Discover is best known for its rewards credit cards, but that’s only part of its business. It is a full-service online bank and a payment services company. Discover provides banking and retirement solutions for individuals. Discover is also a lender that offers personal, student and household loans.
As an online-only bank, Discover does not have a local branch that customers can visit in person for banking. However, that doesn’t mean they are inaccessible. Discover is known for its excellent customer service available 24/7.
Here’s our review of Discover Bank and its personal banking options to see why they’ve been named the best checking account for avoiding fees and best for cash back on Forbes Advisor’s list of the best online banks.
Account data and Annual Percentage Return (APY) are correct as of May 27, 2022.
Account Basics
Verification (Cashback Direct Debit)*
Finding checking accounts is somewhat unusual in the banking world. That’s because — similar to many of its credit card products — discovering checking accounts can earn cash-back rewards. The Discover Cashback Debit Account allows customers to earn 1% cash back on monthly purchases of up to $3,000 with their debit card.
If you hit the $3,000 monthly limit, you’ll get $30 cash back every month. For over a year, you can earn $360 in cash back just by shopping with your debit card. If you only spend $2,000 a month on debit card purchases, you’ll still get $240 back in one year.
Another feature that Discover is known for with its checking accounts is that it doesn’t charge any fees. There are no fees for account maintenance, check orders, use of Internet ATMs, online bill payments, or changing debit cards. There are no minimum balance requirements or activity requirements for the Discover Cashback Debit Account.
Savings
Discover Bank offers an online savings account that pays a competitive 0.70% APY. If you have $10,000 in your savings account, you’ll earn more than $70 a year in interest. Interest is compounded daily and paid monthly.
There are no fees for using the Discover Online Savings Account. There is also no minimum balance requirement. By comparison, a Bank of America Advantage savings account requires a balance of at least $500 to waive the $8 monthly fee.
Money Market
Money market accounts take advantage of the profitability of savings accounts while also providing verification capabilities for more general accounts. Discover Bank’s money market accounts give customers access to ATMs, debit cards and check writing.
Convenience isn’t the only highlight of Discover’s money market accounts. These accounts offer high earning potential. Earn 0.60% APR on account balances under $100,000. Earn 0.65% APY on balances of $100,000 and above. A 5-year savings balance of $20,000 yields $120 in the first year and $609 in savings after five years.
There are no fees and no minimum balance requirements for Discover money market accounts. Money market accounts allow you to earn more interest than traditional checking accounts.
CD
Discover Bank Certificate of Deposit (CD) is a versatile high-yield account that provides customers with guaranteed returns. Discover CDs run for anywhere from three months to ten years, depending on your needs.
Discover offers competitive returns for its CDs, slightly less than the best CD plans on the market. Below is the interest earning potential of Discover’s CD account for various tenors with an initial deposit of $10,000:
Discover offers a total of 12 CD term lengths.
The minimum deposit for a CD account opened through Discover is $2,500. If for any reason you need to withdraw money before it is due, you can withdraw it but you will have to pay a penalty. The prepaid penalty depends on the specific length of the CD term. The penalty for CDs with a maturity of less than one year is three months of simple interest.
Opening a CD account is generally considered a safe investment because you have FDIC insurance and guaranteed returns regardless of the market. Your CD rates are locked in for the duration of your term. The longer the CD runs, the higher the rate obtained. You can also create CD ladders with Discover CDs with different expiration dates to establish some flexibility specifically for withdrawing funds.
IRA CD*
Another option that Discover offers is the IRA CD. Customers can choose between Roth IRA CDs and traditional IRA CDs, depending on their needs. Roth IRA CD:
- Financing in after-tax dollars
- Contributions are not tax deductible
- Income is tax-free
- Contributions can be withdrawn at any time without penalty from the IRS
Traditional IRA CDs are structured differently. Regular IRA CDs:
- Funded by pre-tax funds
- tax-advantaged income
- Contributions are tax deductible within certain limits
- Can withdraw funds without penalty until age 59½
IRA CDs issued through Discover can use funds from other retirement accounts. Customers can also transfer an IRA from another financial institution to a Discover IRA CD.
Discover’s IRA CDs have terms ranging from three months to 10 years, and they pay APY similar to Discover’s regular CDs. Discover IRA CDs open for just $2,500.
Access anytime, anywhere
Discover customers can access their accounts in a number of ways. Accounts are always accessible online.
Discover Mobile is the bank’s highly rated mobile app for iOS (4.9 stars out of 5 on the App Store) and Android (4.7 stars on Google Play). Not only can you access all of your Discover accounts through the app, but you can also use mobile check deposits by taking a picture with your phone or tablet.
Convenience is an important aspect of the Discover mobile app. You can easily log into your account with Touch ID. iPhone users can also log in using Face ID. People using the app can turn on Quick View, which allows you to check your account balance without actually logging into your account. Discover ATMs can also be found via the mobile app.
Discover provides customers with more than 60,000 ATMs. All ATMs in its network are free ATMs. Other banks may charge you if you use an out-of-network ATM.
Another nice feature is access to the digital payment network Zelle. Discover and Zelle have partnered to make it easy for customers to connect their bank accounts to the service. Cell allows you to send and receive money to and from virtually any bank account in the US. There is no charge for this service.
Advantage
- 1% cash back on purchases up to $3,000 per month with a debit card
- No monthly fees, overdraft fees or minimum balances
- Online payment function
- Over 60,000 free ATMs
- US customer service available 24 hours a day, 365 days a year
- Highly rated mobile app
- Competitive APY on savings account and CD
- IRA CDs that can be used for retirement investing
- A variety of accounts to meet different financial needs: checking accounts, savings accounts, CDs, credit cards, personal loans.
Disvantage
- no physical location
- no car loan
- Out-of-network ATM fees are not reimbursed
How Discover Bank stacks up
Discover made a name for itself with its online banking services. They offer competitive rates for most accounts with no minimum balances or fees. Checking accounts earn 1% cash back, which is not common in banking.
Discover supports its accounts and even provides comparisons with other banks on its website so you can see the differences. Its transparency is nice. Flexibility is one of Discover’s best qualities, and it is reflected in all of its banking products.
If you’re intimidated by the idea of online-only banking, Discover Bank isn’t the best choice for your next bank account. Customers who can manage without a local bank branch should benefit from Discover Bank’s high-yield benefits.
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