A high-yield savings account is an important part of any personal finance toolkit—a place to stash your emergency fund, save for a down payment on a house, or to collect your pennies for a new car or vacation. I use my high-yield savings account for my rainy day fund, as well as to save up for Christmas travel and other predictable but non-standard expenses.
If you’ve been putting off opening a savings account—or it’s time to trade-in your current savings account for a better one—consider the Discover Online Savings Account, where you can earn 0.40 percent APY.
The Discover Online Savings Account in review
The Discover Online Savings Account is a competitive online-only high-yield savings account, paying 0.40 percent APY with no minimum balance required.
It’s hard to beat Discover Online Savings Account’s 0.40 percent APY without a large minimum balance requirement or other restrictions.
Here are some of the account’s competitive features:
- Interest is compounded daily and applied monthly
- No monthly fee
- No minimum balance required
- Six qualified withdrawals per month
- The award-winning customer service you would expect from Discover
How much can you earn?
You could earn $102.50 in interest annually for every $5,000 you deposit in a Discover Online Savings Account.
That assumes the principal and interest remain on deposit and interest rate and APY do not change for one year.
At many other national banks, savings rates can be as low as 0.01 percent APY, yielding a return of only $0.50 a year per $5,000 on deposit. If you haven’t moved to a free online savings account yet, you’re leaving easy money on the table.
Why open a Discover Online Savings Account?
A Discover Online Savings Account is ideal for safeguarding your emergency fund or savings you will need within the next two years.
Although a savings account, by itself, won’t grow your money at a rate needed to beat inflation and generate long-term capital growth, a safe place to park cash at a competitive rate remains a critical part of a sound financial plan.
Regardless of your how much or little you earn, you always want to have cash on hand for the unexpected—a car repair, a veterinary bill, or even the loss of your job.
Ideally, you want to save enough money to cover between three and six months’ worth of living expenses.
Once you have saved an emergency fund, you want it to be always available if you need it. You do not want to put your emergency savings into stocks only to discover your investments are down 50 percent when you need to cash them out to pay for something.
With a FDIC-insured Discover Online Savings Account, your money is guaranteed to be safe and available when you need it.
Are you saving for a house, a wedding, or another other big goal? Although it’s tempting to invest that money for a chance to earn a higher return, I believe a savings account is the best place for money that you’ll need in less than five years and definitely money you’ll need in less than two years.
Much of the benefit of investing comes from leaving your money invested for decades as your principal and earnings compound. If you don’t have that long to invest, you’re not getting the full benefits of compounding interest and you’re putting your money at risk of short-term volatility.
How to open a Discover Online Savings Account
You can open a Discover Online Savings Account in just a few minutes.
Simply provide your information (name, address, phone, email and taxpayer ID) and transfer money from an existing bank account by check or electronic funds transfer.
That’s it—you’ll get online confirmation and a welcome kit in the mail. Opening an online savings account couldn’t be easier.
Pros & Cons
- APY — The Discover Savings account has a 2.15%, which is better than most accounts on the market.
- No fees — There are no monthly fees associated with Discover’s Saving account.
- No minimum balance — There’s no minimum balance needed to start earning your 2.15% APY.
- Great customer service — Discover offers, perhaps, the best customer service of any U.S. bank.
- Not many physical locations — Discover has very few locations, so you’ll need to be comfortable doing all your banking online.