Discover Bank Review: CD Rates and Savings

Traditional savings accounts pay very little interest. If you want to earn a more impactful return on your savings, online banks often offer higher rates.

In this article, we will look at how you can use Discover's Online Savings Accounts and CDs to help grow your savings.

How It Works

Discover offers high yield savings accounts and Certificates of Deposit (CDs). Both earn a higher interest rate than a typical savings account. However, the two products work in fundamentally different ways.

• Discovers Online Savings Accounts can earn up to a 1.40% annual percentage yield (APY). They work much like typical savings accounts, except that Discover does not have any physical branch locations.

• Discover's CDs require you to deposit your savings for a set period of time. Withdrawing funds from a CD before the term has ended will incur a penalty. Also, CDs often have a higher minimum deposit than savings accounts. Due to these requirements, some CDs earn a higher APY than savings accounts.

Now that we've covered the basics, let's get into the specifics.

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Online Investor Savings

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Discover is an online bank, so they don't have many of the overhead costs that brick-and-mortar banks do. This allows Discover to offer no minimum deposit and a high APY on its Online Savings Account. Here are some additional details:

• 1.40% APY
  
• No minimum deposit
  
• No account opening fees
  
• No monthly maintenance fees
  
• Daily compounding interest
  
• Free online and mobile banking
  
• FDIC insured

As with any savings account, you'll be limited to 6 withdrawals per month. This is a federally-imposed limitation.

If you need to withdraw money from your Discover savings account, you have a few options: internal Discover transfers, external transfers to another bank, wire transfers, and mailed checks.

Certificate of Deposit (CD)

For CDs, you must deposit a fixed amount of money for a fixed amount of time.

There are a few key factors to consider when deciding on a CD: the term length, the minimum deposit, and the APY. Discover also offers some retirement account qualified CDs, which can be a good option to supplement your retirement savings. Contact your financial professional to see if these retirement options are right for you.

Here are your options:

• Term CDs: Discover's basic CDs are available in 3, 6, 9, 12, 18, 24, 30 months, and 3-, 4-, 5, 7- or 10-year terms. They require a minimum deposit of $2,500, and their APY range from .35% to 2.45%.

• IRA CDs: Discover offers a retirement account qualified CD option as well, if you qualify. Both Roth (post-tax) and Traditional (pre-tax) options are offered. Terms and APY of these products are similar to that of Discover's term CDs.

Why We Like Discover

Here are a few things that we like about Discover's online savings accounts and CDs:

• Low minimum deposits: If you have just started saving or want to set aside a small balance, Discover can be a great choice. Their Online Savings have no minimum balance requirements at all. Their deposits for term CDs and IRA CDs are some of the lowest in the industry.

• High rates: Discover's Online Savings offers such a high APY that it outperforms some of their short-term CDs. This is great news for anyone looking to save, but especially for those who can't pay the high minimum deposits that some other banks require. And if you meet a higher minimum deposit, you can earn as much as 2.45% APY on a CD, depending on term length.

• Minimal fees: Discover cuts out many fees that other banks profit from. For example, you will not be charged any account opening or maintenance fees.

• Retirement options: Discover offers IRA CDs, which can be utilized in a retirement planning strategy.

Reasons You Might Skip Discover Savings

For all of Discover's advantages, there are some downsides that need to be considered:

• No branch locations: In exchange for the high interest rate on your online savings account, you are required to do your Discover banking online or over the phone.

• No ATM card: Discover Savings does not provide an ATM card for easy withdrawals. This could be a good thing so you're not tempted to spend your money. But if you like that convenience, look into their Money Market account instead. Or there are some other online savings accounts that come with an ATM card.

• No Relationship Rewards: Some retail banks in the U.S. are now offering relationship bonuses to incentivize their customers to keep all of their business in one place. If you move your savings balance to Discover from your retail bank, you may miss out on some of these relationship bonuses. Contact your bank for more details.

Common Questions

If you're still interested, you probably have some questions. We'll clear up some of the basics here:

• Should I open a CD or savings account?
  This is a really broad question and everyone has different investment goals. The decision comes down to how much you're looking to set aside, how much risk you are willing to take, and how much you'll need to access your savings.
  
  If you can commit to not touching your savings for at least 1 year and can meet the minimum deposit, you may be able to earn a higher interest rate with a CD versus a savings account. If you need liquidity, a savings account gives you more flexibility to withdraw your savings when needed.

• How can I deposit funds with Discover Bank?
  For savings accounts, there are a few ways to deposit funds: deposit checks with your mobile device, transfer from Discover checking, transfer from an external account, mail a check, or set up a direct deposit to your new account. For term CDs, you can transfer from Discover checking, transfer from an external account, transfer by phone, or mail a check. For IRA CDs, contact Discover for instructions on how to fund a Discover IRA account.

• What is the penalty for early withdrawals from Term CDs?
  It depends on the term of your CD. Here's how it breaks down:
  • Terms less than 1 year: 3 months' interest on the amount withdrawn
    
  • Terms from 1 year to <4 years: 6 months' interest on the amount withdrawn
    
  • Terms over 4 years to <5 years: 9 months' interest on the amount withdrawn
    
  • Terms over 5 years to <7 years: 18 months' interest on the amount withdrawn
    
  • Terms over 7 years and greater: 24 months' interest on the amount withdrawn

How it Compares

	Discover Bank	Ally Bank
	SPECIAL OFFER Discover Cashback Checking – up to $30/month Cashback - Learn More	SPECIAL OFFER Online Savings Account - Learn More
	Benefits and Features
Savings	1.5% APY. No monthly service fee and no minimum deposit.	1.50% APY. No monthly service fee and no minimum deposit.
CD	0.35% to 2.5% APY. Terms of 3 months to 10 years. 12-month CD APY of 2.00%. Minimum deposit of $2,500 to open.	1.00% to 2.50% APY. Terms of 3 months to 5 years. 12-month CD APY of 1.75% for balances under $5,000 (max 2% for balances $25,000+). No minimum deposit to open.
Checking	Earn 1% cashback on up to $3,000 in debit card purchases each month. No monthly service fee and no minimum deposit.	0.10% APY under $15,000; 0.60% APY $15,000 or more. No monthly service fee and no minimum deposit. Ally will refund ATM fees for other banks up to $10 per statement cycle.
Money Market	1.35% APY under $100,000; 1.40% APY $100,000 or more. No monthly service fee and no minimum deposit.	0.90% APY under $25,000; 1.00% APY $25,000 or more. No monthly service fee and no minimum deposit.
Customer Service	24/7	24/7
ATMs	Over 60,000 no-fee ATMs	Over 43,000 no-fee Allpoint ATMs
Locations	Online Only	Online Only
	Discover Cashback Checking – up to $30/month Cashback	Online Savings Account Interest Checking Money Market
Discover Bank: Pricing information from published website as of 4/24/2018 Ally Bank: Pricing information from published website as of 4/24/2018

	Discover Bank	Capital One
	SPECIAL OFFER Discover Cashback Checking – up to $30/month Cashback - Learn More	SPECIAL OFFER Capital One 360 Checking - $25 offer - Learn More
	Benefits and Features
Savings	1.5% APY. No monthly service fee and no minimum deposit.	1% APY. No monthly service fee and no minimum deposit.
CD	0.35% to 2.5% APY. Terms of 3 months to 10 years. 12-month CD APY of 2.00%. Minimum deposit of $2,500 to open.	0.40% to 2.75% APY. Terms of 6 months to 5 years. 12-month CD APY of 2.10%. No deposit to open.
Checking	Earn 1% cashback on up to $3,000 in debit card purchases each month. No monthly service fee and no minimum deposit.	0.20% APY under $50,000; 0.75% APY $50,000 or more; 1.00% APY $100,000 or more. No monthly service fee and no minimum deposit. Overdraft options prevent you from being charged when you accidentally overdraw
Money Market	1.35% APY under $100,000; 1.40% APY $100,000 or more. No monthly service fee and no minimum deposit.	0.85% APY up to $10,000; 1.60% APY $10,000 or more. No monthly service fee and no minimum deposit.
Customer Service	24/7	Mon-Sun 8am - 11pm (ET)
ATMs	Over 60,000 no-fee ATMs	Over 39,000 no-fee Capital One & Allpoint ATMs
Locations	Online Only	Online Only
	Discover Cashback Checking – up to $30/month Cashback	Capital One 360 Checking - $25 offer Capital One 360 Saving - $25 offer Capital One 360 Money Market - $25
Discover Bank: Pricing information from published website as of 4/24/2018 Capital One: Pricing information from published website as of 4/24/2018

Bottom Line

If you're ready to start building your savings, then you should consider if Discover's Online Savings Accounts or CDs are right for you.

Even if you only have $1 in savings, you can start earning interest in a high yield savings account. Or, if you have at least $2,500 set aside and aren't concerned about liquidity, you can earn an even greater return with a CD.

Discover's savings offerings might not be the right savings product for you, but if you're looking to earn interest above that of a standard savings account, opening a savings accounts or CD from Discover is an investment option worth considering.