Discover Bank Review - Everything You Need to Know

Earn high-interest savings and make use of a rare cashback debit card

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Discover Bank is an FDIC-insured online bank with numerous options, including a debit card that offers cash back rewards. There is one branch located in Greenwood, Delaware, but most customers manage their accounts online or with Discover’s mobile app.

Who Is Discover Bank Best For?

With a robust lineup of products and services, Discover Bank can handle most of your financial needs. It may be a good fit for those who want:

Pros

  • Cash back rewards for using your debit card

  • Set up online bill payment directly from the money market account

  • No minimums or monthly fees on savings and checking accounts

Cons

  • No “liquid” CDs, although standard rates are competitive

  • No way for most customers to deposit cash

  • $2,500 minimum deposit for CDs and money market accounts

Types of Accounts

Discover Bank offers the following types of accounts:

  • Online Savings Account
  • Money Market Account
  • Cashback Debit (Checking) Account
  • CD accounts
  • IRA CDs and trust accounts

Online Savings

The Discover Online Savings Account is a classic online bank account with a high interest rate and no fees.

  • Earn two percent APY on your money, at any account size
  • No minimum initial deposit or ongoing minimums
  • No monthly fees
  • Fund your account with online transfers, check deposits (mobile or by mail), or wire transfers

Like many online banks, Discover’s Online Savings Account does not include an ATM card for cash withdrawals. However, you can transfer funds to an external checking account, a Discover Cashback Debit account, or a money market account when it’s time to spend money.

Money Market Account

The money market account is an excellent place to earn interest while keeping your funds available for spending. Discover Bank’s money market is notable because the account offers online bill payment—some banks only include online bill payment from checking accounts. That said, federal law limits certain withdrawals (like bill payments) to six per month, so it’s not for frequent spending.

  • Deposit a minimum of $2,500 to open an account
  • Keep at least $2,500 in your account to avoid a monthly fee of $10
  • Earn 1.85 percent APY on balances under $100,000
  • Earn 1.90 percent APY on balances of $100,000 or more
  • Withdraw cash from over 60,000 fee-free ATMs in the Allpoint and MoneyPass ATM networks
  • Spend with your debit card, online bill payment, or paper checks

The money market account at Discover pays slightly less than Discover’s savings account, and that makes sense: You have easy access to the money. By comparison, Capital One 360 pays 0.85 percent on balances below $10,000, and two percent on balances of $10,000 or more—but does not include online bill pay.

Cashback Debit (Checking) Account

Discover Bank’s checking account is a free checking account that pays rewards when you use your debit card. Most debit cards don’t offer rewards, and cashback rewards are particularly rare on debit cards, so that’s a unique feature.

  • Earn one percent cash back when you use your debit card (maximum $300 per month in rewards)
  • Pay no monthly fees
  • Withdraw cash from over 60,000 fee-free ATMs in the Allpoint and MoneyPass ATM networks
  • Deposit checks with your mobile device
  • Get free checks when you open your account, and order more checks at no charge
  • Pay one-time and recurring bills for free with online bill payment

If you have a Discover Online Savings account, you can automatically deposit cash back rewards into that account. Depending on how much you spend (and how much you hope to save), that can be a nice addition to your savings.

CD Accounts

Discover Bank offers numerous CDs, some with extremely long terms. To buy a CD, you need a minimum of $2,500. Rates are as follows:

CD Accounts
3 Months 0.35% APY
6 Months 0.65% APY
9 Months 0.7% APY
12 Months 2.65% APY
18 Months 2.65% APY
24 Months 2.70% APY
30 Months 2.70% APY
3 Years 2.75% APY
4 Years 2.80% APY
5 Years 3% APY
7 Years 3.05% APY
10 Years 3.1% APY

Discover’s CDs are traditional high-yield CDs with early-withdrawal penalties. If you cash out before maturity, you may pay a penalty for doing so. The penalty amount depends on the term of your CD, and it can result in you receiving less than you originally deposited:

Early-Withdrawl Penalties
Less than 12 months 3 months of interest
12 months to four years 6 months of interest
Four to five years 9 months of interest
Five to seven years 18 months of interest
Seven years or longer 24 months of interest

IRA CDs

If you’d like to use CDs in an individual retirement account (IRA), you can do so at Discover. The same lineup of CDs listed above can be purchased in a Traditional or Roth IRA.

  • Buy a CD with at least $2,500
  • Pay no early withdrawal penalty when early redemption is due to a required minimum distribution (RMD)
  • Pay no IRA custodial fees

Other Types of Accounts

Discover Bank accommodates a variety of needs. You can open trust accounts, and the well-known Discover Card is an option for anybody who needs a credit card with no annual fees. Discover also handles student loans, personal loans, and home equity loans.

How to Bank With Discover

To open an account, visit Discover.com or call 1-800-347-7000. You’ll need to provide personal details required by most financial institutions:

  • Names of all account owners
  • Social Security Number (SSN) or Tax ID Number (TIN) of all account owners
  • A physical address of account owners (mailing address optional)
  • E-mail address and phone numbers of account owners
  • Mother’s maiden name
  • Employment and income information
  • Bank account information for any accounts you wish to link to Discover Bank 

Account Fees

Overall, fees at Discover bank are competitive with other online banks. A notable exception is the money market account: If you fall below the $2,500 average daily balance requirement, you pay $10 per month.

First Fee Forgiveness: Everybody makes mistakes. Discover waives one fee for customers each calendar year under the First Fee Forgiveness program. Eligible fees depend on your account type and may include insufficient funds, stop payment, excessive withdrawal (more than six per month), and money market minimum balance fees.

One per day: If you overdraw your checking or money market account, you don’t have to worry about Discover bank playing games with the order of transactions to maximize fee revenue. The bank charges a maximum of one overdraft charge per day.

Returned deposits: A highlight at Discover bank is the lack of fees for deposits you make that get returned. That’s handy if people who pay you occasionally bounce checks. Still, it’s best not to abuse this feature, as excessive returned items will likely result in account closure.

Other fees:

  • Insufficient funds fee: $30
  • Official bank checks: $0
  • Stop payment: $15
  • Outgoing wire transfers: $30

Money market account fees: In addition to the fees above, the money market account imposes the fees below.

  • Excessive withdrawal fee (after six per month): $15
  • Minimum balance fee (if your average daily balance falls below $2,500): $10

Funds Availability

When you deposit funds to your account, Discover Bank may place a hold on those deposits to reduce risk. As a result, you can’t spend the money until the hold clears. Discover’s policy for mail and mobile deposits is outlined below, but there are always exceptions. It’s wise to call customer service if you’re depositing a significant amount of money or if the deposit is important for any reason.

Overview: For most checks, including personal checks, USPS Money Orders, cashier’s checks, and other official checks, the first $200 should be available on the next business day after Discover Bank processes your deposit. The remainder should be available on the second business day after processing. Two business days is quite reasonable, especially for personal checks—but you’re still responsible if checks bounce.

U.S. Treasury checks: Checks drawn on the Treasury should be available on the first business day after Discover processes your deposit. But for Treasury deposits greater than $15,000, only the first $15,000 may be available within one day. The remainder should be available after five business days.

Significant deposits: If you deposit more than $5,000 in one day (with one or more checks—including official checks), the first $200 is typically available on the next business day. The next $4,800 should be available on the next business day, and the remainder is often available by the fifth business day after processing.

Discover can hold deposits longer for a variety of reasons. Activity in your account, features of the check, and external events (among other things) can lead to long hold times, so verify with a representative before you deposit money you’ll need anytime soon.

Electronic deposits: When you transfer money by initiating the transfer at a different bank, the funds are available when Discover Bank receives the transfer. If you request the transfer with Discover, they estimate four business days of wait time. Wire transfers received before 4 p.m. Eastern should be available on that same business day.

New customers: For the first 30 days after you open your account, Discover Bank may impose longer hold times.

  • U.S. Treasury checks: The first $5,000 should be available within one business day, and the remainder should be available after seven business days.
  • Other official checks: For Cashier’s checks, USPS Money Orders, and other government checks, the first $200 should be available within one business day. The next $4,800 should be available on the second business day, and the remainder should be available by the seventh business day after Discover processes your deposit.
  • Other checks: For personal checks and other items, the first $200 should be available within one business day, and the remainder should be available within seven business days.

    About Discover Bank

    Discover Bank, an FDIC-insured bank headquartered in Riverwoods, Ill., was best known for the payment card that launched in 1985. Around the same time, Discover Financial bought The Greenwood Trust Company for banking services and later renamed that division Discover Bank. Discover Bank first made a splash in online banking by rolling out the Discover Cashback Checking account in 2013. Customers earned $0.10 for every debit purchase, online bill payment, and check payment, but only Discover cardholders could use the account.

    During the financial crisis that began in 2007, Discover bank became a bank holding company and received roughly $1.2 billion from the U.S. Treasury’s Capital Purchase Program. Discover Financial Services repaid those funds in 2010.

    Discover Bank uses industry-standard data protection measures: encrypting communication, storing information securely, and monitoring systems for signs of attack. That said, data breaches are possible anywhere.

    Federal law protects you from certain types of fraud and errors in your account, but you need to report problems quickly for full protection. Discover adds additional features as well:

    • Freeze your debit card: Discover allows you to freeze and unfreeze your card on the mobile app, online, or by calling customer service. That’s a useful feature if you think you lost your card (but you’re not sure). It’s also a smart move if you know you won’t need to use your card for an extended period.
    • Unknown device verification: If you log in from a new device, Discover sends a code to your phone or e-mail that you must enter to confirm your identity.
    • Mobile security: Mobile users can establish a separate PIN, and those with fingerprint-readers can also enable biometric security.

      Discover Bank allows you to link up to 30 external accounts, which should be more than enough for most people.

      The Bottom Line

      Benefits

      Discover Bank provides everything you need to bank online, and the cashback rewards program is a unique perk. With a competitive rate on the savings account, a robust mobile app, and a checking account with all the features you need, Discover could function as your one and only online bank. Those with rigid schedules should especially appreciate the ability to contact customer service 24/7. For money market users, Discover beats Capital One 360 and Ally Bank when your balance is between $2,500 and $10,000.

      Drawbacks

      Discover works well for those with more than $2,500 in savings, but the money market loses its appeal if you have less than that (Capital One 360 could work better with smaller balances). What’s more, the cashback rewards are eye-catching, but it may be safer to use a credit card for everyday spending instead of your debit card (and credit cards tend to have generous rewards).