Discover Bank Increases Online Savings Account Rate

Discover Bank gave a small Christmas gift by raising its Online Savings Account rate on December 24th from 0.80% to 0.85%. This Online Savings Account rate had held at 0.80% since April 2012. This new rate is still a little low compared to the leaders, but it’s nice to see when one of the largest internet banks increases its savings account rate. Hopefully, it’s a sign of things to come in 2014.

Unfortunately, Discover Bank didn’t raise the Premium Savings Account rate. That rate remains at 0.85% and is now the same as the standard Online Savings Account rate. Many Discover Bank customers who had been ETrade Bank savings account customers a few years ago were upgraded to Premium status. This gave them higher rates, but that rate spread has diminished over the years.

Discover Bank Affinity Groups

AAA members used to be able to get an extra 5 basis points on all Discover Bank products. However, this bonus rate now only applies to a few of the CDs. Discover Bank also has agreements with other organizations including American Association of Individual Investors (AAII). AAII members still get a 5bps rate bonus on all products (the online savings account rate is now 0.90%). I have more details about Discover affinity groups in my last Discover Bank CD review.

Discover Bank Checkback Checking

It has been almost a year since I reported that Discover Bank’s new checking account was going to be launched soon. The account is called Cashback Checking. Discover Bank hasn’t given up on this account, but it has been dragging its feet in making it public. According to a Discover Bank CSR, applications to the Cashback Checking are by invitation only. Most invitations have been given to Discover card customers. As I mentioned in my Cashback Checking review, the account doesn’t have anything really attractive for savers. Nevertheless, it does give savers more flexibility in moving money to and from their Discover Bank accounts. I hope we’ll see it available to everyone in 2014.

Bank Overview

Discover Bank is one of the largest internet banks. It has over $74 billion in assets and $43 billion in deposits. Its overall health grade at DepositAccounts.com is an A+ with a Texas ratio of 5.57% (excellent) based on September 2013 data. Please refer to our financial overview of Discover Bank for more details. The bank has been a FDIC member since 1934 (FDIC Certificate # 5649).

How Discover Bank Compares With Other Internet Banks

Discover Bank savings account rate has remained close to the savings account rates from the other big internet banks. The current 0.85% rate matches the savings and money market rates at Ally Bank. It’s a little higher than Capital One 360’s savings account rate (0.75%).

There are a few new big internet banks that continue to hold a rate advantage over Discover Bank. These include GE Capital Bank, Barclays and CIT Bank. They continue to offer a 0.90% rate on their savings accounts.

In addition to the above big players, there are a few smaller internet banks that are trying to stand out with a 1.00% APY savings account. These include MySavingsDirect and First Trade Union Bank. These banks don’t have the best long-term record of maintaining top rates so we’ll have to wait and see how long they’ll last as rate leaders.