Have you ever pulled a coat out of storage, slipped it on, and discovered twenty bucks in the pocket? It just happened to me a few weeks ago and I was thrilled. (full disclosure: it was only $12, I was still happy!)
(and then the weather got to like 70 over the weekend! Double happiness!)
My logical brain knows it was always my money but my lizard brain loved it. I found $20 I didn't know I had and now I can do whatever I want with it! My logical brain promptly put it in my wallet and I went on with my day.
That moment of serendipity is what Digit is trying to achieve with their micro-savings app.
Instead of using spreadsheets, different accounts, and manual transfers to achieve your savings goals, Digit does this automatically for you. You link up a checking account, Digit analyzes it, and then ever 2-3 days it'll transfer some money (an amount they think you won't miss based on your spending activity) into a Digit account.
Automatic savings, conveniently dripped.
Here are some facts:
- Funds are FDIC insured through Wells Fargo Bank, BofI Federal Bank, or Opus Bank.
- You can withdraw your funds within a day.
- You can shut off automatic savings anytime you want.
- You don't earn interest but you do get a bonus, called Digit Plus. 5 cents for every $100 that you've left in for at least 3 months on a recurring 3 month basis. It's a little complicated but it means you get some interest, even if it's only marginally greater than zero.
- You can earn $5 for each friend you refer (links in this post are referral links)
Part of me was a little hesitant to sign up, and thus write about Digit, because I felt that Digit enabled bad money habits. You shouldn't be tricked into saving money with little transfers you won't notice. You should be smart and diligent about your saving. You should set goals and regularly transfer it yourself, or schedule them yourself. You should take deliberate action.
But that's also unrealistic. As a Wallet Hacker, we should put systems in place that enable good results because in the end that's what matters. Life happens and as Derek Sivers has said, “If [more] information was the answer, then we’d all be billionaires with perfect abs.”
I'm idealistic but I'm also pragmatic, this type of automatic savings can help.
Sign Up Took Two Minutes
You enter in a phone number, get and type in a six digit confirmation number, and are whisked away to link up your bank. It'll take 2-3 days before the first transfer takes place.
Digit doesn't publish the algorithm they use to determine the transfers but the amounts all have been relatively small.
The interface is simple and you can do everything via text message, with regular messaging rates. There's a web interface too.
What's cool about Digit is that you can use it to get information from your checking account via text message. I linked it up to my Ally Bank checking account and I can get recent transactions or see the balance with one text message. No more logging into an app, send “recent” to the Digit number and I get the three recent transactions. Simple.
Also, as they transfer money, you can tell them to transfer more or less on each transaction. Just in case you feel it's too much or too little and want to have a say in the algorithm.
Withdrawing Money is Easy
Digit has an iOS and Android app now, which is new to this update of the review, so you can use the app to withdraw your funds easily.
Alternatively, you can text ‘withdraw' to the Digit number. They'll ask you for the amount and even let you enter in a reason, which will be added as a note. I put in a withdrawal request and it was transferred in a day.
Overall, I like the idea of it. I think it'll help folks accidentally save a lot of money, which is a good thing.
What I don't like as much? $5 fee.
Digit is not a bank so they don't offer an interest rate on your savings, it's called a “savings bonus” but is in effect an interest rate on your savings.
Today, that savings bonus is 0.5% – better than most checking accounts and within striking distance of the best online savings accounts.
What Could Be Better?
A better explanation of the algorithm behind the savings. The appeal of Digit is the simplicity – a lot of people don't care about how they do the savings and I get that. Right now it's a black box and while you can tell it to take out more or less, it's still a black box.
Previously, you could only pause the savings for 90 days max, then it starts back up, but that's recently changed so you can pause it for much longer.
Finally, the $5 monthly fee is tough. The concept and goals of the service is great. The interface is great. Before the $5 monthly fee, our rating was a solid 8/10. Now, you can see the impact. There are companies that will manage $15,000 of investments without a single penny in fees – collecting $5 to figure out how many cents to drip from your account seems overpriced.
That said – these services cannot be free. They rely on services to handle the transactions and those services come with a cost. Digit reports that the average user saves $2,500 (on top of other savings) in their first year, which is tremendous, and that's definitely worth the fee.