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Discover Bank is an online only bank that offers excellent rates for savers with low fees. In this review, we cover its products, rates and fees.

Discover Bank Online Savings Account

Interested in opening a savings account at Discover® Bank? Read this article first.

Most every consumer knows the Discover brand, but for it’s extensive line of credit card products. Just a short time ago, Discover decided to open their own banking platform, looking to entice customers to enter a one stop shop for their online banking needs.

Keep reading this article for a full review of opening and using a bank account at Discover® Bank.

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Opening a Discover® Bank Online Savings Account

Step 1. Deposits at Discover Bank are insured by the FDIC and the bank has earned a five-star “Safe & Sound” rating from Bankrate. FDIC insurance alone, regardless of the five-star rating, ensures that regardless of the solvency of the bank, I will be able to withdraw my full deposit when needed.

When beginning the application process, Discover Bank lists everything needed to open an account. The few requirements lead me to believe that the account opening process will be smooth and quick. As with all banks, an address inside the United States, a date of birth, and a Social Security number are necessary.

I choose at this point to open a savings account. Discover Bank also offers FDIC-insured Certificates of Deposit (CDs) and CD Individual Retirement Accounts (IRAs) with high interest rates as well as Money Market Accounts.

At this time, Discover® Bank allows the new customer to add a joint owner to the account. I don’t plan to share this account, so I decline.

Step 2. The second page of the application determines how to fund the account. I decide to link the account to my Capital One 360 checking account with an initial deposit of $2,500 funded electronically. (Ed. note: ING Direct became Capital One 360 in 2013.) Discover Bank no longer requires a minimum for the initial deposit. If you would prefer to fund your account via a wire or check, Discover® Bank offers these options as well.

Open a Discover Bank Savings Account

In order to give your consent to Discover® Bank to perform an ACH transfer, you will need to provide an electronic signature.

Step 3. All that remains now is to verify the information you have provided and electronically sign the tax certification. Banks are required to keep account owner signatures on file, and Discover® Bank handles this electronically as well.

Step 4. Once the bank processes your application, you will be presented with a number of security questions based on the information in your credit report. Many websites use this type of authentication now. For example, you may be asked to select the town where you lived previously from a list of choices.

Note: On the confirmation page, you will see your full account number. Save this information by printing the page now because you will need your account number later in order to activate your online access. The bank will not send it to you through email, and it will take up to ten days to receive your welcome package in the mail.

After passing the security and identity check, I received an email confirming the creation of my new account, including a partially-hidden account number. Those who decide to fund their new account via check will receive in this email the bank’s depository addresses for regular U.S. mail or overnight mail. Interestingly, wire transfers are processed through Mellon Bank rather than being sent directly to Discover Bank.

Using the Discover® Bank Online Savings Account

Open a Discover Bank Savings AccountTwenty-four hours and ten minutes after receiving the first email, I received the second in which Discover informed me my account has been funded. That is faster than I expected, considering I started the process over a weekend. This email includes a link to Discover’s website whereupon I can register to view my new account online. After verifying this email was legitimate and not a phishing attempt, I followed the instructions.

Did you save your account number? If not, you will need to call the Bank’s customer service. You need the account number, your Social Security number, your date of birth, and your mother’s maiden name in order to activate online account access.

After selecting a user ID, a password, and security questions, you will be able to view your account online. I was surprised to see Discover® had already posted interest to my account. You can see how much I received for one day in the screen shot included here.

You can use the Discover® Bank website to set up recurring transfers through their “Automated Saving Plan” or initiate a one-time transfer from a linked account. If you want to link a new account, you will be asked to enter the banking information and required to verify small trial deposit amounts. Unfortunately, the account I used for the initial deposit is not automatically considered a linked account. I must go through the process of adding the same account to the list.

Discover Bank Savings and CD Rates

Discover Bank offers three terrific deposit accounts for every customer.  And their rates are also some of the best you can find online.

  • Online Savings Account – 1.50% APY
  • High Yield CD’s – 1.95% APY (for a 12 month CD) – 2.45% APY (for a five year CD)
  • Money Market – 1.35% (for balances less than $100,000) – 1.40% for balances greater

Conclusion

The process of opening a Discover® Bank online savings account was smooth and quick. This is the opposite of what I experienced with Everbank. When I called Discover’s customer service to get my account number, the representative was helpful and friendly. My call, placed on a Sunday afternoon, was answered without any hold time. Discover® Bank’s features are basic, but it meets the needs of savers with the bonus of a highly competitive interest rate. I plan on taking a closer look at the bank’s high-yield CDs in the near future. After nine months, I haven’t had any problems with my Discover® Bank.

To open an account visit Discover Bank.

Discover® Bank
Routing (ABA) number 031100649
Established August 30, 1911
FDIC certificate 5649
Savings interest rates Click here to see rate
Money Market interest rates Click here to see rate
IRA CD interest rates 1-year IRA CD rate, 10-year IRA CD rate
Standard CD interest rates Click here to see rate
Location 12 Read’s Way, New Castle, Delaware
Direct Connect Not supported
Web Connect Supported
Mint/Yodlee Supported

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There are some big changes in the standard deduction and exemptions for 2018. We have all the numbers here and how the change will affect tax payers.

standard deduction

Most taxpayers can choose between itemizing tax deductions and taking the standard deduction. Itemizing, which requires accurate record-keeping, allows you to take deductions for specific expenditures from the tax year. The standard tax deduction is a fixed amount. Either way, your deductions reduce the amount of your taxable income. So they reduce the amount of overall taxes you owe.

Generally, if you can show that you’ve had more deductible expenses than the amount of the default standard deduction, it’s better to itemize. This way, you reduce your taxable income by more. So you’ll pay less in taxes.

However, if you don’t have enough itemized deductions, taking the standardized deduction works out best.

In 2013, only about 30% of U.S. households itemized their deductions in 2013, the most recent year for which data is available. With 2018’s increased standard deduction amount, there’s a good chance that this number will go down even more. With a higher standard deduction, it will be more difficult for taxpayers to itemize enough to cross that threshold.

IRS publication 501 outlines each year’s deduction amounts. There are some cases where you can make adjustments to the standard deduction. For example, if you are 65 or older, or if you are blind, you get a higher standard deduction.

Taxpayers used to also be able to take a personal exemption of around $3,000, depending on the tax year. This provision has been repealed for 2018, so this is no longer available.

What Tax Reform Means for Deductions

The recent tax reform bill has significantly increased the standard deduction. It has also decreased the number of itemized deductions that are allowed. These factors combined mean more taxpayers will likely take the new, higher standard deduction.

Here’s a historical overview of what the standard deduction has been since 2010:

Tax Year 2018 2017 2016 2015 2014 2013 2012 2011 2010
Single $12,000 $6,350 $6,300 $6,300 $6,200 $6,100 $5,950 $5,800 $5,700
Married filing jointly $24,000 $12,700 $12,600 $12,600 $12,400 $12,200 $11,900 $11,600 $11,400
Married filing separately $12,000 $6,350 $6,300 $6,300 $6,200 $6,100 $5,950 $5,800 $5,700
Head of household $18,000 $9,350 $9,300 $9,250 $9,100 $8,950 $8,700 $8,500 $8.400
Personal exemption Repealed $4,050 $4,050 $4,000 $3,950 $3,900 $3,800 $3,750 $3,650

As you can see, the standard deduction is now much higher. Another major increase came with the child tax credit. Now, taxpayers can deduct $2,000 per qualifying child, with a maximum refundable amount of $1,400. This tax credit starts to phase out for married taxpayers filing jointly at $400,000 in income and at $200,000 in income for all other filers.

What Does it Mean for You?

Of course, the main question for most tax filers is, “How does this affect me?” Well, it really depends on a huge combination of factors. Check out this article for an in-depth overview of the major changes the bill introduced. But here are a few bottom-line takeaways to consider:

  • You’re more likely to take the standard deduction. The higher standard deduction alone will be enough to push many taxpayers into taking it rather than itemizing. But taxpayers who used to itemize due to hefty mortgage interest, lots of charitable contributions, or high state and local income and property taxes may find those more-limited deductions aren’t enough to push them over the threshold now.
  • Taxes may be simpler in some ways but more complex in others. Taking the standard deduction is, indeed, simpler than itemizing. But it may take some time to hash out all the practical implications of this tax law. So be prepared for some complications along the way.

You can use calculators like this one to get an idea of exactly how the new tax bill is likely to affect you.

Remember, this tax law takes effect in 2018. So when you’re filing your 2017 taxes in early 2018, the 2017 deductions and personal exemption still apply.

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No more excuses. It’s time to open your first IRA account. We walk you through the entire process, including where to open your account. It’s easy!

First IRA Account

Establishing your first IRA, or Independent Retirement Account, is a big deal in the world of finance. This tax-advantaged account is a great way to save and invest for the future. It generally earns more than you would in a high-yield savings account (thanks to compound interest!). And it allows your money to grow tax-free for decades. Aside from a 401(k)–if you have one–it’s the biggest first step you can make toward saving, and planning for a successful retirement.

Planning for retirement is imperative, too, if you don’t want to work for the rest of your life. No matter how much you make now or how much you’ll need in the future, set aside what you can, when you can. Believe me: your future self will thank you!

So, how do you go about deciding on and opening your first IRA? More importantly, how can you start saving in this retirement vehicle with a limited initial contribution?

Let’s talk about the first steps toward opening an IRA. Then we’ll discuss the best ways to fund one if you only have, say, $1,000 to contribute.

Who Can Open One?

First, know that not everyone is eligible to contribute to an IRA. So, who is eligible to establish and contribute to one? If you are younger than 70 ½ and have earned, reported income of any kind, you’re good to go.

The rules for an IRA are simple: you’re can contribute up to the maximum of either the annual contribution limit or your earned income for the year, whichever is lower. The annual contribution limit can change from year to year. For 2018 it’s $5,500 in or $6,500 if you’re over 50.

This means that if you earned $100,000 this year, you can still only contribute up to $5,500 (or $6,500) to your IRA. Conversely, if you only earned $2,500 this year, that is all you can contribute. Even if you have savings elsewhere or your parents want to give you a little extra cash, you can’t put more in the account than you earned in income.

Decide Which Type Is Right for You

There are two types of IRAs to choose from: traditional and Roth. Both are tax-advantaged. This means they both offer tax benefits as they grow. But they work very differently.

Both IRA types have the same contribution limit. You can have both types of IRAs and contribute to both throughout the year. But if you split the money, the combined amount you contribute to both accounts still can’t exceed the applicable maximum.

A traditional IRA lets you see the tax benefits now. You contribute money to this account during the year tax-free. You can contribute pre-tax dollars through your employer. Or you can contribute post-tax income on your own, and then deduct the contributions when you file your taxes.

Your earnings in the traditional IRA will grow tax-free over the years. However, when you withdraw the funds in retirement, you will pay income taxes at whatever your normal rate is at that time.

A Roth IRA is a little different. You will contribute to this fund with after-tax dollars throughout the year. So your employer won’t contribute from pre-tax dollars. And you can’t take a tax write-off for your contribution. Every penny you contribute has already been taxed.

Again, your earnings will grow tax-free over the years. However, when you withdraw funds, you won’t pay any income taxes. None, nada, zip. You’ll be able to withdraw dollar for dollar in retirement (after age 59 ½), without Uncle Sam taking another cut.

So, which one should you choose?

Well, first off, you don’t have to choose. You can certainly open both types, or even open one now to begin contributing and then open the other type later on. However, if you’re asking which would be the better choice for you, here’s the general rule:

  • If you think you’re making more money now than you will in retirement, go with the traditional IRA. Taking the tax break now, while you’re in a higher income bracket, is smarter and results in more savings.
  • If you think you’ll make more in retirement than you’re making now, go with the Roth IRA. A tax cut now, in the form of annual deductions, doesn’t do you much good if you’ll pay higher taxes on distributions when retirement comes.

Decide when you’re most likely to be in a higher tax bracket, and take the tax benefits then. You can also change this later down the line, if your career shifts and you wind up making substantially more or less than you do now.

Where to Open It

So, you’ve picked an IRA type and set aside some cash. Now, where is the best place to open your account and invest the money? After all, an IRA isn’t simply a savings account, meant to sit around earning a couple percent in interest. It’s a retirement account that you want to grow.

You have a few options available. Almost all major financial institutions offer IRAs. You can open one through a bank or a credit union of which you’re a member. You could turn to mutual fund companies or investment accounts for a more traditional option. Or you can even look into using your IRA to invest with a peer-to-peer lending site, such as Lending Club or Prosper.

You have many, many investment options–more so than with 401(k) investments, in fact. Which you choose is determined by your risk level, your ability to manage the account, and whether you have any specific investment goals.

You can invest your IRA with a robo advisor like Betterment or Wealthfront. These low-cost options can help you decide on a portfolio. They’ll even re-balance your portfolio over time to keep meeting your investing needs.

You could look into utilizing a broker, such as Ally Invest or OptionsHouse. If you want to invest in ETFs (exchange-traded funds) or individual stocks, this is the way to go. This is a great option if you want to pick and choose where your money gets invested.

Mutual fund companies, such as Fidelity, Vanguard, or Charles Schwab are some other preferred places to invest. Each company offers plenty of its own mutual funds to choose from, so you can pick the one that best suits you.

Within the “mutual fund” umbrella, you have a number of options for where your money actually goes. You can pick a target-date retirement fund, which is a fund based on your expected year of retirement. The company will rebalance your portfolio and asset allocation as you go, according to an established timeline. Essentially, the company starts you off in higher-risk, higher-reward investment options when you’re young. As you near retirement, they’ll move your money into safer bonds.

Lifestyle funds are similar, in that they automatically rebalance your portfolio as you go. However, with these, you choose your asset allocation from the get-go, and it doesn’t change over time.

You can also utilize financial advisor services to manage your investments. Each of the mutual fund companies mentioned here offers these services. This is a bit more costly of an option, but can be a great choice if you want to have more control over your money.

Which of these options really depends on your personal preferences and how much money you have to invest. Many companies have initial investment minimums of $0 to $500. But some have minimums of $2,000+. Be sure to check out the details and our reviews before you settle on a company for your first IRA.

Opening and funding an IRA is a great first start toward saving for retirement. It provides more of a return on your savings than a basic savings account would, and also offers tax advantages that help you keep a little more of what’s yours.

By wisely contributing and investing your IRA, you’ll not only grow your money but also save for a successful retirement future. And believe me, you’ll be glad you did.

 

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APR vs. APY: While the seem similar, there’s a big difference between annual percentage rate and annual percentage yield. Here’s what you need to know.

APR vs. APY

APR and APY are short acronyms with big importance. Despite the confusion, these two terms are not interchangeable. What exactly is the difference between APR and APY? Here’s a quick lesson:

  • APR stands for annual percentage rate
  • APY stands for annual percentage yield
  • APR is more commonly used regarding credit cards, mortgages, and loans
  • APY is more commonly used regarding interest-bearing accounts

One thing APR and APY have in common is that they come into play in our lives just about every day if we use credit cards, pay a mortgage, or keep money in the bank. Both determine how much you will earn or pay on investment products and loans. Understanding the basic differences between APR and APY is important before you do something like open a credit card or choose an investment account.

APR is going to be tossed at you when you shop around for credit cards, car loans, or home loans. APR represents the interest you’ll be responsible for paying. APY is a phrase you’re going to hear as you search around for bank accounts, CDs, and a variety of investment products. APY is the amount you stand to earn if you place your money in the hands of a financial institution.

The Basics of APR

The rate portion of an annual percentage rate refers to the amount of money a lender is charges when you borrow money. You can figure out the APR of a loan or balance by multiplying the period rate by the number of payment periods in a year. A simple way to look at it is that an account with an interest rate of 1 percent will have an APR of 12 percent.

On the other side, you can divide the APR by the number of payment periods to get the per-payment rate. Many loans will give you the APR rather than the per-payment rate. If your car loan has a 7.5 percent APR, you’ll pay .625 percent in interest every month.

Sometimes you’ll see both an interest rate and an APR for any given loan or balance. In this case, the APR is typically higher. That’s because APR includes interest, points, broker fees, and additional fees. This is especially common for accounts like mortgages.

The Basics of APY

APY is the rate of return of an interest rate. It takes into account compound interest. Compound interest is the interest you earn on top of the principal and simple interest. APY takes the interest rate and provides a percentage based on how often interest is compounded during a year.

Remember the account with an interest rate of 1 percent and an APR of 12 percent? That same account would carry an APY of approximately 12.68 percent. However, that’s just a basic estimate using the most basic scenario. Actual percentages will always depend on factors like the specific financial institution you’re dealing with and state laws.

Things to Keep in Mind When Shopping Around for Rates

Keep in mind that most lenders and institutions will list whichever number makes their products appear more appealing. This is why it’s important to always ask a potential lender or institution which percentage type they’re quoting as you’re shopping around for loans or accounts.

Compare all the options you’re considering based on the same percentage type to get a true picture. Anything else would be like measuring apples against oranges instead of making a true apples-to-apples comparison. The Truth in Lending Act (TILA) requires all lenders to provide you with accurate cost information that allows you to comparison shop for loans.

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2018 Review of Prosper Lending and Borrowing

by Guest Author

Prosper claims to offer great rates for both borrowers and investors. In this Prosper review, we put these claims to the test. Prosper offers a different way to look at lending. The Prosper platform is a peer-to-peer marketplace where people can borrow money for all aspects of life. It’s an interesting platform for people who […]

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10 Steps to Break the Credit Card Habit

by Abby Hayes

Credit cards offer convenience, security, and rewards. Overspend with a credit card, however, and the interest and fees can bury you. Here are 10 tips to stop using credit cards. If you’ve got a bad credit card habit, chances are you know it. Whether or not you’re willing to admit it is a whole other […]

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The Best Current and Historical Bank Interest Rates — February 2018

by Rob Berger

We’ve tracked bank rates since 2008. The latest list shows the best bank interest rates available nationwide as of February 2018 (with daily updates). Since many banks are constantly updating their interest rates offered on savings, money market and checking accounts, this chart should come in handy. On the 1st of every month, this page […]

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The Best Travel Rewards Credit Cards of 2018

by Michael Pruser

Enjoy free travel with this list of the best travel rewards credit cards of 2018. I’ve personally used several of these credit cards for free flights and hotel stays. It’s time to plan your holiday travel. That may mean cashing in the travel rewards you’ve accumulated on credit cards–or it may mean starting to use […]

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Best Robo Advisors

by Kevin Mercadante

A robo advisor can make it easy to invest in an IRA or taxable account. But how do you choose? Here’s our 2018 list of the best robo advisors for your money. This is something of a controversial topic. There are any number of “best robo-advisors” lists, and they all look a little bit different. […]

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7 of the Best Places to Open an IRA in 2018

by Kevin Mercadante

Opening an IRA is an important decision. To help, here is our survey of the best IRA accounts for 2018, including fees and features of each option. Just about every bank, investment brokerage, and robo-advisor welcomes Individual Retirement Accounts (IRAs). But there are a handful of institutions that stand out above the rest. Below are […]

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