Discover Bank is the latest of the large internet banks to raise their savings account rate to 1.75% APY. Discover Bank’s Online Savings Account rate increased 10 bps this morning to 1.75% APY. In addition, it raised the rates by 10 bps of both tiers of its Money Market Account. The top tier now earns 1.65% APY ($100k+) and the lower tier earns 1.60% APY (below $100k). Lastly, several CD rates were increased. Rate gains ranged from 5 bps to 15 bps. The rate gains weren’t enough to make any of the CDs competitive with the rate leaders.
Online Savings Account
The Online Savings account now earns 1.75% APY on all balances. Several other large internet banks have already raised their no-minimum savings account rates to 1.75% APY. These include Ally, American Express, Barclays and Synchrony. So Discover is a little behind.
Discover’s Online Savings has a long history. DA began tracking it in 2009 when it had an APY of 1.85%. By 2010, the APY had fallen to 1.60%, and the rate continued its gradual decline until it finally settled at 0.80% in April 2012. With four modest rate increases (totaling only 15 bps) over the next five years, the Online Savings APY finally started to climb in June 2017. In the past year, the Online Savings has added 74 bps.
More than a year ago, Discover Bank removed the $500 minimum opening deposit requirement for the Online Savings account, which can now be opened with any amount. It also has no monthly maintenance fee or minimum balance fee, but there is an Excessive Withdrawal Fee of $15 per withdrawal beyond the six allowed per month.
Thanks to DA reader, Maecl, for his continuing Forum posts, including today’s post about the Online Savings rate increase.
Savings Account Bonus
Discover Bank has been regularly offering a bonus for new customers who open an Online Savings Account and meet specific deposit requirements. The bonus recently expired on June 29th, but I expect to see it back soon. The bonus had been either $150 or $200 for deposits of $15k or $25k, respectively. Once this bonus returns, you’ll be able to find the details in this blog post.
Discover Bank’s Money Market account has two new tiered rates: 1.65% APY for balances of $100k and above, and 1.60% for balances below $100k.
|1.70*%||$100k||-||Discover Bank||Money Market|
|OTHER TIERS: 1.65% → Up to $100k|
Unlike the Online Savings, the Money Market account requires a minimum opening deposit of $2.5k. There is also a minimum balance requirement of $2.5k to avoid a $10 fee per each statement cycle.
Must have an average daily balance of at least $2,500 beginning on the third
statement cycle; otherwise, a monthly minimum balance fee will be charged.
The advantage of the Money Market account over the Online Savings account is quite simple: access to your money, using checks and/or a debit/ATM card. Standard checks are free (both the initial order and re-orders), and there’s fee-free access to more than 60,000 ATMs throughout the U.S. Like the Online Savings account, the Excessive Withdrawal Fee (EWF) of $15 per withdrawal beyond the six permitted per month applies, but the EWF does not apply to ATM withdrawals.
First Fee Forgiveness Program
In each calendar year (January 1 through December 31), the first eligible fee charged to
your Money Market Account will be automatically waived and credited to your account. Excessive Withdrawal, Insufficient Funds, Stop Payment, and Money Market Minimum Balance fees are eligible for the first fee forgiveness program. Wire transfer fees are not eligible, and will not be waived even if they are the first fee on an account in a calendar year.
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.
Discover Bank’s CD Rates
Discover Bank increased several of its CD and IRA CD rates. Rates for terms of 18 months to 10 years increased 5 to 15 bps. The gains weren’t enough to make them competitive with the rate leaders.
The minimum opening deposit for any of Discover Bank’s CDs is $2.5k, with no balance cap. The CDs are also available as IRAs (Traditional and Roth) earning the same APYs and with the same funding requirements. According to Discover’s FAQs, “account ownership types including Trust, Custodial, Guardian, and Estates.”
Discover Bank’s long-term CDs opened or renewed before 3/15/2013 had fairly small early withdrawal penalties (EWPs). Those penalties have increased twice, and now the CDs with terms from 5 to 10 years have hefty penalties. The current EWPs are as follows:
Less than 1 year: 3 months simple interest
1 year to < 4 years: 6 months simple interest
4 years to < 5 years: 9 months simple interest
5 years to < 7 years: 18 months simple interest
7+ years: 24 months simple interest
Higher Rates for AAII Members
Discover Bank's agreement with the American Association of Individual Investors (AAII) is still in effect. AAII members receive a 5 bps rate bonus on all products, with the Online Savings earning 1.80% APY and Money Market Account offering 1.70% APY and 1.65% APY.
Discover Bank used to have a similar nationwide agreement with AAA. Some AAA regions may still list Discover Bank, but my region (Florida, Georgia, and Tennessee) now only lists products from Auto Club Trust, FSB.
Headquartered in Greenwood, Delaware, Discover Bank is a “pure” internet bank, having 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 the Online Savings and/or Money Market accounts must done online or by phone (1-800-347-7000). If you’re an AAII member, make sure to use Discover Bank’s web page specifically set up for this organization.
Discover Bank has an overall health grade of "A" at DepositAccounts.com, with a Texas Ratio of 7.84% (excellent) based on March 31, 2018 data. In the past year, Discover Bank has increased its total non-brokered deposits by $3.32 billion, an excellent annual growth rate of 9.32%. 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. With assets in excess of $100 billion, Discover Bank is currently the 27th largest bank in the country.
How The Online Savings Account Compares
When compared to the 215 Savings Accounts tracked by DepositAccounts.com that are nationally available with low minimum balance requirements, six Savings Accounts have higher APYs than Discover Bank’s Online Savings Account. Eight other institutions are also offering 1.75% APY.
The above rates are accurate as of 7/6/2018.