Discover’s Cashback Checking Against Its Competition

Simon Zhen

By , Staff Writer
Posted on Wed Feb 27, 2013, Last Updated on Tue Jul 29, 2014

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Discover’s Cashback Checking Against Its Competition

Discover Bank’s online cashback checking account has launched, offering consumers another free alternative to accounts that are available through traditional banks. It enters an increasingly crowded arena filled with online checking accounts — differentiating itself with a cashback approach. But, it may fall short against the competition.

The new Cashback Checking account carries no monthly maintenance fee and it offers 10 cents per debit card purchase, online bill payment or written check. Discover Bank doesn’t charge a fee to use any ATM, but the ATM operator may impose a surcharge. This surcharge is waived at MoneyPass ATMs. The account comes will all the mobile features you’d expect from an online bank, including native mobile applications that offer mobile deposit and bill pay.

See how it compares to similar online checking accounts with transaction-based rewards:

Features Discover Bank Cashback Checking PerkStreet Financial UFB Direct Airline Rewards Checking
Monthly fee $0 $0 ($4.50 in months without a posted transaction) $0
Rewards 10 cents per debit card purchase, bill payment or written check Up to 2% cash back at certain retailers, 1% cash back on all other purchases, and 25% cash back on special weekly deals 1 mile per debit card purchase of at least $2 and a personalized-deals program
Free online bill pay Yes Yes Yes
ATM access No fees from Discover Bank and no surcharge at MoneyPass ATMs (ATM operator may charge fee) No fees at STARsf® ATMs, $2 at other ATMs (ATM operator may charge fee) Unlimited ATM fee reimbursements
Mobile banking apps Yes No Yes
Remote check deposit Yes No Yes

At a cash back rate of 10 cents per debit transaction, Discover’s Cashback Checking account doesn’t appear to be attractive enough to encourage debit card usage.

Under PerkStreet’s debit card rewards program, customers will earn 10 cents in cash back with a $10 purchase. With UFB Direct’s personalized deals program, for instance, customers might get $5 back on a $25 purchase at a major retailer — which is equivalent to the cash back earned on 50 debit transactions on Discover Bank’s checking account.

Currently, one caveat of the Cashback Checking account also places a shadow over the debit card program. Initially, the account will be available to select Discover cardmembers, before gradually becoming available to all Discover cardmembers in 2013. A public roll-out is expected in 2014. Discover cardmembers may already be earning a competitive cash back or rewards rate on their credit cards (like the Discover it card), which obscures the appeal of Cashback Checking.

Ideally, the customer that gains the most from having Discover Bank’s checking account is anyone who regularly uses his or her debit card for purchases of less than $10 — effectively earning more than 1% cash back, which would even beat the cash back rate on many credit cards.

Those who don’t swipe their debit card often may be better off with an interest-bearing checking account, such as those offered by Capital 360, Ally Bank, Bank of Internet and others.

 

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  • RA SONY SETIAWAN

    R.A SONY SETIAWAN

  • Orion Antares

    Two things here would be that you can open a savings account for interesting bearing and keep the checking account low since there is not minimum. You only need to do a transfer to the account to pay bills each month. The appeal to this account I think would be the micro transactions where retailers, usually small businesses, require a minimum purchase to accept credit cards but will still accept debt cards below that level.

  • Guest10836

    Debit card purchases — does that exclude debit card swiped as credit?

    • cody

      i’m also trying to learn of this information so if you could tell me what you’ve found out

  • Trevor

    I’m doing this as a second account. I already have the discover it card.

  • Greg

    I think the biggest disadvantage of Perk Street is that they are no longer in business.