Discover Bank savings account: why I don’t trust it

Recently I considered opening an online savings account at Discover Bank.

I was intrigued for a couple of reasons. The appeal started with the rate. The savings yield was very competitive and even slightly higher than ING Direct. As of this writing, Discover Bank offers a 1.35% APY versus ING Direct’s 1.10%.

And then there was the name. The bank is associated with Discover Financial Services, and it brought to mind the good customer service and great website usability of the Discover credit card.

The high rate and the good reputation were strong reasons. I was sold on the account…almost.

Before I opened an account, I decided to look at the fees. It was there I saw what looked like a red flag.

The stupidest fee ever

Here’s a list of Discover Bank online savings account fees:

One fee stood out to me and it’s marked above–the Account Closure fee of $20 within 90 days of opening.

From a consumer perspective, it puzzled me. I’ve never heard of a bank that charges to close an account, let alone an online one that doesn’t have the overhead of a physical bank. This definitely seems like a sneaky and annoying fee.

It also struck me as a bad signal from a game theory perspective. A bank that has a high rate and a good reputation should not need a closing fee to keep me as a customer. It’s customer service should do that job. The account closure fee was like the bank saying, “Trust us, you’ll love our services. But by the way, if you don’t love our services, we’ll charge you to leave.”

This is reinforced by the 90 day lock-in period. A small period of 15 or 30 days might be understandable to discourage rate-chasers that keep moving their money around to find the highest rate. A 90 day period seems excessive. I am not going to try an untested savings account for a 90-day period, particularly in a market with so many banks that don’t charge closing fees.

If Discover Bank ever wants my business, it will eliminate this account closure fee.

And it would also help to improve its customer service–Discover Bank is getting a lot of /bad reviews.