59 1/2. You can roll over several types of retirement accounts, including 401ks, 457 deferred compensation plans, annuities, and other traditional or Roth IRAs.

Mortgage and Home Equity Loans

Through Discover Financial Services, Discover Bank offers a wide range of purchase, refinancing, and home equity loans. Its mortgage options include, but aren’t limited to:

• 30-year fixed rate purchase and refinance loans
• 15-year fixed rate purchase and refinance loans
• 15-year fixed rate FHA loans
• 5/1 adjustable rate purchase and refinance loans

Other Loans

Discover Bank also offers loans for undergraduates, graduates, and post-graduates (such as medical residents and law school grads studying for the bar).

Discover doesn’t charge origination or maintenance fees on these loan products, which come with rewards (a one-time cash rebate equal to 1% of the value of a newly issued student loan) for maintaining a GPA above 3.0 or its equivalent.

To redeem this reward, you need to submit your transcript for the academic term covered by the loan within six months of its end date. Discover then reduces your loan’s principal by 1%. An interest rate credit of 0.25% also applies to accounts with auto-debit. Additionally, Discover Bank issues personal loans for non-students, including debt consolidation loans and loans for big-ticket purchases. Discover Bank doesn’t disclose interest rates for these loans on its website – you need to call for a personalized rate quote.

Other Features of Discover Bank

Discover Bank has some additional features worth noting:

• Discover Cashback Debit. Discover Bank’s Cashback debit account is available to anyone with a Discover-branded credit card or existing Discover Bank account, such as a savings or money market account. Every qualifying debit card purchase earns 1% cash back, up to $3,000 in purchases ($30 in rewards) each month, and rewards never expire once earned.
• Discover Bank loans. Discover Bank offers home loans, home equity loans and lines of credit, student loans, personal loans, and select other credit products. If you have a savings account here already and need low-cost financing, it’s worth exploring your options.
• No-fee ATM network. Discover works with the MoneyPass and Allpoint networks to provide fee-free ATM access at about 60,000 ATMs in the U.S. The bank’s online, mobile-friendly ATM locator marks these fee-free ATMs with orange pins.
• Google Wallet. Discover’s partnership with Google Wallet lets you store your Discover credit or debit card on your phone and pay for purchases without taking the card out of your wallet. Participating retailers include McDonald’s, Macy’s, CVS, Walgreens, Home Depot, Subway, and Petco.
• Mobile check deposit. Discover Bank has a pretty extensive mobile banking app that lets you deposit physical checks without visiting a branch or using the postal mail. Just enter the amount of your check, take photos of the front and back, and confirm your deposit.
• Gift cards. Using the funds from your Discover savings or money market accounts (or any third-party bank account), you can purchase personalized, Discover-branded gift cards. Denominations range from $20 to $500.
• Customer support. Discover Bank has a 24/7 customer support hotline and a slew of specific departments open during regular or extended business hours. Wait times longer than 10 minutes are rare, even during busy periods. And you might not even have to talk to a human: Discover Bank has a pretty sophisticated help center with a detailed knowledge base and FAQ section.

Advantages of Discover Bank

Discover Bank has some noteworthy advantages to consider before doing business with any competitors.

• No fees on deposit products. Discover Bank waives deposit account fees commonly charged by competitors, such as excessive withdrawal fees for savings and money market accounts, fees for dropping below minimum balance thresholds, and insufficient funds fees. This is clearly a major selling point, particularly for accountholders who struggle to meet minimum balance requirements.
• Impressive savings yields. Discover Bank’s savings products have category-leading yields, making it one of the best places to park your money for the short or long haul.
• Lots of CD options. Discover Bank has more than a dozen CD options, from very short-term (3 months) to very long-term (10 years). It’s easier to build a CD ladder here than almost anywhere else.
• Full line of loan products. Although many national brick-and-mortar banks offer lending services for homebuyers, refinancing homeowners, and folks who just need some extra cash, online banks often have limited or nonexistent lending services. For instance, Ally Bank only makes auto loans to its clients, and TIAA Bank only deals with folks who want to buy or refinance their homes.
• 24-hour customer service. Discover Bank features an online secure message feature and a traditional phone center. The former is open at all times except midnight to 7am eastern time on Sundays, but the customer service center is always open to take phone calls.
• No fees for checks. Even if they offer to cover the cost of your first book of personal checks, many online banks charge for the privilege of cutting a cashiers’ check or sending additional books of personal checks. By contrast, bank checks cut from Discover Bank’s money market accounts, savings accounts, and even CDs never cost anything. Discover also never charges for issuing checks to your account.

Disadvantages of Discover Bank

Consider these drawbacks before opening an account with Discover Bank.

• High minimum deposits for money market and CD accounts. Discover Bank imposes minimum deposit requirements for its money market accounts ($2,500) and CDs ($2,500). Ally Bank and Capital One Bank both lack minimums on their money market accounts. TIAA Bank requires lower deposits – $1,500 for its money market and savings accounts. For traditional banks, opening deposit requirements are usually minimal – for instance, Wells Fargo’s money market account asks just $50 to open.
• No penalty-free early withdrawals for CDs. In addition to the high minimum opening deposit, Discover Bank’s CDs have another big limitation: You can’t cash them out early without incurring a penalty. This isn’t unusual, but no-penalty CDs have become more common in recent years. Discover Bank’s popular 12-month CD comes with an early withdrawal penalty of 3 months’ interest.
• No online brokerage or market investments. Discover Bank might offer more loans than many of its online bank competitors, but it’s not attached to a brokerage that could provide additional investment options for account holders. Other online banks are much better in this department. For instance, Capital One 360 lets you link a checking, savings, or money market account to its Capital One Investing platform and trade stocks, mutual funds, ETFs, and options with your deposited funds.
• No business accounts or loans. Although Discover Bank does offer credit cards for small business owners, it doesn’t have any business banking accounts. Contrast this with TIAA Bank, which has separate checking options for small businesses, large businesses, and nonprofit organizations, as well as money market accounts and CDs for businesses of all types. Discover Bank can’t get you a business loan, either. While some other online banks focus solely on consumers, many traditional banks offer commercial loans as well.

How Discover Bank Savings Stacks Up

Discover Bank is just one of several major online banks popular with savers. Its lineup of savings accounts, CDs, and money market accounts might be comprehensive, but it’s not unparalleled.

Let’s see how Discover Bank’s savings options stack up against those offered by another big online bank: Ally Bank.

Final Word

Discover Bank offers an almost-full suite of online banking services, including checking accounts, savings accounts, money market accounts, retirement options, and CDs. It also connects its customers with several popular credit cards, which offer perks like cash-back rewards and online shopping discounts.

And Discover Bank issues several types of loans for students, home buyers, existing homeowners, and regular consumers who need extra cash. That said, better options for business customers would help attract even more users into the fold.