Discover Bank (Discover) is promoting its Cashback Debit account, which currently earns 1% cash back on up to $3,000 in debit card purchases each month. Instead of earning interest, you can only earn cash back rewards from your debit card purchases. For those who keep a small balance in their checking and prefer using debit cards, this checking account might be for you. Even if you don't plan on using its debit card, it can be a convenient account if you have the Discover Online Savings account.
Unlike the vast majority of other cashback reward checking accounts, Discover’s Cashback Debit account has no qualifying requirements – no minimum number of transactions, no required ACH transactions, no required number of logins. Nothing.
This is a fee-free account. The Cashback Debit landing page spells out everything that’s free:
- Monthly maintenance
- Withdrawals at over 60,000 ATMs nationwide
- Replacement debit card
- Standard checks
- Official bank check
- Online bill pay
- Expedited delivery for debit card replacement
- Expedited delivery for official bank checks
- Deposited item returned
- Stop payment order
- Insufficient funds
- Account closure
Cashback Debit History
I first wrote about the Cashback Debit account in 2013, in anticipation of the account finally being launched. Discover had been hinting that a new checking account was in the pipeline for about two years. Existing Discover customers received a preview (albeit premature) of the Cashback Debit in January 2013 when logging into their accounts. The launch was delayed for almost another two years and was initially available only to Discover credit card and deposit customers. The Cashback Debit account originally offered 10¢ bonus on up to 100 transactions per month for each debit card purchase, online bill pay, and check written. The 1% cash back on up to $3k in monthly debit card purchases went into effect in February 2018; at the same time, the Cashback Debit account became available to everyone.
In the past, Discover offered sign-up bonuses (up to $300) when opening a new Cashback Debit account. It’s been a while since I’ve seen one mentioned, but it never hurts to ask, as DA reader, Carpline, mentioned in a 2015 Forum post. If you come across a bonus, please leave a comment or Forum post.
Discover Credit Card
Discover is probably best known for its credit cards. Unfortunately, if you have a Discover Bank account, you don't receive any extra benefits from having a Discover credit card. When Ally Bank offered a credit card, you could qualify for slightly higher cash back rewards when you deposited the cash back earnings into your Ally Bank account. That's not the case with Discover. Nevertheless, Discover credit cards do have some nice cash back features.
Discover’s credit cards offering three different ways to earn cashback:
- Unlimited 1% cash back on all purchases
- 5% cash back at different places each quarter, when activated
- New cardmembers get an automatic, unlimited dollar-for-dollar match on all of the cash back earned at the end of the first year
Discover offers four different ways in which to redeem credit card cashback earnings
Turn your rewards into cash in any amount, any time. Deposit into your bank account or apply to your Discover bill as a statement credit.
Pay with your Cashback Bonus at checkout at Amazon.com and with PayPal.
Get gift cards starting at only $5. Plus get an added bonus on every card!
Make a difference and donate to a charitable cause.
Online Savings Account
Earnings from a Cashback Debit account can be automatically transferred into a Discover Online Savings Account every month.
Discover has offered bonuses when opening a new Online Savings account in the past, but there’s not any mention of a current bonus on Discover’s website. But once again, it never hurts to ask.
The Online Savings account has no minimum opening deposit requirement. It also has no monthly maintenance fee or minimum balance fee. While there is no Excessive Withdrawal Fee for any withdrawal beyond the six allowed per month,
If you exceed these transaction limitations during any calendar month, we may refuse to pay each transaction in excess of the limitations. If you exceed these limits on more than an occasional basis, we reserve the right to close your Account.
We are currently not enforcing the monthly transaction limit on savings and money market accounts. Therefore, exceeding these limitations on more than an occasional basis will not result in the closure of your account.
Overdraft Protection – Discover offers free overdraft transfers from a savings or money market account to a checking account to cover transactions that cause the checking account to go negative. This service makes it easier to keep a higher balance in a savings account (rather than in a checking account) so it can earn more interest. There’s one difference between this service and the one offered by Ally: Discover does not cover debit card purchases. According to Discover’s Overdraft Protection Service Agreement Addendum, they deny debit card purchases if the checking balance isn’t large enough.
5. TRANSFER REQUIREMENTS
b. The Overdraft Protection service does not cover ATM withdrawals, or, POS debit transaction. POS debit transactions and ATM withdrawals will not be completed if sufficient funds are not available.
Discover Bank’s ACH Transfer Features
ACH bank-to-bank funds transfer service can be a deal maker or breaker for opening an account at an internet bank. Discover Bank does allow large ACH transfers to be initiated from its online account center. According to the Account Center Banking agreement,
Incoming limit is $250,000 per 30-day rolling period for each Account Center registered owner. Outgoing limit is $250,000 per 30-day rolling period for each Account Center registered owner. The limits above are subject to a combined incoming/outgoing limit of $300,000 per 30-day rolling period for each Account Center registered owner.
Headquartered in Greenwood, Delaware, Discover Bank is a “pure” internet bank with no brick-and-mortar branches. To qualify to open an account of any kind with Discover Bank,
each Account owner must be a U.S. citizen or other U.S. person, be at least 18 years old, have a valid Taxpayer Identification Number, have a valid physical U.S. address and provide an electronic consent and signature.
Applying for a Discover Cashback Debit account must done online or by phone (1-800-347-7000).
Discover Bank has an overall health grade of "A+" at DepositAccounts.com, with a Texas Ratio of 5.32% (excellent) based on December 31, 2020 data. In the past year, Discover Bank has increased its total non-brokered deposits by $9.58 billion, an excellent annual growth rate of 17.91%. Please refer to our financial overview of Discover Bank (FDIC Certificate # 5649) for more details.
As one of the largest financial services firm in the country, Discover Bank traces its roots back to the Greenwood Trust Company, which was established in 1911. Discover Bank came into being following the purchase of the Greenwood Trust Company in 2000. As one of the largest internet bank in the country, with assets in excess of $111 billion, Discover Bank is also currently the 30th largest bank in the country.
Cashback Debit Account Bottom Line
With no fees, no qualifying requirements, and maximum potential annual earnings of $360, this is the most lucrative cashback debit card account from a major online bank that I’m familiar with.
Axos Bank also offers CashBack Checking that allows you to earn 1% cash back with your debit card for up to $2,000 per month in spending. It does have a minimum balance requirement of $1,500 to qualify for the cash back.
Radius Bank (now LendingClub Bank) offers a Rewards Checking in which you can earn unlimited 1% cash back with your debit card. To qualify for the cash back, you must either receive $2,500 worth of direct deposits into your account or keep an average balance of $2,500 or more.
The above information and rates are accurate as of 3/26/2021.