Bank Review: Discover Bank

Discover Bank is an online bank that is part of Discover Financial Services, Inc., a Riverwoods, Ill.-based company with a widely diverse array of financial tools.

Discover Financial Group traces its history back to the mid-1980s and Sears’ launch of the Discover Card, where it was a unit of Sears’ Dean Witter group. From that start, Discover grew to be the third largest credit card brand in the U.S., and also offers money management tools through its Discover Bank.

First among the advantages Discover Bank claims over its competition is its online structure. Since it is an online bank, Discover Bank isn’t saddled with the overhead costs of traditional brick-and-mortar institutions. The bank doesn’t pay for the leather chairs and marble counters found at typical downtown or neighborhood bank branches, and their high-interest savings accounts and other high-interest tools offer rates that often surpass the national average as a result.

Discover Bank provides consumers with a number of products that include online savings accounts, money market accounts, certificate of deposit (CD) accounts, IRA CD accounts, and home loans, home-equity loans, student loans and personal loans. Here is an overview of some of these products:

Online savings accounts

Requiring no minimum opening deposit, Discover Bank’s online savings accounts are intended to help depositors accumulate money for both large and small purchases. The online savings rates are designed to be competitive, and they strive to exceed the national savings average. The accounts also feature quick and simple online money transfers and easy-to-implement automatic savings plans. Depositors of online savings accounts can make up to six withdrawals per statement cycle, including pre-authorized, automatic and telephone transfers.

Money market accounts

Requiring a minimum opening deposit of $2,500, the money market accounts of Discover Bank can help depositors save for unexpected expenses. They offer depositors returns similar to online savings accounts, but with greater access to funds. Depositors can access their money when they need it by check, debit and online service. They can also pay bills online with the bank’s Easy service. Up to six withdrawals per statement cycle can be made on a money market account, including pre-authorized, automatic and telephone transfers.

Certificate of deposit accounts

For guaranteed returns, Discover Bank’s certificate of deposit accounts let depositors lock in a fixed rate not subject to fluctuations in the market. The bank’s highest rates are offered in return for limited availability of funds. Because they offer a combination of access, liquidity, safety and growth potential, they are often recommended for those who want to limit risk to their portfolio.

The minimum opening deposit is $2,500 and a penalty may be charged for early withdrawal. The bank offers CD accounts in terms of three months to ten years, and CD interest can be reinvested or distributed. These savings-growing strategies offered by Discover Bank frequently include either laddering CDs with different terms and returns, or combining CDs with money market accounts, depending on the individual needs and goals of the depositor.

Individual retirement account (IRA) CD

Also requiring a minimum opening deposit of $2,500 and being subject to early withdrawal penalties, Discover Bank’s IRA CD is designed as an instrument to help depositors safely invest for their retirement years.

Appropriate for either a traditional or a Roth IRA, these CDs allow depositors to generate guaranteed returns not subject to fluctuations in the market, and there are no monthly maintenance fees. Discover Bank allows depositors convenient renewal options at maturity and the ability to roll over a 401k, or transfer another IRA into these IRA CDs.

Discover Bank offers consumers a number of different strategies to grow their money; but they also offer mobile banking, a state-of-the-art encryption process for security, FDIC-insured deposits up to the maximum allowed by law and the fact its U.S.-based banking specialists are available 24-7 online and by phone.