Discover Bank increased the rates today of its Online Savings Account and Money Market Account by 10 bps. The Online Savings Account now earns 1.50% APY on all balances. The Money Market Account now earns 1.40% APY on balances of $100k and over. Balances under $100k now earn 1.35% APY. Discover Bank also increased the rates of eight of it CDs.
Discover Bank joins several other large internet banks that have raised their no-minimum savings account rate to 1.50% APY. This rate is no longer the high-end for large internet banks. Two large ones now offer 1.55% APY on their no-minimum savings accounts (CIT Bank and Synchrony as of 2/23/18). Nevertheless, this move should put pressure on those few remaining large internet banks that have been keeping their savings account rates below 1.50%.
The 1.50% APY applies to all balances. Last March, Discover Bank removed the $500 minimum deposit requirement for opening the savings account. Now the Discover Savings Account has no minimum opening deposit. Plus, it has no monthly maintenance fees.
The last time Discover Bank was offering a rate this high on its savings account was January 2010 when the APY was 1.60%. The lowest rate was in 2012 and 2013 when the savings account rate was 0.80%. The rate slowly went up for the next three years. Last year was the first year that we’ve seen steady increases. It started in April when the APY increased to 1.01%. Discover then followed with rate increases in June, August, October, December, January and then today.
Thanks to DA reader, Buckeye61, for his Forum post about these rate increases.
Discover Money Market Account
Unlike the savings account, the money market account has a minimum opening deposit of $2,500, and a minimum balance requirement of $2,500 to avoid a $10 fee for each statement cycle. The advantage of the money market account over the savings account is access to your money with checks and with a debit/ATM card. Standard checks are free, and there’s no-fee access to over 60,000 ATMs in the U.S.
|1.40*%||$100k||-||Discover Bank||Money Market|
|OTHER TIERS: 1.35% → Up to $100k|
As with any money market account, no more than six withdrawals per month are allowed. Each withdrawal over that amount is charged a $15 fee. This Excessive Withdrawal Fee does not apply to ATM withdrawals.
Discover Bank’s ACH Transfer Features
One important feature of an internet bank is its ACH bank-to-bank funds transfer service. Discover Bank does allow large ACH transfers to be initiated from its online account center. According to the Account Center Banking agreement, the incoming and outgoing limit is $250,000 per 30-day rolling period with a combined incoming/outgoing limit of $300,000 per 30-day rolling period.
Discover Bank CDs
Eight of Discover’s CDs and IRA CDs for terms from 1-year to 7-year increased today, but the increases were relatively small, ranging from 5 to 15 bps. None of the new rates make the CDs rate leaders. The new rates are shown below. The IRA CDs had the same rate increases. To review all of them, please refer to the CD rates section of our Discover Bank page.
In addition to the rates being unimpressive, the CDs have a harsh early withdrawal penalty (EWP). That is especially the case for the 5-, 7- and 10-year CDs. As stated in Discover Bank’s Certificate of Deposit Account Guide, the EWP reads as follows:
1-3 years: 6 months simple interest on principal amount withdrawn
4 years: 9 months simple interest on principal amount withdrawn
5 years: 18 months simple interest on principal amount withdrawn
7+ years: 24 months simple interest on principal amount withdrawn
DA readers may recall that in March 2013 and February 2014, Discover Bank increased its EWPs, making the option of an early closure much less attractive.
Higher Savings Account Rate for AAII Members
Discover Bank still has an agreement with the American Association of Individual Investors (AAII). AAII members still receive a 5-bps rate bonus on all products (the Online Savings Account APY is now 1.55%, and the top APY of the Money Market Account is 1.45%).
Discover Bank used to have a similar agreement with AAA for all of AAA’s regions in the nation. Some AAA regions may still list Discover Bank, but my region (Florida, Georgia and Tennessee) now only lists products from Auto Club Trust, FSB.
Savings Account Bonus
Discover Bank has regularly offered a bonus for new customers who open a savings account and deposit the required amount. The latest bonus offers up to $200 for a $25k deposit. For more details, please refer to this blog post.
Recent Changes to Cashback Checking
Discover Bank recently changed its Cashback Checking Account. Customers now earn 1% cash back on up to $3,000 in qualifying debit card purchases each month. Also, the account is now available to everyone. The main downside continues to be that the account earns no interest. I have more details in this blog post.
Headquartered in Greenwood, Delaware, Discover Bank is an 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 the Discover Savings Account 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 6.65% (excellent) based on September 30, 2017 data. In the past year, Discover Bank has increased its total non-brokered deposits by $3.48 billion, an excellent annual growth rate of 10.51%. 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. Today, Discover Bank has assets in excess of $96 billion.
How Discover Bank’s Online Savings Account Compares
When compared to 209 nationally-available savings accounts from banks and credit unions tracked by DepositAccounts.com with similar balance requirements, Discover’s Online Savings Account APY currently ranks eighth, tied with four other banks.
The above rates are accurate as of 2/23/2018.