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.
What Is Digit?
You don’t have to direct or schedule your Digit 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. When it first launched, it was functionally unique, though it has since spawned imitators.
Digit is free to join and use for 30 days. After that, it costs $2.99 per month. A 1% annualized yield (a “savings bonus,” in Digit’s parlance) offsets this monthly charge, though Digit only pays out once every three months. There’s no minimum balance required at any time.
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
Here’s how Digit works.
Sign-up, Algorithm, and Account Management
To get started with Digit, you need to provide some basic personal information and contact details. You’ll then be asked to securely link your bank account with your new Digit account. You won’t need to provide your account number or routing number, and the link usually happens near-instantaneously.
Once you’re set up with your FDIC-insured Digit savings account, the app 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 relatively small amounts.
Bear in mind that you may not receive a notification of each withdrawal. However, 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.
Let’s take a closer look at some of Digit’s key features.
Digit Pay is a free billpay service designed specifically to help you pay down credit card debt. Activate it when you set a “credit card debt” savings goal in the app.
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 up to two overdraft fees.
Digit has a live customer support team available by phone 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 Balance Requirements
Digit savings accounts don’t have balance requirements. This isn’t always true of comparable services offered by big banks like U.S. Bank and Bank of America.
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.
7. 1% Quarterly Savings Bonus
Digit savings accounts don’t accrue interest in the traditional sense, but they do have de facto yields: 1.00% APY, paid quarterly as a Savings Bonus. To qualify for each quarter’s Savings Bonus, you need to maintain your Digit savings account for the entire three months prior. The bonus is annualized, meaning you earn 0.25% of the balance in your account at the end of each quarter.
1. $2.99 Monthly Maintenance Fee
Digit has a long fee-free introductory period – 100 days – but eventually the bill comes due. After the intro period ends, you’re automatically charged $2.99 per month. When you’re just starting out and your balance is low, this charge is likely to swamp your Savings Bonus. You’d need at least $3,600 in your account at the end of the quarter to make it up, in fact.
2. 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.
3. 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, Digit 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.