Courtesy Kevin Panitch
- When I opened my Discover high-yield savings account a few years ago, my APY was 1.75%. Now, post-pandemic, it's a 0.60% APY, more than 1% lower.
- But I have no plans to close my account. For one thing, I'm still getting a higher rate than I would at any traditional bank.
- Plus, Discover's great customer service and easy-to-use platform are still the same, so it's worth leaving my cash alone.
- See Business Insider's picks for the best high-yield savings accounts »
I originally opened a Discover high-yield savings account a few years ago as a place to store my emergency fund, and I haven't looked back since.
At the time, Discover was offering an annual percentage yield of about 1.75% (it was a whole different world back then!), as well as a sign-up bonus of $150. The promise of earning a few hundred dollars with nearly zero added work was more than enough reason for me to switch from my "big bank" savings account that was offering a paltry 0.02% interest rate.
However, I didn't choose Discover only because of the clear monetary benefit. There were a few other high-yield savings accounts that I was exploring that offered similar interest rates and sign-up bonuses.
I liked Discover because of its strong customer service, its bare-bones (but easy-to-use) online interface, and the fact that there were no fees and no account minimum.
The last point is especially important to me. A lot of other banks would not only reduce your interest rate if you dropped below a certain minimum, but actually charge you a fee as well. Discover does neither.
It gave me peace of mind that if I actually had to use part of my emergency fund, I wouldn't be penalized. At the end of the day, an emergency fund is there to be used if needed. I didn't want to be further stressed about the financial repercussions of using it when and if that time came.
Why I'm still using my Discover high-yield savings account todayToday, Discover is offering a significantly lower APY, as many banks are. As of September 2020, it's down to just a 0.60% APY.
While that is a large drop of over 1% from when I signed up, it's still much better than what most traditional banks will offer. Plus, there are a few other reasons I'm sticking with my Discover high-yield savings account in 2020 and beyond.
It's still a great place to store my emergency fundThere is an ongoing debate about how many bank accounts is the right number of bank accounts to have open.
While the answer is dependent on your situation, my default answer for most people is two.
One checking account to manage the ongoing flow of your finances, and a high-yield savings account to store your emergency fund.
A checking account is great for managing paychecks coming in, expenses going out, and savings and investments transferring to other accounts.
Your high-yield savings account should be FDIC-insured and extremely safe, but also pay some amount of interest to help offset inflation. This is where my Discover high-yield savings account is still coming in handy.
While the interest that is offsetting inflation has certainly decreased, it's still best in class when it comes to high-yield savings accounts. For example, right now, both Marcus by Goldman Sachs High Yield Online Savings Account and Ally Bank are offering interest rates within 0.10% of Discover.
Plus, since the account is FDIC-insured, there is virtually zero risk associated with storing my money with Discover (outside of the opportunity cost of keeping money on the sidelines). It's the fiscally responsible place to put my emergency fund right now and helps me sleep at night knowing it won't drastically decrease in value.
I haven't found a compelling reason to switchNone of the benefits that I found when I signed up with Discover have changed. It is still offering:
- A best-in-class interest rate
- An easy-to-use online interface
- Excellent customer service
- No account minimums
- No fees
Plus, it still stacks up nicely when compared to other bank accounts that I researched when first selecting one. These included offerings like Marcus by Goldman Sachs High Yield Online Savings Account, CIT Bank Savings Builder High Yield Savings Account, Ally Bank, and Chime Savings Account, to name a few. While all are great banks, I don't think any are clearly superior to the Discover high-yield savings account I have today.
I'm saving for a down paymentLast, to add to my reasons for keeping my Discover account, I recently started saving for a down payment.
I don't have any immediate plans to buy a house, but over the next two or three years I do, so I'm starting to put some money aside now so that I can make a 20% down payment in the future.
I could save this money in the stock or bond market, but since I am looking to use this money in the near term (less than five years out), I run the risk of my investments losing value exactly when I want to buy a house. I would prefer to store those funds in my Discover high-yield savings account where I know my money is safe from a steep decline.
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