Money at 30: My Experiments in Internet Banking

This might come as a bit of a surprise to anyone who read my column last week all about my banking loyalty but I just recently opened two new bank accounts. Don't worry — I still have that Wells Fargo account I was yammering on about but I decided it was time to experiment with a novel idea: having my money actually earn me a return. For that reason I turned to the internet to see what was out there.

Here's what I found.

Why Internet Banking?

The way I've utilized my checking account over the past few years isn't exactly normal or smart. Aside from taking on my direct deposit and being used to pay rent, it basically acts a slush fund for my wife and me that just sits there until we need it. That's not a terrible idea but, then again, it doesn't earn us anything either. That's why I decided it'd be better to open a real savings account that would at least get us some interest.

Brick and Mortar Rates

Once this idea struck me my first plan was to just look into opening a new savings account with Wells Fargo (they could use a small win about now, right?) or perhaps a local bank in my area. However I was shocked to learn that unless you have some serious bucks — we're talking five figures here — you would only get a .01% interest rate on your account. Really? 

I knew savings account rates were low but I didn't know they were that low. Luckily internet banks offer much much better rates.

Internet Bank Rates

The first place I searched was what is perhaps the best known internet-only bank: Ally. They made a strong case for themselves with a 1.00% APY (annual percentage yield), which is among the highest available at the moment (Synchrony offers 1.05%). But before pulling the trigger, I decided to look into Discover Bank.

You might recall that I recently opened a Discover It credit card account and have been pretty impressed with my experience so far. I also figured it would make a lot of sense to go with them since I already had a credit card with them. Ultimately, even though they offered a slightly lower .95% interest, I went with Discover for my savings account... and then was lured by another idea which we'll get to in a minute.

The Benefits and Drawbacks

First a big plus: unlike many too-big-to-fail banks, Discover Bank doesn't charge a maintenance fee or mandate a minimum daily balance. While it did take at least a $500 opening deposit to get started, I can still dip below that without penalty. Additionally, like many banks, Discover's accounts compound interest daily and pay out monthly, which is exciting since it's the whole reason why I wanted to open a new account.

As for the downsides, internet banking account have limits on the number of transactions you can make in a month. In the case of both Discover and Ally that limit was set at six. Although I don't really anticipate needing more than that, such a restriction might concern others. Of course the whole "no physical branch" thing can also be a deal-breaker for some as well.

My Experience With Discover Bank

It's only been a couple of weeks since I joined Discover Bank but I've had enough time to explore their site and make a few observations. For one, my decision to join Discover for convenience sake was partially justified as my credit card account and other accounts share the same app. However they do require separate logins which can be slightly annoying. 

Here's what else I've learned:

Cash Back Checking Exists

As I alluded to, I didn't just open a savings account with Discover — I actually opened a checking account as well. That's because Discover Bank offers cash back checking, rewarding customers with $.10 every time they make a purchase using their debit card, check, or online bill pay. This perk is limited to 100 transactions and the bank does warn against trying to outsmart them by breaking up purchases into multiple transactions, so don't try it! It should also be noted that their cash back checking is exclusively for customers (like myself) who already have a Discover credit card.

Ten cents might not sound like much but, when you think about it, it actually could be a decent percentage depending on what you purchase. In fact, if the transaction is less than $10 (and doesn't fall into one of the special categories for my Discover IT credit card), then I actually get more out of using the debit card instead. Best of all the cash back earned can be merged with my credit card rewards, making it even more attractive.

No Branch? No Problem

To be honest, the initial reason I decided to sign up for the checking account was because Discover debit cards offer access to (apparently) more than 60,000 ATMs without a fee. Since there's not a Wells Fargo within a few hundred miles of my home I thought it would be wise for me to have a backup plan. Sure this whole plan only saves me a couple of dollars per withdrawal but everything adds up.

Like many banks, Discover's app also allows you to deposit checks into your savings or checking account just by taking a photo of it. You can also sign up for various bill pay options although I haven't bothered to explore those yet. Lastly you can easily transfer money between your accounts using the app or website, so there's really is no need for a branch.

Other Advantages 

A lot of what I liked about the Discover It card's app also applies to the Discover Bank account with a few exceptions. First the bank's widget looks great in the new iOS 10 and gives me at-a-glance updates on my balances. However, to my surprise, my Discover debit card does not seem to be Apple Pay compatible like my credit card is. This isn't a big deal but, especially since I have four different cards in my wallet now, having the Apple Pay option would have been a nice touch.

I haven't had either account quite long enough to see growth or actually collect my rewards but, when I do eventually get those, I know exactly where on the app the find them. The application also has a helpful ATM locator so I can be sure to find a machine that won't charge me (there are at least 10 within a square mile of me). With the Touch ID compatibility that I love so much also offered, I think I can say with some certainty that the banking side of the Discover app is every bit as functional and useful as the credit card side.

A Few Issues

While I'm pretty satisfied with my account experience overall, there were a couple of problems I had when setting up my accounts. First, when signing up on the website, I was shown my account numbers and then presented with the option to register my accounts for online access. There was just one problem: clicking the button took me away from the page with my account numbers and there was no way back to them.

I assumed this wouldn't be a big deal as surely they must have sent me an email confirmation, right? Sadly, no — aside from that initial confirmation page I had no other way of knowing if my accounts were actually even opened until several hours later when I was notified that my funding transfers had gone through. This should have been relieving but, since none of these emails contained my full account numbers, I was now sending money to accounts I couldn't access. To be fair, I could have called their helpline to retrieve the info I needed, but I instead opted just to wait until my paperwork arrived in the mail.

Obviously this wasn't exactly a deal breaker but I could see others being much more frustrated by such a situation than I was. I can also see some being upset that, in order to transfer between an external account and your Discover Bank account on the app, you must first add the external account information on the website. Again, not a huge deal but it is a little less elegant than you might want.

In Conclusion

So far I'm pretty happy with my new internet banking accounts. Ultimately I think it makes a lot more sense to stash my extra money there and earn interest than to leave it sitting in a checking account for no reason. And, speaking of checking, I've been pleasantly surprised with my cash back checking so far. While it will take some extra thought on my part, I'm excited about the additional rewards prospects it offers.

Specifically concerning Discover Bank, despite my somewhat rocky start, I do appreciate the continuity and convenience having three (savings, checking, and credit card) accounts with them along with their special offers. And while it'll require me to manage my money akin to the way Pee Wee makes breakfast, I do appreciate the peace of mind that comes now with having free ATM access within the same zip code. Of course it's only been a couple of weeks now so I'll be sure to follow up and tell more about what I discover with my Discover Bank accounts.

Money at 30: My Experiments in Internet Banking was previously seen on www.dyernews.com