Get Interest-free Banking With Digit, a Terrible New Way to Save

Look, we all know that interest rates are pretty low. So low, in fact, that if you opened up a Wells Fargo Way2Save savings account at its current 0.01% APY and deposited $10,000, by the end of the year you’d have… wait for it… $10,001.

So keep that single dollar in mind as we take a look at Digit, a new savings app that promises all the benefits of saving money without even the pretense of interest.

What’s Digit? It’s a new app that works to predict what portion of your money you aren’t going to spend, and puts that money into a savings account for you. According to the testimonials on its website, it uses “trustworthy robots” to make these calculations, and you know that I am all about the trustworthy robots. How do these Digit robots work?

Every 2 or 3 days, Digit transfers some money (usually $5–50) from your checking account to your Digit savings. We never transfer more than you can afford, so you don’t have to worry about over-drafting your account. In fact, we have a no-overdraft guarantee.

That no-overdraft guarantee means that Digit promises to pay the fees if you overdraft your account due to money that Digit took out of your account without your permission.

And that’s not the only slightly untrustworthy robot thing about Digit. As Business Insider notes:

But there’s a catch: Users do not earn any interest on their savings.

Reading the Business Insider piece gives you a better idea of how Digit works: Digit takes your money and puts it into “FDIC-insured, custodial accounts held by Digit at two of its partner banks, Wells Fargo and BofI Federal Bank.” It’s important to note that these accounts are not in your name; they’re in Digit’s name. Digit is literally saving your money in its savings account.

Then, when you need your money back, Digit will gladly hand over what’s yours — while keeping the interest earned on your savings.

“Now wait just a minute,” you might say. “You already told us that, even if you have saved $10K, you’re only going to get, like, a dollar in interest. Who cares?”

Well, I care. First of all, who knows what kind of interest deal Digit has with its partner banks. I bet it’s not a basic Way2Save savings account with 0.01 APY. Second of all, I love robots but this is one situation where it is better to handle your own savings transfers yourself. Your bank probably has an automatic savings transfer system that’ll let you transfer a set amount of money every payday. Or you could set a Google calendar reminder to transfer money to savings every time you pay your bills — that way, you get your bills paid and use what’s left over to pay yourself. You don’t have to worry about overdraft fees, and you won’t have to watch someone else literally take the interest off your money.

Digit CEO Ethan Bloch did tell Business Insider that “Our goal is to share some of the interest with our customers as we grow our deposits, as long as we know we can cover our costs.” Maybe Digit should use Digit to figure out how much money it doesn’t need, and give that money back to its users as interest.

Until then, save your money somewhere else.

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