If you spend $3 on a latte every day, that’s about $1,100 a year. The magnitude of impact that small, regular actions can have can be disconcerting. As Benjamin Franklin once said, “Beware of little expenses. A small leak will sink a great ship.”
Digit is an automated micro-saving tool that exploits our tendency to overlook those minor, everyday expenses.
It hooks up to your checking account and automatically withdraws small amounts of money daily, typically between $2–$17, which vary based on your typical income and spending habits. That money is then held in Digit’s FDIC-insured (non-interest bearing) account, and you can have it returned to your checking at any time by texting Digit “withdraw.”
On April 11, it announced that it would begin charging a monthly fee of $2.99 (existing users as of the announcement date will be able to continue using it free for 100 days). On the same day, it also increased its savings bonus to 1% annually, so every three months, you’ll get 0.25% of the average total savings balance you’ve had over the past three months.
Its Goalmojis feature also allows you to save for a certain purpose.
There are no account minimums or limits on transfers between accounts.
You’ll get into an intimate texting relationship with their bot, who sends a notification of your checking account balance each morning. Using simple commands, you can manage and get status updates on your savings account easily. For example, here are a few functional commands:
- “New goal” – allows you to set up a new savings goal
- “Nickname” – changes how Digit addresses you
- “Save more” – increases Digit’s aggressiveness in its savings withdrawal attempt during a given day
The Digit company provides assurance that it won’t overdraft your account, and they’re confident enough about that that they’ll cover the fee up to twice per customer.
As far as security is concerned, Digit employs 128-bit encryption and asymmetric cryptography architecture to transfer sensitive information. Tech stuff goes right over my head, but it sounds quite safe to me. According to programmer/IT-tech boyfriend Jeffrey Thompson, “Current supercomputers would take something like 200 years to crack it—maybe even longer.”
However, Digit has a major drawback: the very low return on savings (0.25% every three months) coupled with a $2.99 monthly fee. You could instead be earning 5% APY by keeping your savings in a Northpointe Bank checking account, among many other high-yield account options.
Digit would be most fitting for someone who regularly keeps a lot of money in a low or no-interest checking account, and I advise against that.
For one, you should be using a rewards credit cards for all purchases that take credit in order to take advantage of the effortless 1%–5% back that they provide.
Two, your emergency cash reserve should be in a high-yield interest account (there are checking accounts of that sort offering as much as 5%).
Further, keep your priorities straight: If you have high-interest debt, Digit isn’t for you; any money you’re saving (especially in an non-interest bearing account such as Digit) comes at a potentially much larger cost when you factor in the debt that you could have paid off and stopped receiving interest on long ago.
If you are said non-ideal person who spend money out of a no-interest checking account and refuses to use rewards credit cards, but you have a separate savings account that does offer some interest (hopefully high), then you may want to consider using Digit and periodically (don’t let it get above, oh, $100) transferring the money from Digit over to your savings account. That way, you divert a bunch of money for the purpose of savings and don’t even notice it’s missing. Just be sure to transfer it right away after moving it back to your checking or you obviously gain nothing. (Update: since there’s a $2.99 fee now, I no longer suggest using this, even in said case.)
Conclusion? It’s a neat tool, but I cannot recommend it.