Automating your finances is a cornerstone of sound money management. Chief among automation priorities is savings. But how can you automate savings so it happens without you even thinking about it?
Enter Digit. Digit is an app that tracks your spending to determine how much is available for savings. Then it makes automatic withdrawals from checking into savings. The basic idea is to enable you to save money–automatically–and even without your knowledge.
It’s one of a growing number of savings apps enabling people to save money without changing their behavior. What makes Digit unique is that it’s completely automated. You go about your financial business, just like usual, and the app skims off small amounts of extra in your checking account. Then it moves it into savings.
Let’s see how Digit works.
What Digit Can Do For You
The major benefit of Digit is that it enables non-savers to save money. That’s no small benefit either. The most recent Go Banking Rates savings survey indicates that 57% of Americans have less than $1,000 in savings, and a staggering 39% have no savings at all.
If you count yourself among that group, Digit is an app for you. It can enable you to save money without any effort on your part. It may only be a couple hundred dollars per month, but that’s a start. If Digit can generate $250 per month in savings, you’ll have $3,000 after one year.
That’s a lot of money if you haven’t been a saver in the past. Perhaps even more important, Digit can kickstart the savings habit. People often fail to save mainly because they never get started. But if you can accumulate savings passively, it might create the incentive for you to make the transition from non-saver/debtor over to saver/investor.
Sometimes all you need is a little push–and that’s exactly what Digit does.
How Digit Works
Digit automatically determines a safe amount to withdraw from your checking account, based on your lifestyle, income and spending patterns. It does this without any input from you.
When you sign up for the app, and connect your checking account, Digit reviews your spending habits. Digit can support more than 7,000 banks and credit unions across the US (Note: PayPal isn’t supported by Digit). Digit is only available for US-based customers and banks. But they are planning to expand internationally in the future. The app can only accommodate one checking account.
If extra money is available in the account after the review, the money will be moved into your Digit account. Digit’s savings algorithm uses four factors to determine how much money to transfer into savings:
- Checking account balance
- Upcoming income, including paychecks or predicted irregular income
- Upcoming bills
- Recent spending
Digit reviews your checking account each day to look for savings. However, transfers into savings typically occur two or three times per week on average. They also indicate that the average amount transferred is between $10 and $30 per transfer. These numbers can be higher or lower, depending upon your own spending patterns.
What about your credit card activity? Digit doesn’t work with credit cards. But that’s not an issue since your monthly payments on those cards will be reflected in your checking account. In that way, your credit cards are being considered by the app, even if not directly.
Setting Up Your Account
When you open an account, you start by setting a checking account minimum balance. You do this by texting “Minimum” to Digit. Digit recommends setting a minimum threshold of at least $200, but it’s really up to you.
You can add a secondary user to your account. That person will be able to use the account the same way you do, but they will not be able to log in to the administration dashboard and make changes to the account.
You’re given a Digit account, that is the savings account into which withdrawals from your checking account will be moved. It is also referred to as the Rainy Day Fund. And of course, you’re always free to withdraw funds from that account, and into a savings account of your own choice. No minimum balance is required for this account.
Your first automated savings should happen within two or three days. Monthly statements will be available by PDF.
Control how much you save. You can even regulate how much you save. For example, if you want to save more, you can simply message “Save More” to Digit and increase the amount that’s being saved. If you change your mind, you can just text back “Save Less”, and your savings level be restored to Minimum. You can even text “Pause” if you want to take a break from savings.
You’re also free to make manual transfers into your Digit account at any time, which can be done by text.
Digit withdrawals. You can make withdrawals on a 24/7/365 basis, by messaging Digit “Withdraw” if you want to move money back in your checking account. There are no limits as to how often you can make these transfers, and no fees for doing so.
You can use your Digit account to create savings for a variety of purposes. You may want to build an emergency fund, save up for a specific purpose, like a vacation, or even make an IRA contribution. If you’ve been unable to do this in the past, Digit can make it happen for you.
Goal setting. Digit refers to goals as “Goalmoji’s”. You can set them up to pay individual bills, or to reach specific savings goals. That can include making your monthly credit card payment or saving for a dream vacation. You can make this happen just by establishing New Goals. If you’d like to save to pay a certain bill, you can simply create a New Bill for that purpose.
Digit Features and Benefits
Savings Bonuses. When you save with Digit for three consecutive months, you will rewarded with a 1% annualized Savings Bonus. The bonus is automatic, and no account minimums are required in order to qualify. The bonus is paid on a pro-rata basis every three months, and is based on the average daily balance in your Digit account.
Digit No-overdraft Guarantee. If your checking account is ever overdrawn as a result of Digit automatic savings withdrawals, Digit will reimburse overdraft fees up to two times. However, they promise that an overdraft will be “very unlikely”.
Customer service. This is limited to Digit’s Help Page, which is more like a FAQ page. There’s no phone number, and no live chat feature. The company doesn’t even publish it’s address on the website, though its Facebook page indicates that they’re located in San Francisco.
The closest thing to direct customer service contact is by email. They indicate they’ll respond to all inquiries in less than eight hours. Regular business hours are Monday through Friday, 9:00 AM to 5:00 PM, Pacific Time, excluding holidays.
BBB Rating. The Better Business Bureau has given Digit a rating of A- (on a scale of A+ to F). BBB indicates the company was founded in January, 2013, and has been BBB accredited since April, 2015. 11 complaints have been filed against the company.
Digit Mobile App. The phone app is available for both iPhone and Android.
Digit account safety. Digit uses state-of-the-art security measures, including anonymizing and encrypting your information. This includes use of 128-bit encryption to protect transmission of data, as well as firewalls and other security precautions.
Funds held on deposit with Digit are FDIC insured, up to $250,000 per depositor.
Digit gives you use of the app free for 100 days. Once the free trial expires, you’re charged a fee of $2.99 per month. The service can be canceled at any time, with no future obligation.
However, since Digit pays you a 1% annual yield on your savings, you can recover the fee and more.
For example, at $2.99 per month–let’s say $3–the app will cost $36 per year. If you save at least $300 per month–$3,600–you’ll get $36 back. That will nullify the monthly fee, and leave you with the full $3,600.
Digit Pros and Cons
- This is the perfect app for someone who isn’t a saver to become one.
- No special effort is required on your part to make savings happen.
- Digit pays an annual savings bonus of 1%. Though the account doesn’t earn interest, the bonus is well above the rate typically paid by banks on savings and money market accounts (though it can be completely offset by the $2.99 per month fee).
- No savings account is required to use Digit. When you sign up for the app, you’ll have an FDIC insured Digit account.
- The $2.99 monthly fee. It may strike some as strange to have to pay a fee in order to save money.
- Digit is currently unavailable to non-US residents.
- Only one checking account can connected to the app. If you have two or more, you have to choose the one that has the most activity to get the biggest benefit.
- Customer contact is very limited.
Should You Sign Up With Digit?
Digit is a must for someone who wants to become a saver, but hasn’t been able to up to this point. This step is mission critical if you hope to ever achieve any level of financial independence. If you want to invest for the future, you can’t do it if you can’t save money. Digit can help you cross that bridge.
The real attraction of this app is that everything happens automatically. You go about your regular financial life, depositing money and spending as needed or desired. Digit then moves any excess into your Digit account. It’s a passive way to accumulate hundreds, or even thousands of dollars.
It may be just what you need to begin becoming a saver on your own. After all, if you can see the positive effect of money being passively accumulated, you may be motivated to add to it with other strategies.
The biggest downside of Digit is the very limited customer contact. Most of us are accustomed to being able to reach the people who hold or manage our money with a phone call, or instantaneously by live chat. Sending and waiting on emails can be a slow process, despite the promised eight-hour response time.
But if you can deal with that limitation, Digit is well worth checking out.
If you’d like more information, or if you’d like to sign up for the app, check out the Digit website.