I’m in favor of anything that makes it easier to add to my savings account balance, and Digit definitely fits the bill. It’s a free-to-join, automatic savings tool that ties into your checking account, uses a sophisticated algorithm to analyze your income and spending habits, and then makes regular transfers to your FDIC-insured Digit savings account, typically every week or every few days.
You don’t have to direct or schedule these transfers in any way. In fact, you don’t even know in advance how much Digit will transfer. With its automated, hands-off saving algorithm, pretty much all you have to do is sit back and watch your savings account balance grow over time. Though if you’re unsatisfied with the pace of Digit’s automatic withdrawals, you can tell it to save more or less with each withdrawal.
Digit isn’t the first online tool designed to simplify and incentivize savings. There are plenty of bank-run programs, including U.S. Bank’s S.T.A.R.T. and Bank of America’s Keep the Change, which both allow for recurring checking-savings transfers and small, automatic savings deposits when you make a debit card purchase. And, of course, you can set up recurring checking-to-savings transfers at banks without formal savings incentive programs, including online banks such as Ally Bank and Capital One 360. The difference is, Digit is the first totally automated savings tool – it is functionally unique, though that’s not to say it can’t spawn imitators.
Digit is free to join, charges no account fees, and doesn’t require a minimum balance – but you don’t earn interest on your savings. Instead, Digit takes the interest you’d earn to pay for its services. All told, Digit has some useful advantages over any other program, account, or service on the market – plus a few drawbacks that may hamper your experience.
How It Works
Sign-up, Algorithm, and Account Management
To get started with Digit, you need to provide some basic personal information, your phone number, and the account and routing number for the checking account you want to link. You’re then given an FDIC-insured Digit savings account. Though Digit advises that most accounts go live shortly after sign-up, it can take up to two business days if Digit can’t verify your routing or account number, which happens for about 10% of banks.
Once you’re set up, Digit goes to work. It uses its proprietary algorithm to get a sense of your spending (debit transactions and ATM withdrawals), income (paychecks), and recurring obligations (monthly bills). To get the most out of Digit, you should make sure that all important bills are included in your checking account’s bill pay system (or otherwise paid out of the tied checking account) so Digit’s algorithm can see them. The same goes for paychecks and other income sources. Digit doesn’t know what goes on outside the tied checking account, so you need to make sure it has as much information as possible.
Transfers and Withdrawals
Based on your income, spending patterns, and obligations, Digit begins making transfers from your checking account, the first typically coming within a week of sign-up. These transfers are completely automated – you never have to set an amount or frequency. Digit’s algorithm only allows for transfers it thinks you can afford, so there’s little chance of an overdraft or cash crunch. After the first one, transfers usually happen every two or three days in amounts ranging from $5 to $50 (you don’t get notifications at every withdrawal). If Digit determines at any point that you really don’t have the funds to save, it simply stops making withdrawals until you can afford them again.
You can withdraw funds held in your Digit account whenever you wish, with no daily or monthly limit, and have the money in your checking account on the following business day. You can also manually override Digit’s automatic savings algorithm and make manual deposits into your Digit account at any point, provided you have enough money in your linked account to support the transfer.
- Text Alerts and Commands. Texting is Digit’s preferred mode of communication. To withdraw from your Digit savings account, text Digit with the command “Withdraw” and your withdrawal amount. You can use other text commands as well, such as “Balance” to receive your current checking account balance, “Pause” to stop withdrawals temporarily, and “Bills” to check for upcoming bills due (if they’re included in your checking account’s bill pay system). To adjust Digit’s automatic savings algorithm, use the commands “Save More” or “Save Less.” If you want to make a manual deposit into your Digit account, use the text command “Save.” Digit also sends out text notifications when your account reaches savings milestones.
- No Overdraft Guarantee. Since Digit’s algorithms are designed only to withdraw what you can afford, the likelihood of a checking overdraft due to a Digit withdrawal is low. However, should Digit ever cause an overdraft, the company guarantees reimbursement of any associated fees or interest charges.
- Customer Support. Digit has a live customer support team at (888) 322-3103 available during Pacific Standard Time business hours. You can also email [email protected] for a fast response, typically one business day or less.
1. Next Business Day Transfers
If you need to withdraw from your Digit savings balance, you can have the funds in your checking account on the next business day. By comparison, transfers from savings accounts (especially from online banks such as Ally Bank) to external accounts can take two or three business days. If you need funds fast, that can be an inconvenient time frame.
2. “Set It and Forget It” Automation
Digit is unique among savings tools in that it’s completely automated: It measures your spending and income on a daily basis and uses a sophisticated algorithm to determine how much you can save without affecting your lifestyle. If you earn more and spend less, Digit automatically increases your savings. If you earn less and spend more, Digit automatically saves less.
As long as you’re satisfied with the amount you’re saving, you never have to manually transfer funds to your savings account (though you do have this option to fall back on). This setup is superior both to recurring bank transfers, which need to be manually adjusted to account for changes in income and spending, and budgeting tools such as Mint, which aren’t truly automated.
3. Unlimited Savings Withdrawals
You can make unlimited withdrawals from your Digit savings account – one per day, if you like, or even multiple times per day. Savings accounts at traditional banks and credit unions, including those tied to a recurring savings plan, typically limit withdrawals to six per month.
4. No Overdraft Fees
In the unlikely event that a Digit transfer results in an overdraft from your checking account, the company promises to pay any associated fees and charges. However, it doesn’t specify if there’s a limit to what it pays in this case. Therefore, if your balance remains negative for many days on end, you could stretch the limits of this guarantee.
Regardless, you get no such protection from banks like Capital One 360, Ally, or brick-and-mortar institutions such as U.S. Bank. These charge daily or interest-based overdraft fees that can amount to $10, $20, $30, or more per day.
5. No Maintenance Fees or Balance Requirements
Though it won’t earn you any interest, your Digit savings account also doesn’t come with maintenance fees or balance requirements. Many other savings incentive programs require you to open accounts with such limitations. For example, you can’t participate in U.S. Bank’s S.T.A.R.T. unless you pay at least $6.95 in monthly maintenance fees or maintain a $1,500 minimum daily balance.
6. Responsive Customer Support
For such a small company, Digit has an impressive customer support apparatus. When you call its main line during business hours, you’re almost immediately connected with a human representative. That’s a far cry from the cavernous phone menus that big institutions such as Bank of America and U.S. Bank require you to navigate – not to mention the long wait times that could eat up your lunch break.
1. You Need to Give Your Bank Account Information to a Third Party
To work properly, Digit requires your external checking account number. This is a problem if you’re bothered by the thought of providing sensitive financial information to yet another third party and thus increase your risk of exposure to a data breach. Safer options include bank-run savings incentive programs with checking and savings accounts under the same roof, such as U.S. Bank’s S.T.A.R.T.
2. You Forfeit Any Interest Earned on Saved Balances
Digit pays its bills by keeping the interest earned on funds held in your Digit savings account. If your account balance remains low, this probably won’t amount to much. However, as it grows, the lack of interest can start to bite. If you want to earn interest on the money you save with Digit, you need to open a savings account with another institution – likely an online bank that offers high-yield savings accounts.
3. Website Is Missing Some Important Functions
Though Digit’s website is mobile-friendly and attractive, it has some significant limitations. For instance, you can’t initiate a savings withdrawal from your account dashboard. Instead, you have to text the command “Withdraw” to Digit and specify the amount.
Unfortunately, it’s difficult or impossible to view your balance while you’re doing this – it’s not akin to pushing a button and immediately watching your balance draw down. According to a Wired report, Digit’s principals are considering adding this functionality to the main website or launching a mobile app that can handle it, but no firm plans are in place.
4. No Option for Transaction-Based Withdrawals
Digit doesn’t let you tie automatic checking-savings transfers to a debit card transaction, which is another way to make easy savings deposits – sometimes multiple deposits per day – without dramatically reducing your checking account balance. Bank of America’s Keep the Change program lets you round up debit card purchases to the next dollar and deposit the difference in your savings account, while S.T.A.R.T. allows savings deposits of $0.25 to $5 per transaction.
According to America Saves, an advocacy organization, just 68% of Americans say they spend less than they make – that means about one in three of us doesn’t save a dime. In that light, Digit’s couldn’t-be-easier savings automation tool is welcome news.
However, it isn’t a panacea – it only squirrels away funds on your behalf if you consistently demonstrate that you spend less than you earn. It can’t force you to rein in your spending habits or live within your means. For that, a strict personal budget and lifetime savings plan are still your best options.
Digit might not be the first tool to streamline and incentivize personal savings, but it definitely evolves the concept. Thanks to near-total automation, Digit users may barely notice the steady stream flowing back into their pockets. If the alternative is saving irregularly, or not saving at all, that’s okay. Fast transfers, unlimited withdrawals, and no overdraft fees are particularly attractive.
However, Digit isn’t perfect. It needs a mobile app, better onsite tools, and a way for users to claim some of the interest their accounts earn.
4.2 out of 5 stars: Digit’s easy-as-pie automation, great customer support, and fast, flexible withdrawals are all great. Its score would be higher with a mobile app, better site functionality, less reliance on text alerts, and interest payments.