Review of the Discover Bank Cashback Debit Account
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.
BUT,
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.
Availability
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).
Bank Overview
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.
Additionally, Federal anti-fraud protection is clearly better for credit cards vs. debit cards.
You're not kidding about that 111. With a credit card you have at most trivial and in most cases no liability for fraud at all. With a debit card your fraud liability is potentially UNLIMITED. That can happen if you don't report the fraud within a couple of statement cycles.
Uncharacteristically, I'm currently playing 6 different FI bonus games at the moment. It's not really something that is going to have any effect on my lifestyle, but I'm sort of hooked on the challenge of the game. It's a nice hobby and distraction when your life is as boring as mine these days. And the money makes it feel like something useful. Some of them are about opening savings accounts and they send a debit card. I never activate them. I don't even like to touch them! I treat them like they are Covid infected! That's some scary plastic. The number of bonus games I can play is very limited because I don't do any that need a direct deposit or debit card charges... which the great majority require.
Also uncharacteristically I applied for the first new credit card I've had in at least 20 years. I've always had just one card... really didn't care about having any others. But...they made me an offer I couldn't refuse at Chase... including preapproval and a bonus. So I added it to my bonus game roster, and this one I will actually keep and use. What clinched it is that this card compliments the features of the other one I have (which is also a Chase by the way!) so now, between the two cards I have all the bells and whistles in terms of rewards if I care to work them.
What I find funny is that this will INCREASE my credit score, which is already over 800. That's actually kind of funny. All the credit reporting sites kept telling me that my only FICO weakness was that I didn't apply for enough credit. Not that I ever cared because I never borrowed a penny in my life. But either way, this should put me at the highest level possible (after the hard pull comes off the record.) That's just a pride thing... feels nice... if you're at the mid to high 700s the extra points don't make any difference in credit decisions anyway.
I have a trust account at Discover, but it's just a place holder. A family member has one of their credit cards though and gets some use out of it.
Oh I meant to mention, the missing piece in the discussion so far as to why some people get debit cards rather than credit cards is largely answered by the fact that not everyone can qualify for a credit card, but most can get a debit card.
https://www.wsj.com/articles/payments-companies-give-credit-where-its-dueto-debit-11604239201
That article suggests it's due to stimulus checks, and to tighter underwriting on credit cards.
With a couple of special-purpose exceptions my debit cards are for Rewards Checking accounts only, do not leave the house, and are used only at online payees I know well and trust - for example some utilities.
I have a grandfathered Penfed 5% off gas purchases that they take off each bill. It's the only account I have with Penfed.
You can get cash back if you purchase items online using the Rakuten website once you sign up for an account. Once you get to Rakuten you search for the store you want. It shows the cash back percentage and you go to the store website via Rakuten and you get the discount. The discount in most cases is 1% but you can get up to 10%. They mail you a check I believe quarterly. Works like Upromise. I got a Fidelity Charge card and a $200 bonus. The only way I get 2% is if I deposit my rewards to Fidelity account which I do have. So we use the Citi charge card for a base 2%.
2% all purchases Citicard
3% Chase for restaurants and drug stores including medication. 12 months 5% grocery.
3% Amex grocery.
3% Online purchases BOA card.
My Chase Freedom card has rotating 5% categories and a base cash back rate of 1%. They also have a feature similar to Rakuten where you can shop at stores through their website in your account and get additional discounts. You pay with the card and the extra discount is added to the card's cash back account. I have not used that in years, but I think it is still there.
That particular card is not available anymore but I am betting other Chase cards and probably other kinds of cards offer that same feature.
Rakuten.com has many more on line sites than Chase that you get cashback. The Chase card I have gives discounts on a few on line sites that change often.
I just looked at my Chase account and it looks like both of my cards give you access to "Shop through Chase." It says there are 450 stores. And it goes up to 15% back. I see lots that are in the 4-5% range. Maybe Rakuten has more, I don't know.
There are also other deals in Chase when you go to redeem your points.
About the tax issue... should cash back be considered income. Every time something you buy is on sale, it's the functional equivalent of getting "cash back." Now the last thing I want to do is give these tax and spend politicians any ideas because taxes are already about 10 times higher than they should be. But if a cash back discount is considered income, so should the difference between the regular price and the sale price be considered income. Either one though is clearly NOT income, it is a reduction in expenses.
I have two Chase credit cards. One of them is the Freedom Unlimited that pays a 1.5% base rate and seems to have the same other percentage discounts as yours on dining and drug stores, etc. My other card is the original Freedom card that has a base rate of 1%.
I am able to use Shop through Chase with either of these cards through my online account.
Got 10% off Under Armour using Rakuten a few days ago and 3% using my BOA card. Bought a new laptop and got 2% from Ratuken and 3% BOA.
I have never used it because I primarily use topcashback
chase calls it points
https://ultimaterewardsearn.chase.com/
I think this may have also appeared here in DA.com.