Discover Bank Online Savings Account Overview
November 16, 2012
Discover, the credit card and financing company, is best known for its credit card accounts and cash back programs. What you may not know is Discover also has a retail banking division that offers several options for consumers.
Similar to Other Online Banks
Discover Bank is an online only bank similar to other population options such as ING Direct, HSBC, and Ally Bank. These banks do not have physical retail branches for you to deposit checks or talk to a teller. The lack of branches relieves the bank from the costs of owning or leasing the branch, overhead like electricity and security at each branch, and salaries of branch employees.
Customer service is handled via phone or e-mail; accounts are funded through electronic transfers from other banks. These cost savings allow online banks to offer more attractive and higher interest rates on savings accounts.
Competitive Interest Rates
How competitive are Discover’s online savings account rates? Discover bank pays a competitive rate in comparison to the other banks mentioned. Follow the links above for current rates.
Talking about rates in the 1% range may seem like small potatoes, but just a few years ago these online accounts were paying out interest rates in the 3% to 4% range. The rates are lower now due to the Federal Reserve’s monetary policy and should go up in the future.
Additionally the national average for savings accounts at the time of this writing is 0.21% APY so you’ll definitely be getting more than that with Discover Bank.
How to Fund an Online Savings Account
Without physical branches the act of opening and funding an online savings account is a bit different. To fund this account you must connect another account (online or with a traditional brick and mortar bank) and electronically transfer funds directly to the account. You can’t swing by the local branch and bring $50 in cash to get started since there is no physical branch location.
Once the account is funded you can continue to transfer back and forth between your linked accounts. Additionally you can set up direct deposit just as you would with any other bank account.
Do I Need a Brick and Mortar Bank?
Whether or not an online account can fully meet your banking needs depends on what those needs are. If you never deposit paper checks then it is definitely a possibility as long as you can get the account funded with another bank account.
Personally I always maintain at least one brick and mortar account just in case I have cash or a check I need to deposit. You can always transfer the money elsewhere, and most banks still offer free checking accounts that can be used for this purpose – switching to a new bank is pretty straightforward if you need to do so.
Discover Offers Additional Financial Products
Aside from the Discover Online Savings Account, Discover Bank offers additional financial products to consumers. These include Money Market accounts, Certificates of Deposit, and IRA Certificates of Deposit. Similar to the savings account these accounts are managed online and offer competitive rates.
What’s your favorite bank? How do you think Discover Bank compares to other banks?
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