Why I Replaced My Online Accounts with Discover Bank
Awhile back, I took advantage of a Free Money Friday offer to open a new E-Trade account. Some time later, that account was converted along with most E-Trade deposit accounts to a Discover Bank account.
If you’re like me, you associate Discover with credit cards only – in fact, I previously had no idea that they had a bank arm at all! Now that I’ve had my account for several months, I thought I’d share my thoughts with all of you.
Discover Bank Account Details
- Interest Rate: 1.15% APY.
- Opening Balance: You must open your account with at least $500. Accounts transferred from E-Trade were exempt from this requirement.
- Minimum Balance: Once the account is opened, there is no minimum balance requirement.
- Fees: None for incoming wire or a limited number of electronic transfers/withdrawals (see below). Outgoing wire transfers cost $20-$40.
- Withdrawals: Up to 6 free withdrawals per month, then $15 per additional withdrawal.
Discover Bank Account Features
- Transfers: As with other online banks, you can only “push” transfers rather than “pull” them, meaning the transfers have to be initiated to/from Discover Bank rather than in any other account. As with most electronic transfers, funds will take 3-4 days to appear in your linked account.
- Resources: Discover Bank provides resources beyond those of your average online bank. Their “Tips and Advice” page gives you more information about how their products and good financial habits can work for you. Their online savings calculator allows you to plan for the future, and their FAQs are very comprehensive.
- Customer Service: I had to use customer service after I accidentally initiated a transfer to a closed bank account and the funds bounced back to Discover. For my protection, Discover prevented me from making future transfers until I could verify my identity and delete the closed account from my linked accounts. My initial email was answered within 4 hours, and when I called the 1-800 number as directed I did not have to wait at all before speaking to a very knowledgeable representative and getting my transfer privileges immediately reinstated.
Other Discover Bank Products
In addition to the online savings account, Discover Bank offers a Money Market account, CDs, and even IRA CDs. The money market account pays up to 1.10% (1% for deposits less than $10,000) and allows you to write checks and make ATM withdrawals. The CDs pay 2.35% for a 5-year term and the IRA CDs pay 3.0% for a 10-year term. For more on the various products, see this information page from Discover Bank.
My Experience with Discover Bank
I’ve been very happy with Discover Bank. Their interface is easy to use and their interest rate surpasses many of the well-known online savings accounts. In fact, in a quest to simplify my financial life I recently closed my accounts with EmigrantDirect and INGDirect. While I was happy with most other aspects of those accounts, the interest rate at Discover was enough to make my Discover account one of two online savings accounts I use regularly (the other is SmartyPig).
I should have seen the warning signs. When I first opened the account in August 2011, Discover tried to pull the initial deposit amount ($9,000) THREE TIMES from my other bank, resulting in multiple overdraft charges of $105. When I asked my bank about this, they told me that I needed to get refunded from Discover and of course Discover told me otherwise. So basically I had to fight with both banks and then eventually closed off my original bank account (since their service was worse than Discover’s). What a mistake. Things were going well with Discover as I had a regular deposit in place. But after unacceptable delays in money transfers and having to wait almost a week for each transaction to occur, I decided to pull out from Discover and open a HSBC bank account that only takes 3 days per transfer. As I was pulling out all my money, of course Discover did what they do the best-they repeatedly tried to “transfer” money into my other account multiple times, resulting in $35 overdraft fees. When I called Discover to ask how on earth this multiple pull happened, they explained that I logged on and transferred the money multiple times myself (they even got a tech person at Discover to verify this!). This was the most insane excuse I have ever heard. And all of this mysterious ‘transfer’ that I requested all occurred after I emptied out my account. When I asked them “why would I try to make transfers from an empty account?”, they were like, “I can see that this doesn’t make sense and there must have been a mistake”. So I asked for a refund for the $35 fee they charged and then they told me that was impossible. I realized that this is how Discover penalizes people who empty out their accounts–they falsely charge you with fees based on a fake transfer that their system creates. This is the most unbelievable experience I have ever had with a bank. I truly believe that Discover bank is committing a crime through their fraudulent practices.