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. Free.
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)
I signed up earlier in the month and after couple weeks, Digit had squirreled away some cash:
Part of me was a little hesitant to sign up, and thus write about Digit, because Digit enables 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, even if it comes at the cost of developing good habits. 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
To withdraw, just 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? $2.99 fee.
What Could Be Better?
The interest rate is zero and they have this strange bonus structure based on money being in there for 3 months. Giving a few cents for money left in there for a few months isn't ideal, but it's also not a large sum of money. Interest rates are also very low anyway, so giving that up in return for automatic savings is a valuable trade.
A better explanation of the algorithm behind the savings. 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. You can only pause the savings for 90 days max, then it starts back up.
Finally, the $2.99 monthly fee is a deal-breaker for me. The premise of the service is great. The interface is great. Before the $2.99 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 $2.99 to figure out how many cents to drip from your account seems overpriced.
Have you used Digit? Thoughts on it, the basic premise, or anything else?