Discover Bank review: Stellar checking, sky-high savings

Our #1 pick for the best online bank in the U.S.

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adam-morgan

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Adam Morgan

Adam Morgan

Editorial Director, Personal Finance

Adam Morgan is an editorial director at Policygenius who leads the personal finance team. Previously, he led editorial teams across multiple brands at Red Ventures — including Bankrate, The Simple Dollar, NextAdvisor, Million Mile Secrets, and many others.

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Hanna Horvath, CFP®

Hanna Horvath, CFP®

CERTIFIED FINANCIAL PLANNER™ & Managing Editor, Growth

Hanna Horvath is a CERTIFIED FINANCIAL PLANNER™ and managing editor for growth at Policygenius. She helps produce the Easy Money newsletter, and owns all growth initiatives for Easy Money. She recently passed her exam to become a CERTIFIED FINANCIAL PLANNER™ in November 2020.

Hanna's work has appeared in NBC News, Business Insider and Inc. Magazine. She is regularly quoted in top media outlets, including CNBC, Best Company and HerMoney. She has also appeared on the Money Moolala podcast and All's Fair podcast.

Prior to Policygenius, Hanna wrote for KNBC in Los Angeles and WNBC in New York. When she isn't writing, she's (often) running, (usually) cooking and (sometimes) doing photography.

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5.0 / 5

Discover Bank isn't a traditional bank like Chase or Wells Fargo — it's an online bank from the company that created the Discover Card in 1986. It's also the best online bank in America according to our rankings of the best banks and credit unions in 2021, where it scored a perfect 5 out of 5. While most checking accounts are just places to keep your spending money, Discover offers cash back. While most savings account APYs are hovering around 0.06%, Discover offers five times that much. And while most banks charge fees under certain conditions, Discover dropped nearly all fees on deposit accounts in 2019. [1]

Discover Bank

OVERALL

Out of 5. See our Methodology section at the bottom of the page.

5.0

THE GOOD

    1% cashback checking account

    0.40% APY savings account

    Top-rated mobile app and customer satisfaction

    60,000+ fee-free ATMs

THE BAD

    No investing brokerage accounts

    No branch offices (it's an online bank)

THE BOTTOM LINE

Discover is the only bank that scored a perfect 5 out of 5 in our rating methodology. It's our #1 pick for the best online bank in 2021 thanks to fantastic checking and savings, an excellent mobile app, industry-leading customer satisfaction ratings, and almost zero fees.

Savings APY

See our Methodology section at the bottom of the page for more details.

10.0

Offerings

See our Methodology section at the bottom of the page for more details.

10.0

Mobile App

See our Methodology section at the bottom of the page for more details.

10.0

Fees

See our Methodology section at the bottom of the page for more details.

10.0

Support

See our Methodology section at the bottom of the page for more details.

10.0

The good

A checking account that pays you back

A handful of banks offer interest-bearing checking accounts, but Discover is one of the only banks in America that offers a cashback checking account. First introduced in 2018, Discover's Cashback Debit account gives you 1% cashback on every qualifying debit transaction of up to $3,000 per month. That adds up to $30 a month, or $360 a year, just for using your debit card.

While you can certainly get more than 1% cash back on a premium credit card, not everyone qualifies for those cards, and Discover's cashback debit doesn't have any spending category limitations. If your credit card offers a higher cashback rate for dining, gas, or groceries, for instance, you can keep those expenses on your credit card and still get 1% cash back on $3,000 worth of debit card expenses.

A 5x savings account

Dating back to its original launch in 2009, Discover Bank's online savings account has always offered a competitive interest rate. While savings APYs (annual percentage yield) have taken a nosedive since the onset of the COVID-19 pandemic, [2] Discover's current APY is 0.40%, which is still more than five times higher than the national average, according to Informa Research Services Inc. Plus, there's no minimum deposit, and interest compounds daily (instead of monthly, like many traditional banks).

Almost zero fees

In 2019, Discover made headlines for dropping nearly all fees on its deposit accounts, including checking, savings, money market, and CD accounts. "In addition to offering deposit accounts with no fees for monthly maintenance, checkbook orders or replacement debit cards," said the press release, "going forward, Discover is eliminating fees for insufficient funds, excessive withdrawals, falling below minimum balances and stop-payment requests." That puts Discover Bank in rare company, since nearly all banks charge at least one or two of the fees listed above.

Lots of options

Some online banks only offer checking and savings, but Discover Bank has quietly built a comprehensive suite of products and services that rivals a megabank like Citi or Chase. Credit cards are a given, but Discover also offers lending services (personal loans, home loans, and student loans), as well as retirement accounts, money market accounts, and certificates of deposit. If you're the kind of person who wants to do all their money management at the same financial institution, Discover offers almost everything you'd ever need, with a couple exceptions (see below).

Discover Bank in the news

The bad

No brokerage accounts or premium credit cards

There are two popular financial solutions that Discover Bank doesn't currently offer. The first is a brokerage account for individual investors. While you certainly don't need to keep your investment accounts with your primary bank, some active investors enjoy the convenience. Our top-rated banks with brokerage accounts include Ally, Charles Schwab Bank, Marcus by Goldman Sachs, Citi, and Chase. The second thing Discover currently lacks is a true "premium" credit card that offers travel and dining rewards alongside a hefty signup bonus. While the Discover it® Cash Back Credit Card is a great mid-tier card with a unique cashback calendar and no annual fee, Discover doesn't offer anything like the premium cards available from Chase and American Express.

Discover Bank's latest bonus offers and promotions

  • $360 checking bonus: 1% cash back on up to $3,000 in debit card transactions per month (which equals $360 over the course of a year)

  • $50-$100 referral bonus: A statement credit for eligible Discover credit card holders who refer a friend.

  • Credit card bonus: A 100% cashback match on all the cash back you earn during your first year as a cardholder.

Reputation

Discover was originally a credit card offered by Sears back in 1986, when Sears was still Amazon of its day and the biggest retailer in the world. Discover became its own company, bought a bank in Connecticut, and later rebranded it "Discover Bank" in August 2000. [3] These days, Discover Financial Services is based in a sprawling postmodern headquarters in Riverwoods, Illinois, a suburb of Chicago. You might recognize it from a popular ad campaign touting its personalized customer service (or from the Saturday Night Live parody of that campaign).

Discover Bank has a great reputation for customer service and community impact. Every year, it's one of the top-ranked banks in J.D. Power's Direct Banking Satisfaction Survey. [4] Its parent company, Discover Financial Services, has made major community investments in financial education, charitable donations, and environmental stewardship. [5] For instance, in July 2020 it donated $5 million to Black-owned restaurants as part of its Eat It Forward campaign.

However, Discover has run afoul of regulators a few times in the last decade. In 2012, the Federal Deposit Insurance Corporation (FDIC) and the Consumer Financial Protection Bureau (CFPB) ordered Discover Bank to refund customers $200 million after finding evidence of "deceptive telemarketing and sales tactics used by Discover to mislead consumers into paying for various credit card 'add-on products' – payment protection, credit score tracking, identity theft protection, and wallet protection." [6]

More recently, in December 2020 the CFPB ordered Discover to pay another $35 million in settlements for issues with its student loan servicing, including "misstat[ing] the minimum amounts due on billing statements and tax information consumers needed to get federal income tax benefits." [7] While serious, these settlements pale in comparison to the scandals that have plagued Wells Fargo, Bank of America, and other major banks since the 2008 financial crisis.

Discover Bank

by the numbers

Checking monthly fee

$0

Checking minimum deposit

$0

Savings monthly fee

$0

Savings APY

0.40%

Savings minimum deposit

$0

Money Market monthly fee

$0

Money Market APY

0.30%-0.35%

Money Market minimum deposit

$2,500

Methodology

To compare Discover Bank with other options and determine the best banks and credit unions of 2021, we collected quantitative data on more than 50 major U.S. financial institutions. Specifically, we looked at savings account APYs, product offerings, fees, mobile app satisfaction, and customer support. We rated each aspect on a scale from 1 to 5, then averaged the five scores into a single rating. Here’s a detailed breakdown of each scoring matrix.

Savings account APY

We rated the highest APY that each bank or credit union offers on a savings account (excluding accounts or rates with a minimum balance requirement greater than $1,000).

Rating

Best Savings APY

1

Less than 0.1%

2

0.10%-0.19%

3

0.20%-0.29%

4

0.30%-0.39%

5

0.40%+

Offerings

We counted how many product lines each institution offers, since many people enjoy the convenience of keeping multiple accounts at the same bank. We included deposit accounts (checking, savings, money market, certificates of deposit), credit cards, loans (personal, student, auto, home equity), mortgages and mortgage refinancing, retirement accounts, and investment accounts as distinct qualifying offerings.

Rating

Offerings

1

1 offering

2

2 offerings

3

3 offerings

4

4 offerings

5

5+ offerings

Mobile app satisfaction

Since mobile apps are increasingly becoming the primary way people manage their bank accounts, we consulted the J.D. Power 2021 U.S. Banking Mobile App Satisfaction Study. For any banks or credit unions that weren’t included in the study, we used mobile app customer ratings from the Google Play store.

Rating

J.D. Power Score

App Store Score

1

Less than 840

Less than 3.0

2

840-849

3.0-3.4

3

850-859

3.5-3.9

4

860-869

4.0-4.4

5

870+

4.5+

Fees

We consulted every bank’s fee schedule and terms and conditions to search for any of the following: monthly maintenance fee, overdraft fee, insufficient funds fee, debit card replacement fee, account closure fee, and stop payment order fee.

Rating

Qualifying Fees

1

4+ fees

2

3 fees

3

2 fees

4

1 fee

5

0 fees

Customer support

Since different people prefer different support options at different times, we counted how many customer support channels each bank offers, including telephone, email, online chat, mobile app, online forums, online learning center, and physical branches.

Rating

Support Channels

1

1 option

2

2 options

3

3 options

4

4 options

5

5+ options