Discover Banking: How To Earn Big Banking With Discover

Discover is best known for offering credit cards, but it is a larger financial services company that also operates an online bank. Like most online banks, Discover’s accounts come with minimal fees and excellent interest rates, making it possible for customers to earn big.

Discover Checking

One of the first things most people look at when evaluating a bank is its checking accounts. Your checking account is the hub of your personal finances, so you want to choose one that’s easy to use.

Since checking accounts are designed for frequent transactions rather than longer-term savings, they don’t usually have great interest rates. Instead, people typically look to see if there are account fees, such as monthly fees, fees for wire transfers, insufficient funds fees, or overdraft fees. Most people will try to find a bank account that keeps fees low.

The bank of Discover doesn’t charge monthly maintenance fees or many other fees and has no direct deposit or minimum balance requirements you must fulfill to avoid fees. It claims its accounts are almost entirely fee-free except for a small service charge for outgoing wire transfers.

What sets the account apart is that Discover offers a cash back debit card, meaning you’ll get rewards for your debit card purchases. Discover lets its customers earn cash back on their debit card purchases. You’ll get 1% back, up to a total of $30 in rewards each month. This means you can earn up to $360 annually with a Discover Cashback Debit card.

Discover Savings

When you bank Discover, you can choose from three accounts that help you save money and earn interest to grow your wealth.

Savings Account

The Discover online savings account is a standard option with no minimum balance and a high annual percentage yield. At the time of writing, customers can earn 4.30% APY on the balance of their high-yield savings account. That’s well above the national average for savings accounts.

Since Discover Bank is a member of the FDIC, you’ll receive FDIC insurance on your account balances. This protects the money you keep at the bank up to a limit of $250,000. 

You can easily monitor the balance, make a mobile check deposit, or initiate transfers from Discover’s mobile app, so your money stays easy to access.

Certificate of Deposit

A certificate of deposit offers a trade-off. You promise to keep your savings in the account for a set time without making any withdrawals. In exchange, the bank will provide a higher interest rate on the deposit amount. In short, you sacrifice flexibility for a higher return.

Discover offers a variety of CD terms, ranging from as little as three months to as long as 10 years. Rates vary, but the highest-yielding CD is the 18-month CD, which offers 5% APY.

The minimum opening deposit is $2,500 for this account. If you open an 18-month CD with that amount, you’ll earn roughly $189 in interest, leaving you with an account balance of approximately $2,689 once the CD matures.

Given their lack of flexibility, you shouldn’t use a CD for an emergency fund. They’re usually better for longer-term financial goals, like saving for a future purchase.

Money Market Account

A money market account is a unique deposit account that combines the features of checking and savings accounts. It pays an elevated interest rate compared to a checking account but offers more flexibility than savings accounts.

For example, money market accounts usually come with debit cards and checkbooks. Discover has a network of over 60,000 no-fee ATMs that you can use to make withdrawals.

Usually, money market accounts have high minimum deposits and charge fees. Discover’s account has a minimum deposit of $2,500 but charges no monthly fee or fees for many other services, including requesting an official bank check, stop payment, or excessive withdrawals.

How much interest you earn depends on your account balance. You’ll earn 4.20% APY for balances under $100,000 and 4.25% for balances $100,000 or higher.

Retirement Options

Saving for retirement is something everyone has to do, but it can be challenging to get started. Discover lets customers open an Individual Retirement Account (IRA), which offers tax advantages, using two different Discover bank account options.

IRA CD

An IRA CD is a certificate of deposit held in a tax-advantaged IRA. Since the CD is in the IRA, you won’t have to pay tax on the interest.

Discover’s long-term CDs can be an excellent choice for people who want to set money aside for retirement, especially if they’re young. Younger people can afford to lock their money away for an extended period because they won’t need it until they retire.

You can choose between a Traditional IRA CD, which gives you a tax break now but requires that you pay taxes on withdrawals, or a Roth IRA CD, which makes you pay tax now but lets you withdraw your money tax-free.

IRA Savings Account

An IRA savings account might be a better choice for people getting closer to retirement. They offer more flexibility, letting you make a withdrawal anytime. If you’re thinking about retiring soon or are already retired, knowing that you can take cash out of the account without a penalty is essential for budgeting purposes.

For example, you could keep some of your savings in an IRA and occasionally make withdrawals to supplement your Social Security payments. If you used a CD instead, you’d need to wait until the CD matured to be able to make withdrawals.

Rewards Credit Cards

Discover offers various credit cards to its customers. Like its Discover Cashback Debit account, the bank’s credit cards offer rewards to help you earn money when you make purchases.

Eligible customers can apply for student credit cards and a secured credit card alongside Discover’s three main rewards cards.

Discover’s Cash Back Card offers 5% cash back on purchases in a specific category that rotates every quarter, plus 1% cash back on all your other purchases. The Gas & Restaurant Card pays 2% cash back on restaurant and gas station purchases plus 1% on everything else. The Travel Card offers 1.5 miles for every dollar spent using the card.

All three cards offer a match in the first year. You’ll get double the cash back rewards, or two miles per dollar, instead of 1.5 if you get the Discover Travel Card.

Bottom Line

Whether you are looking for a savings account, checking account, or an IRA CD, Discover likely has an online banking solution that will work for you. Don’t miss the account options Discover Bank offers so that you can earn big and improve your personal finances.