A division of Discover Financial Services — the company best-known for its pioneering cashback credit card — Discover Online Banking began offering accounts in 2013. Virtually, a digital institution, it operates online, through its app and via a vast network of more than 60,000 ATMs.
In this review, we’ll provide you with the information you need to determine whether Discover Online Banking is the right bank for you.
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Cash-back bonus on debit card purchases
Large ATM network
Only one brick-and-mortar branch
High minimum CD deposit
Cash-back bonus on debit card purchases. Cash back on credit cards is pretty standard, but Discover rather uniquely offers a 1% cash-back bonus on anything you buy with your debit card, up to $3,000 in purchases a month. You could potentially earn up to $360 annually.
No fees. Discover Bank's checking account boasts no fees — no monthly minimum fees or fees for insufficient funds. Plus, you won’t get dinged with a charge for returned items, or should you close your account.
Large ATM network. The Discover debit card is accepted at 415,000 ATMs in the U.S overall. Account-holders can make withdrawals at no charge at some 60,000 ATMs belonging to the Allpoint and MoneyPass networks. Using a machine outside these networks might incur a surcharge imposed by the third-party ATM owner. Discover itself, however, never charges a fee for ATM use.
One brick-and-mortar location. True to its name, Discover Online Banking has but one actual branch, in Greenwood, Del. So if you like face-to-face contact, this isn't the institution for you.
High minimum CD deposits. While Discover Bank's interest rates for its certificate of deposit stack up nicely against the competition's, you'll need at least $2,500 to get started. This sum skews a bit high: Other online banks allow you to open a CD with as little as $500 or $1,000.
Who Is Discover Online Banking Best For?
Discover Online Banking should be a good fit for those seeking a digital bank that offers a suite of different services.
It might be a particularly good fit for those who:
- Prefer paperless, digital transactions
- Hate paying fees
- Typically use their debit card for day-to-day transactions
- Prefer to bank with an established "name" financial institution
What Does Discover Online Banking Offer?
As you might expect from the banking division of a major financial services company, Discover Bank offers an array of products and services:
- Checking account
- Savings account
- Money market account
- Certificates of Deposit
Discover Checking Account
A major feature of the Discover Checking Account is its cash-back debit card. The 1% cash-back reward strictly applies to purchases, though. ATM transactions, money orders, loan payments made with your debit card, and payments using peer-to-peer platforms aren’t eligible for cash-back rewards.
Besides cash-back on your cards, there are no monthly maintenance fees, insufficient funds, or a fee for returned items or stop payment orders. There’s no minimum to open an account, and there’s no monthly minimum balance to keep the account open.
Other perks include free checks.
Digital-only banks like Discover's only allow you to withdraw cash from ATMs; you can't deposit cash or physical checks. Discover lets you deposit paper checks via its mobile banking app, or by mail to a Salt Lake City processing center.
Discover Savings Account
Like the checking account, Discover Savings Account doesn't require any minimum to open or maintain the account. As of July 28, 2020, the annual percentage yield (APY) is 0.95%, which is higher than the average national savings rate of 0.06%.
Discover Bank’s no-fees features apply here too: The account is free of no monthly maintenance or insufficient funds charges. While federal law Regulation D prohibits account holders from making more than six withdrawals or transfers per from a money market or savings account within a month, you won’t be dinged with a fee for excessive withdrawals, either (note: due to the COVID-19 crisis, the Federal Reserve Board is allowing financial institutions not to enforce Regulation D). However, if it’s a recurring problem, your account might fall in danger of being closed.
Discover Money Market Account
While there’s no ongoing minimum required to maintain a Discover Money Market account, you’ll need at least $2,500 minimum to open it. There are two interest rates: If your balance is less than $100,000, you’ll earn an APY of 0.80%. If it’s more than $100,000, you’ll get a slight bump of 0.85%.
Once opened, the account generates no monthly maintenance fees, no fees for insufficient funds, or if you make more than six withdrawals or transfers in a given month.
Money market accounts are similar to savings accounts in that they’re a deposit account that generates interest on your money. However, you can typically withdraw funds more easily, usually via a linked debit card; the account may also come with check-writing privileges.
Discover Certificate of Deposit (CD)
Discover’s high-yield certificates of deposit (CD) give you the option of tucking away a sum of money for a set amount of time. CDs usually earn a higher interest rate than a standard savings or checking account. And the longer your term, the more you can earn. The minimum amount for an opening deposit is $2,500. Discover’s high-yield CDs range from three months to 10 years, and the interest rates are as follows:
|Discover Bank CD Rates|
Should you need to take your money out early, you’ll get hit with an early withdrawal penalty. How much you’ll get dinged depends on the term of the CD:
|Discover Bank CD Early Withdrawal Penalties|
|Term||Early Withdrawal Fee|
|Less than 1 year||3 months simple interest|
|1 year to less than 4 years||6 months simple interest|
|4 years to less than 5 years||9 months simple interest|
|5 years to less than 7 years||18 months simple interest|
|7 years to less than 10 years||24 months simple interest|
You would only pay interest on the amount you took out before the CD matures. So if you have a $5,000 CD and pulled out $1,000 early, the fee would only be on that $1,000.
Your CD needs to be open for at least eight days before you can pull money. And here’s the kicker: There’s no early withdrawal penalty before the 30-day mark.
Discover offers both an Individual Retirement Account CD and an IRA Savings Account. The IRA CD requires a $2,500 minimum and offers APYs comparable to those of the regular CDs. The IRA Savings has no minimum and currently offers a 0.85% APY. The retirement accounts can be either traditional or Roth IRAs.
Discover Credit Cards
Discover has a handful of no-annual-fee credit cards in its network, including a travel card, student card, gas card, and restaurant card. Technically speaking, though, these cards are not part of Online Banking but offered through another division of its parent, Discover Financial Services, rather confusingly known as Discover Bank. You don't need to be an Online Banking customer to apply for a Discover credit card; nor does being an Online Banking account-holder or grant you special access to these cards.
General Travel Rewards Cards
Secured Credit Cards
Business Credit Cards
Other Financial Services Offered by Discover
As with the credit cards, the products listed below are technically offered not through Online Banking, but since they are part of Discover Financial Services, the parent company, we list them here as a service.
Discover Bank Customer Service
Discover Online Banking offers 24/7 customer phone support, 365 days a year — with reps based entirely in the U.S., as the company likes to emphasize. You can also reach out to customer support by e-mail. And like most banks, you can deposit a check and access your banking information and financial transactions through its mobile app.
According to the J.D. Power 2019 U.S. Credit Card Satisfaction Study, among credit card issuers, Discover has a top ranking with a score of 842. And per the J.D. Power 2020 U.S. Banking Mobile App Satisfaction Study, Discover ranked highest with online credit card satisfaction.
In 2012, Discover Financial Services paid out $200 million to 3.5 million customers for deceptive practices — such as enrolling clients in products like its payment protection plans, without their permission. Discover also paid a civil fine of $7 million both to the Consumer Financial Protection Bureau (CFPB) and to the Federal Deposit Insurance Corp. (FDIC).
How to Bank With Discover Online Banking
Opening an Online Bank account is a simple and straightforward process. Whether you’re an existing Discover customer (a card-holder, loan borrower) or are a new one, you can open an account online in minutes.
Discover Online Banking is an excellent option for those who feel comfortable with a completely digital financial platform. The generous cash-back bonus on its debit card, lack of fees, and around-the-clock service make it a standout in many ways. The interest rates offered on its accounts are competitive.
However, Discover Online Banking's options are limited to the bare bones of banks: checking, savings, certificates of deposits, and money market accounts. Beyond that, there are a few IRA account options available. If you're looking for a financial institution that offers a full suite of products and services (i.e., credit cards, mortgages, personal loans, and wealth management), you might be better off looking elsewhere. While other Discover divisions do offer some of these options, it's not clear if there's much interaction among them — and if using one product benefits you with getting another.
Likewise, if you like to do your banking in person, Discover Online Banking probably isn't for you. The company's customer reps are friendly and knowledgable, but it's not the same as developing a relationship with the personnel at a physical branch.
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