Remember the days when banks paid you to keep your money on account? Remember when interest rates were actually worth talking about as a credible income stream? Today, the model has flipped. You have to pay them to hold your money. There’s a fee for everything.

Discover Financial Services offers a checking account that feels a little more like the checking accounts of old. How does it stack up against offerings from traditional banks?

The Issuer

First, yes, it’s the same Discover that offers the credit card. Discover Financial Services is the financial muscle behind the Discover credit card. If you have its credit card, you’re probably happy with it if you agree with the majority of reviews (see Discover Credit Cards: Advantages & Disadvantages).

After a series of acquisitions and reorganizations, Discover Financial Services was formed. Along with its credit card offerings, DFS functions as an Internet bank offering many of the traditional banking services including checking and savings accounts, certificates of deposit, bill pay and more.

The Benefits

The best part of Discover’s checking account might be the fee structure: There is no fee structure. The account is completely free. There are no ATM fees, online bill pay is free along with the ordering of paper checks. ACH online transfers and incoming wire transfers are free, and many other administrative requests (ordering a copy of a check, for example) are free, too. You will pay a fee for things that are outside of the normal services such as insufficient funds, deposited items that are returned and stop payment requests, but those fees seem reasonable. 

You can also earn rewards. Discover gives you 10 cents on up to 100 transactions per month including debit card purchases, online bill payments and cleared checks. Bonuses can be redeemed as cash to your checking account or if you have a Discover credit card, combine the rewards with your card.

But don’t try to game the system. If you break up your groceries into 10 purchases, not only will you annoy everybody behind you, Discover is watching for that and won’t reward you for your attempt at a few extra dimes.

Deposit, Withdrawal

But you may be asking, “How do I make deposits?" You can transfer money from your traditional bank or do direct deposit of your paycheck through the Discover app on your mobile device, wire transfer or – if you really want to go the vintage route – you can mail a check.

You can withdraw money with your debit card, online transfers, online bill pay, writing a check or wire transfer.

The Negatives

What are drawbacks of the Discover checking account? First, the rewards aren’t all that impressive. If you have 50 transactions per month you will earn all of $5 as a bonus. Since Discover pays no interest, other Internet banks that do pay interest may be a better deal if you have a high balance. But wherever you go, don’t expect to earn any meaningful amount in interest or rewards.

Second, the big banks will likely work with you to keep fees at a minimum or eliminate them altogether. Because switching banks is often a tedious task that involves changing bill pay information as well as transferring funds, talk to your bank first and ask if it is willing to give you terms that involve no fees. Often that involves maintaining a minimum balance, but it’s worth asking. 

Finally, if you’re a traditionalist who likes to make deposits at branch locations, stay away from banks like Discover. For more, see What are the pros and cons of online checking accounts?

The Bottom Line

The big banks are closing branches as more people migrate to using their mobile devices for most of their banking. This is favorable for Internet banks such as Discover. With less overhead expense, banks can offer better rates and terms to their customers. Discover, like so many Internet banks, is increasing in popularity especially because people don’t want to drive to a branch to do their banking.

Don’t, however, ditch your current bank if you’re happy with its service. You’re not likely to get much more from Discover than you are now. The rewards that it advertises aren’t substantial enough to warrant a move. For more, see The Pros and Cons of Internet Banks.