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Updated on Tuesday, September 1, 2020
Discover Bank’s roots stem back to the Discover credit card brand and the Sears-owned Greenwood Trust Company. Over the past 30 years, Discover Bank’s parent, Discover Financial Services, has become one of the largest credit card issuers in the U.S.Discover Bank offers an array of financial products, including a full menu of certificates of deposit (CDs). If you’re looking for competitive CD rates, Discover Bank is worth a look.
Discover Bank’s CD rates
Annual Percentage Yield (APY)
How do Discover Bank’s CD rates compare?
While Discover Bank’s CD rates aren’t always the highest available in our listings of the best CDs, they are consistently among the top offers we’ve seen across all terms. That said, you may be able to find a similar or even better rate with a CD that has a lower minimum deposit than Discover Bank’s rather hard-to-swallow $2,500.
There are usually several nationwide banks offering a 12-month CD at an annual percentage yield (APY) that’s higher than Discover Bank’s 12-month CD APY. Some minimum deposit requirements are also lower.
Regarding returns, it’s always a good idea to invest in CDs with the highest APYs possible, but remember to keep your CD investing strategy in mind. For example, if you’re investing in CDs using the ladder strategy, it might be easier to keep everything in one bank since you’ll be switching in and out of CDs frequently.
Discover Bank manages to stand out from its competition with its mobile app and 24/7 U.S.-based customer service. To some people, these conveniences may be worth a few basis points of interest accrued.
What you need to know about Discover Bank’s CDs
Discover Bank provides an open image, and the company makes even its fine print more accessible and easier to understand than other banks do. Consumers may find Discover Bank’s transparency a key asset when investing their wealth. Due to this approach, purchasing CDs through Discover Bank is a rather straightforward process.
How to open a Discover Bank CD
On Discover Bank’s online banking webpage, click on the orange “Open an Account” button near the top right of the page. You can then choose which accounts you’d like to open. Select the certificate of deposit option, then after inputting your details, choose a CD term and enter an initial deposit amount.
You’ll then need to complete the application by providing your name, address, date of birth, phone number, Social Security number, employment status and possibly your driver’s license. Once your application is complete and accepted, you’ll need to fund the account.
How to fund a Discover Bank CD
You’ll need to fund it within 45 days of submitting your application, which you can do in one of three ways:
- Transfer funds from another bank account over the phone. (You can only do this when you first fund your account.)
- Transfer funds from another bank via online transfer.
- Mobile check deposit.
- Write a check to yourself and send it to the following address:
- Discover Bank
- P.O. Box 30417
- Salt Lake City, UT 84130
The minimum opening deposit amount for each of Discover Bank’s CDs is $2,500. Once you open a CD, you can’t deposit funds into the same CD later, so it’s a good idea to make sure you have all the cash you want to invest before you open the account. Alternatively, you could look into a CD ladder strategy.
Withdrawing funds from a Discover Bank CD
When you want to withdraw money from your CD, the biggest thing to consider is whether that CD has matured or in other words, finished its term.
If your CD hasn’t yet matured, you have two options: You can take your earned interest out penalty-free at any time, or you can withdraw the principal at any time — but you will incur a penalty. Discover Bank’s penalty amount is determined by the original term of your CD:
- Less than 1 year: three months’ worth of simple interest
- 1 year to less than 4 years: six months’ worth of simple interest
- 4 to 5 years: nine months’ worth of simple interest
- 5 years to less than 7 years: 18 months’ worth of simple interest
- 7 years or longer: 24 months’ worth of simple interest
If your CD has finished its term, you can withdraw your money penalty-free, allow the CD to renew or roll it into a CD of a different term length (more on that in a bit).
Earning interest on a Discover Bank CD
Your Discover Bank CD will start earning interest on the same business day that you fund the account. The interest will then be added to your account once each month.
When deciding what to do with your interest, you have two options: The default option is to allow it to compound within the CD (meaning you’ll earn interest on that interest amount), or you can have it automatically deposited each month into another Discover Bank account.
What happens once the Discover Bank CD matures?
You’ll get a heads-up notice from Discover Bank about a month before your CD matures so you can decide what to do with the money. You have two main options: Either reinvest it into another CD (of the same term length or a different term length), or withdraw the money from the CD and put it into another account, such as a checking or savings account, or even a CD at a different institution.
If you don’t let Discover Bank know what you want to do with the maturing CD, it will automatically renew in a new CD of the same term length. You have a nine-day grace period after your CD automatically rolls over to make any changes or withdrawals penalty-free.
The bottom line
As far as big-name banks go, Discover Bank offers great CD products. Although the initial investment required seems a bit high, the bank offers exceptional customer service and APYs that make up for a relatively minor inconvenience for many investors.
If you’re the kind of person who likes to keep your finances in one place, Discover Bank has competitive online savings and checking accounts. No matter how long you’re considering investing money in a CD, Discover Bank is worth a look. Even if the bank doesn’t have the best available APYs, it’s usually within several basis points of the top offerings and well above the average.