I have been a member of Discover for many years. Recently, while checking out my account on their site, I came across a service that they offer that I never even knew about. It’s called Discover Bank, and its catch phrase pretty much says it all: “A better way to save.” As part of Discover Bank, the service offers rates that are five times the national average for their online savings account.
Online Savings Account
Discover bank offers a variety of savings options, the first of which is their online savings account. They offer a 0.90% APY on all balances, and according to their information, this is five times the national average. They derive their statistics from Informa Research Services, which states that the national average for online savings accounts stands at 0.21%.
The online savings account offers a low opening deposit of only $500 and no real minimum. However, if you want to always gain the interest, you do need to keep your balance above $500. You can make online transfers to and from the account for free. But keep in mind that federal law prohibits you from making more than six in a month. After that, fees will apply. You can also set up automatic transfers from any checking or savings account.
Regarding fees, I will not go into a complete list; just keep in mind that they certainly do exist as with most banks. They call it a “schedule” of fees. The most humorous one on the list is their “priority mail” fee which will run you $20. I wonder which post office they go to. I think it goes without saying don’t go the “priority mail” route.
From what I can tell in my research, the online savings account would be a great option to begin saving. They even include a calculator, which can show you your actual savings depending upon how much you want to contribute, how often, and for how long.
Discover Bank also now offers Money Market Accounts. They have a 0.75% APY on this account. You’ll be able to access this account through a variety of methods such as online, through an ATM, or with your Discover Card or Discover Debit Card. As with the online savings account, you can transfer money online for free (keeping under the monthly limit of six), and you can also set up an automatic savings plan as well. Their rates are about four times the national average for this account.
They have their “schedule” of fees as well. Besides the standard ones, the one to take note of is the $10 fee if you fall below the $2500 average daily balance.
Money Market accounts certainly do not earn what they used to. However, in the grand scheme of things, the rate that Discover bank offers is pretty competitive.
Discover Bank also offers some very competitive rates on their Certificates of Deposit. They have a great five year rate which currently stands at 2.10% APY. You can choose a term from as short as 3 months all the way up to ten years. The interest you accumulate from your CD can even be transferred to another account if you so desire. Your money is perfectly safe here as well, as these accounts are FDIC insured. Their rate for their five year CD seems is right at 1.5 times the national average. You can earn as much as 2.30% APY if you choose the ten year option.
Regarding fees, the only thing that I would mention is that I would never put money into a CD unless I was sure I was never going to need it until the term is up. Of course, you can never say never, but I think you get the point. The fees regarding early withdrawal from a CD are not Discover Bank specific, but go for CDs in general. Money invested in a CD should be money that you’re close to 100% sure you’re not going to need until the term is up otherwise you’ll face some hefty fees.
Discover Bank also offers something that is new to me: an IRA CD. I won’t get into a detailed explanation of what an IRA CD is, but this is quite an interesting concept. It combines the parameters of an IRA along with the guaranteed rate of a CD. I was so intrigued by this option that I was actually just checking the performance of my own IRAs to see if this might be a better option. They offer very competitive rates, starting at 0.70% APY for a three month term and going up to 3.25% for a term of ten years.
Their verbiage explains it all. You can “secure” a great rate through an IRA CD. As I see it, what this means is that you would take out some of the risks associated with your regular IRAs, which are subject to the fluctuations in the markets. Putting your money in an IRA CD gives you a locked-in rate but also limits the potential upside. A great option to consider especially in a volatile market.
The site does not have a blog, however, they do have a Tips and Advice Section. Here they offer different articles on a variety of subjects regarding saving, budgeting, and retirement. A brief overview of the articles shows that they are pretty objective in nature. They are certainly not there simply to try to sell you some of Discover Bank products, so I would consider it a viable resource.
All in all, I think that any of these products offered at Discover Bank are worth looking into and their rates are some of the most competitive in the nation. The application process could not be simpler. Basically, the application that you would fill out for any of the above four accounts is exactly the same and takes about ten minutes. After approval, you can easily fund whichever account you’ve decided on with a transfer or deposit and you’re ready to begin saving.
I have been a member of Discover Card for many years and have always been treated very well by them on the credit card side of things. They have stood by me through a lot of tough times, and believe it or not, they were the first to offer me a credit card after my emergence from my years of credit card debt. Their customer service has always been second to none and I am sure that is the case with Discover Bank as well. I think that any and all of these four options would be great opportunities for someone looking to begin saving money.
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