Discover Bank Review: Cashback Checking and High-Rate Savings

Discover Bank Review: Cashback Checking and High-Rate Savings

Discover's deposit accounts come with few fees, a fairly high interest rate and a cash-back feature on your debit spending, making it a potential choice for people who make lots of small debit purchases each month.

Good for

  • Earning above-average interest on your savings
  • Getting cash back on smaller debit purchases
  • Managing Discover credit cards more easily

Bad for

  • No access to branches or in-person services
  • No options for loans, financing or investment
  • No option for depositing cash

Editor's Rating

4.5/5.0

Most people recognize Discover as a credit card company, but it has some hidden strengths as an online bank as well. Discover's deposit accounts come with few fees, a fairly high interest rate and a 1% cash back feature on your debit spending, making it a great choice for people who prefer spending on debit rather than credit. If you already have a credit card with Discover, the Discover Mobile app will let you handle your deposits and credit card accounts in one convenient interface.

Review: Should You Bank With Discover?

Current Discover credit card customers are some of the most likely to benefit from a bank account at Discover. Managing all your Discover accounts on one platform offers a more effective way to manage your finances as a whole. However, Discover's bank accounts deliver several advantages even for people who don't already have a credit card through the company.

Overall, Discover Bank gives customers a range of unique benefits and very few fees. Like most online banks these days, most of Discover Bank's accounts are digital app-based financial products that cost no monthly fee. But in addition to the usual mobile check deposit and bill pay functions, Discover's accounts offer unusual perks like cashback on debit card purchases, 24/7 customer service, and forgiveness for one service fee per year.

Discover's interest rates are decent but don't stand out quite as much from other online banks like Ally or Marcus. Like Discover, these digital competitors can afford to cut back on account fees and boost the rates they offer. If you find yourself trying to decide among multiple online options, give some thought to which bank has other products—like credit cards or loans—that could be useful in your situation.

Discover Checking Account Features

Discover offers just one standard-level checking account, but its cost-effectiveness and debit cash back feature make up for the lack of other checking options at this bank.

Account NameDetails
Discover Cashback Checking
  • Minimum to Open: $0
  • Monthly Fees: $0
  • Rewards: 1% cash back on up to $3,000 in monthly debit card purchases
  • Non-Network ATM Fee: $0
  • Daily Debit Card Limit: $5,000

Discover Cashback Checking grants you 1% cash back on up to $3,000 of your debit card purchases each month. Very few checking accounts include cash back benefits, making this a fairly unique opportunity. This is a strong alternative to credit card rewards for consumers who can't or don't want to apply for credit cards. Better yet, the lack of monthly fees and balance requirements also make Discover Cashback Checking cost-effective to maintain. However, the debit cash back policy doesn't cover everything: you won't earn cash back on ATM withdrawals or peer-to-peer payments such as Venmo and Paypal.

However, you may prefer an interest-bearing checking account at a different bank if you tend to save more than you spend. Since Discover Cashback Checking earns no interest, people who maintain a significant balance in an interest-bearing checking account may earn more from interest than a cash back reward. The math is simple: if your usual account balance is equal to or greater than your monthly debit spending, then you'll earn more with a 1% interest-bearing checking option than you will with Discover's 1% cash back.

In terms of account fees, Discover stays competitive by allowing customers free ATM withdrawals at any out-of-network machine: although third party operator surcharges may still apply, the bank itself doesn't charge any fee. Moreover, Discover's own 60,000-strong ATM network makes it unlikely that you'll be too far from a 100% free ATM. While withdrawing cash won't be an issue, cash deposits are another story: with Discover, you'll be restricted to making deposits via online bank-to-bank transfers and direct deposits.

Discover Savings Account Features

Discover's savings account and money market account each earn an above-average rate, but the Discover Money Market Account's high monthly fee and minimum balance requirement leave the Discover Savings Account as the better choice for most people.

Account NameDetails
Discover Savings
  • APY: 2.00%
  • Minimum Balance for APY: $0
  • Monthly Fees: $0
Discover Money Market
  • APY: 1.95% OR 2.00%
  • Minimum Balance for APY: $0 OR $100,000
  • Monthly Fees: $10
  • Monthly Fee Waiver: $2,500 average daily balance

Discover Savings yields 2.00% APY on any balance and charges zero monthly fees, which puts it near the top of all the online savings accounts we've seen. One or two competitors do offer a slightly higher rate of 1.25% APY, but the relative difference is marginal at best. To illustrate, depositing $5,000 in Discover Savings at 2.00% APY earns $50.25 after one year, while a different account earning 1.25% will return $62.38 on the same amount. If you're interested in a Discover credit card or checking account, the small loss may be worth the convenience of bundling your finances in one place.

If you're absolutely set on getting a money market account, Discover's money market account offering easily ranks among the best —but only if you can keep at least $2,500 deposited. While a few banks award higher APY for money market accounts that have at least $10,000, many people look for lower balance requirements, and Discover's 1.95%APY for $2,500 compares very well to other options. This rate isn't as high as Discover Savings, but if you want to have an ATM card that can withdraw straight from your savings, the money market account is the only interest-earning product at Discover that lets you do so.

How Does Discover Compare to Other Banks?

Discover Bank can be summarized as "better than most". From the standpoint of banking services, it's not as accessible as a brick-and-mortar bank, although the bank tries to compensate for this with a 24/7 customer support line. Its interest rates and fee policies aren't the best among online banks, but it comes close enough to remain a superior choice to most competitors. We've matched Discover against some of its most popular rivals to get a better sense of their differences.

Discover vs. Ally

As online banks, Discover and Ally Bank are remarkably similar in rates, fees and services, but Ally retains the slight edge in nearly all areas. Ally's accounts, including its checking account, earn better interest rates than Discover's options, with the exception of short-term certificates of deposit. If you don't have any active Discover credit cards and don't plan on applying for any, Ally's established reputation for customer service might make it the better choice. Frequent ATM users, however, should note that Discover's network includes more fee-free ATM coverage than Ally Bank.

Discover vs. Wells Fargo

Wells Fargo Everyday Checking
Wells Fargo Everyday Checking

You should pick Discover if you need a better interest rate and go with Wells Fargo if you find it impossible to do your banking without an actual bank to visit. While Discover's fees and rates are far more customer-friendly, some people might find it difficult to manage their money without the help of branch locations and face-to-face service.

map of Wells Fargo branches in the US, by county

It's somewhat difficult to make a useful comparison between Discover, an online bank, and Wells Fargo, one of the largest brick-and-mortar banks. Despite the rapid growth of online banking, most Americans still prefer to have at least some access to a physical location. While Discover's fee policy is much more cost-effective, it's hard to dismiss the many advantages in convenience and accessibility you pay for at a national brand like Wells Fargo.

Wells Fargo also holds the advantage for any small business owners, thanks to its extensive selection of small business loans and deposit accounts. In general, you'll find that traditional banks offer a much wider range of financial services than online companies like Discover, including loans, mortgages and retirement accounts. If your financial situation requires more comprehensive management, a bank like Wells Fargo may be preferable.

Discover vs. Chase

Choosing between Discover and Chase will likely depend on which company's credit cards you have. While Chase doesn't do any better than Wells Fargo in terms of its high fees and poor interest rates, this bank comes much closer to Discover in its selection of credit cards. Chase's Ultimate Rewards is one of the strongest credit card points programs available to consumers, thanks to its variety of cards and flexible redemption options. Like Discover, Chase allows customers to manage checking and savings accounts through the same app as their credit cards, making transfers and monthly payments much more convenient.

map of Chase branches in the US, by county

Credit cards aside, you'll have to figure out whether Discover's lower fees and higher rates are more important to you than Chase's wide range of financial products. If you carry a lower balance and don't have much to worry about in terms of loans or investments, Discover might be a slimmer banking option that can boost your savings in the long run. You should also look at Chase's areas of service: while its branches and ATMs are plentiful in urban areas, it does have some significant service gaps that might negate its advantage over Discover as a full-service bank.

Discover vs. Bank of America

Bank of America Core Checking
Bank of America Core Checking

Bank of America has thousands of physical locations and offers more products than Discover, but it charges higher fees while offering lower rates. Unlike Chase, this bank doesn't field a particularly strong credit card program, giving Discover more of an advantage in that area. In general, people who value branch access should choose Bank of America, while the more adventurous might benefit from Discover's online-only service model.

map of Bank of America branches in the US, by county

Like its two largest competitors, Bank of America offers its customers two big advantages: nationwide access to services and a diverse selection of products. Most people won't have a problem with Bank of America's fee policies, which include a $12 monthly fee on its standard Core Checking account. However, if you're not interested in meeting Bank of America's minimum balance or direct deposit in order to avoid that fee, Discover's streamlined Cashback Checking could be a better deal. Pick Discover if your finances are simple enough to fit in just one or two low-cost accounts.

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