Digit Review – Can It Really Help You Save?
Only 41% of Americans would be able to handle a $1,000 emergency. You can go ahead and forget about a rainy-day fund, too, with even more Americans not having enough cash aside for an extended period of unemployment or other financial difficulties.
So, when something like Digit, which promises effortless savings for those at any income level, comes along, it’s bound to attract some attention.
Digit is very user-friendly and makes it easy to set financial goals for all kinds of important things, from rainy day funds to having a little money to splurge. But it comes with a $5/month fee, which is pretty steep considering the tiny returns it offers for parking your money with them.
What’s the deal with Digit? Will it help you reach your savings and financial planning goals. Discover what you need to know in this Digit review.
What Is Digit?
Digit is an automated savings tool that you connect with via your text messages. It’s one-part virtual assistant and one-part savings account that you interact with.
Since its founding in 2015, Digit has helped people save over $1 billion. The key advantage it offers is just how easy it is to use.
You can set up different goals on their web or mobile app and begin a “set it and forget” method saving through automated withdrawals from your linked checking accounts.
It’s not overly sophisticated. You can fine-tune a few other settings like blocking transfers if you have under a certain amount in your checking accounts and adding authorized users.
But that’s the whole point. The idea is for it to work completely in the background saving you money over time.
The Digit Algorithm
This is one of the cooler Digit features. Digit has an algorithm analyzing your spending, earning, and earning behaviors. When you can save, it will put some money into savings. Likewise, if cash is tight, it will automatically stop withdrawals.
Overdraft Protection And Automated Credit Card/Student Loan Payments
Digit’s other features include overdraft protection on any withdrawals it makes—but you still have to watch out for your own transactions.
You can also set up automated credit card and student loan payments to whittle down your debt over time. The latter function is also quite helpful as it applies that same automated approach to debt.
Is Digit Legit?
Yes. Digit is not a scam. But it is kind of a rip-off, which we’ll go into more detail about below.
How Much Does Digit Cost?
Digit is free for the first 30 days. This gives you a nice preview of what they offer. From here, they charge $5/month.
That might not sound like a lot, but depending on how much you have saved with them, that can be a pretty high investment. For example, if you’re saving $100, then you’re effectively getting a 5% fee.
This is a key area where Digit really doesn’t stand up, as there are plenty of other places where you can either tuck your money away for free and/or get a better return rate.
Are Digit Accounts FDIC Insured?
Yes. Digit savings accounts are FDIC insured up to 250,000.
Can You Make Money With Digit?
You may have noticed that one of Digit’s perks is a 0.1% annual savings bonus. But there are some stipulations to this:
- Bonus is paid once every three months
- It is calculated from the average daily balance in your Digit account from the past three months.
- It is an annual bonus. So, if your average balance was $1,000 for the last three months, then your bonus would be $4,000 x (0.10% ÷ 4) = $0.25.
As you can tell, it’s really not much and doesn’t even offset the monthly fee.
How Does Digit Compare With Other Savings Accounts?
It has some advantages. The first is there is no minimum balance, and you can make unlimited deposits and withdrawals.
This makes Digit a good fit for those who are just beginning their savings journey. However, the interest rate is laughably low.
As of this writing, there are tons of other savings accounts with much higher interest rates topping out at 0.7% and either no minimum balance or similar monthly fees as Digit.
Is Digit Safe?
Yes. Digit connects to your financial accounts through Plaid and its 256-bit encryption. It’s about as secure as you can get.
Digit Float provides you a cushion if you have unexpected expenses. If you enable this, you can get set up with a certain “Float” amount based on your previous finances. This is one of the best Digit features as they don’t charge any interest, and all fees are included in standard membership.
Should I Use Digit?
There are some people who can benefit from Digit. If you can’t manage to save each month and really need a push, it can be helpful.
But there are so many other options out there that also do that that you should really consider Digit as your absolute last choice.
Is Digit Worth It?
No. It really isn’t. No matter how much money you can put away, it should work for you. In addition to a high monthly cost, you’re basically earning nothing on your savings with Digit.
The annual rate of inflation is 2.1%, so if you’re earning less than that, then you’re actually losing money even if Digit is helping you to “save it.”
It’s not difficult for you to set up individual accounts for your different savings goals and set up automated transfers every month. With a little bit of effort, you can do this for free, or close to it, and earn a better return.
- Easy setup
- Personalized interactions via text message
- FDIC insured
- Mobile apps plus online
- Savings goals are intuitive
- Smart algorithm automatically figures out how much you should save
- Free trial
- Digit Float can provide you with a little cushion if needed
- Use Plaid’s secure API
- Easy to cancel the account if you don’t want to join after trial
- High monthly costs
- Very low rate of return
- No budgeting features
- Basically, any savings or investment account will offer better value
Almost any of the other personal finance apps that we have reviewed are going to offer you a much better value than Digit.
Above all, however, we recommend you check out Acorns.
Acorns is a savings and investing app that empowers anybody to start making money in the stock market. They offer a range of accounts from $1, $3, and $5/month, including traditional investment, IRA, and other forms of wealth building.
You might say, “is that way, riskier than a savings account?” Yes or no.
First, with Acorns, you’re not investing in individual stocks. Rather they give you a selection of funds, bonds, and deposits based on your risk tolerance.
While it may not be FDIC insured, you can keep your money in bonds alone and get a much higher rate of return. You could also go for a combined approach and capitalize on the market’s average 7% annual growth, so instead of earning about $1 a year, you can earn $70.
There are even cheaper options than Acorns, but if you’re looking for a hands-free approach that combines your savings on autopilot, it’s hard to beat. It also includes an Acorns Spend account, which adds another 2% on every dollar you spend, plus roundups and other tools. So, check it out!
Honorable mentions also go to Worthy Bonds and Stash.
Digit: The Bottom Line
Digit is a no-fuss easy way to start putting away cash. But with the relatively high monthly cost and low return, it’s really not worth it. Spend the time educating yourself and looking into better offers, and you’ll not be able to save some cash but earn a good return on it as well.