Digit is HORRIBLE App For Saving Money

Digit Logo

What Is Digit?

Digit is one of many micro-saving apps that have hit the FinTech market in recent years. The idea behind Digit is to make saving money a passive task by automatically transferring money from your checking to a savings account managed by Digit. By transferring small amounts of money automatically, Digit can help you build a rainy-day fund.

In addition to the automatic transfers Digit has a few additional features:

  • High-Yield Savings Account — The Savings Account that Digit transfers your money to offers a 1% annualized Savings Bonus for every three months that you save with Digit. Hence, your savings will grow when you leave them in the account.
  • Text Messaging — Digit allows you to perform all your regular banking transactions such as: viewing your balance, initiating withdrawals, saving extra money or even viewing upcoming bills through text messages. For example, if you want to pause your savings, simply text “PAUSE” to Digit’s number and the automatic transfers will stop.
  • Same-Day Transactions for Chase and Wells Fargo Clients — If you use Chase or Wells Fargo Bank, you can receive same-day transfers to and from your Digit Savings Account.

So What’s So Special About Digit?

What makes Digit “special” though is that it does not just take a fixed amount of money from your checking account. Instead, it monitors your spending to find how much you can save. Here is how Digit describes their service:

“Digit studies day-to-day spending and income history looking for daily savings opportunities consumers won’t notice. Every 2 or 3 days, Digit transfers some money from a checking account to a secure Digit account. The four main signals that influence Digit’s savings include checking balance, upcoming income, upcoming bills and recent spending patterns. From these variables, Digit derives a non-essential amount you won’t notice based on how you’ve been spending. There is never a transfer of more than you can afford, and there is a no-overdraft guarantee.”

At first glance, Digit seems like a really smart move for most people who struggle to save money. By dynamically setting how much money is taken out of your checking account you can easily and efficiently build a rainy-day fund.

So What’s The Problem?

The big problem with Digit is it charges you a monthly service fee of $2.99 a month! You will earn some of that money back from the interest-bearing Savings Account, but you won’t break even until you have at least $330 in your account. If you’re trying to save money, you should not be spending $36 a year on a service which moves money from one account to another.

Moreover, a 1% APR is nothing special. There are several High-Yield Online Savings Accounts that pay over 2% now. Most of them do not have a minimum balance requirement so can start saving with as little as $1.

Alternatives To Digit?

You could replicate almost everything Digit does by simply opening a HYSA and then scheduling monthly deposits from your checking account. You will have to choose a fixed amount to transfer each month, but you can always start small and gradually increase over time. I recommend starting with the $3 a month you will save by NOT using Digit.