Earlier this week, Discover Bank announced that it has ended fees on all deposit products. This won’t be a big benefit for most savers with Discover Bank accounts since its deposit products already had few fees. This appears to be a way Discover Bank is trying to compete with Ally Bank and other online banks which promote fee friendly policies. I think for most savers, interest rates are more important than fees, unless there are unusual fees.
Below are excerpts of the Discover’s press release which announced this change:
Discover announced today the elimination of deposit account fees, promising to help customers keep more of what they earn and save. Customers with a checking, savings, money market or CD account from Discover Bank now can rest easy knowing their money will stay where they put it without fees for an occasional oversight or pressing need.
In addition to offering deposit accounts with no fees for monthly maintenance, checkbook orders or replacement debit cards, going forward, Discover is eliminating fees for insufficient funds, excessive withdrawals, falling below minimum balances and stop-payment requests. Discover banking customers also have access to 60,000 fee-free ATMs across the country.
Elimination of the Money Market Minimum Balance Fee
This change will be most beneficial for those who have Discover Bank’s Money Market Account. Before this change, the Money Market Account had a $10 fee when the balance fell below $2,500 after the third statement cycle. Now, there is no minimum balance fee. However, there still is a minimum deposit of $2,500 to open a Money Market Account.
Elimination of the Excessive Withdrawal Fee for the Savings and Money Market
Before this change, if you had more than six withdrawals (excluding ATM withdrawals) within a calendar month from your Savings or Money Market Account, Discover Bank would charge a $15 excessive withdrawal fee for each withdrawal over the six. That fee has been eliminated. However, that doesn’t mean you can now go beyond the six withdrawals per month. That limit is governed by federal regulation. Discover Bank’s Deposit Account Agreement describes what they may do if your withdrawals exceed the limit:
If during any calendar month you exceed these transaction limitations, we may refuse to pay each transaction in excess of the limitations. [...] If you exceed these transaction limitations on more than an occasional basis, we reserve the right to close your Money Market or Savings Account or change the Account to a Checking Account.
Elimination of NSF Fee and Stop Payment Order Fee
Before this change, all of Discover Bank’s liquid accounts (Savings, Money Market and Checking) had a $30 Nonsufficient Funds (NSF) fee, but Discover charged a maximum of one NSF fee per day. The NSF fee has been eliminated. Thus, if you happen to overdraw from your account, you won’t have to worry about this fee. The Deposit Account Agreement describes what happens where there are insufficient funds:
Generally, we will not pay or honor any withdrawal or transfer against your Account if there are insufficient available funds to satisfy the full amount. In this case the transactions will be returned unpaid.
Discover Bank does offer overdraft protection which provides free overdraft transfers to cover transactions that overdraw an account. It requires that you first enroll in overdraft protection. This will link an eligible account (like the checking account) to another eligible account (like the savings account). According to Discover’s FAQs, “Overdraft Protection is used to cover transactions like checks, online bill payments and ACH transfers initiated at another bank. It does not apply to ATM, debit card transactions or transfers initiated at Discover.”
Before this change, a stop payment order for Discover’s liquid accounts was “$15 per order to stop payment for 6 months.” Now the stop payment order is free.
Fees That Still Exist
Not all fees have been eliminated. Discover’s Account Guides list what has no fees and what has fees.
Discover Bank still has an outgoing wire transfer fee of $30. There continues to be no fee for incoming wire transfers.
CDs still have early withdrawal penalties (EWPs). The EWPs are harsh for the long-term CDs (18 months of interest for the 5-year CD and 24 months of interest for the 7- and 10-year CDs).
Discover Bank doesn’t charge a fee for using any out-of-network ATM. However, the ATM operator may assess a fee for ATMs outside of Discover’s no-fee network. Discover Bank does not offer any reimbursements for these fees. There are no foreign transaction fees for those who travel outside the U.S.