If you struggle to save money, you aren’t alone. According to a recent Bankrate survey, 20% of Americans do not save money at all and those who do save aren’t putting away enough. Just 16% of Americans save at least 15% of their income, which is the level experts recommend. More than 20% save just 5% or less. Even more troubling, more than 40% of people have less than $10,000 saved up for retirement. It seems that a lot of people need some money saving tips.
No matter how much you earn, you can probably afford to save more than you think. One of the biggest barriers to savings is actually taking the time to transfer money and the psychological response of transferring money into an account you won’t touch. That’s where Digit comes in. This app is designed to make saving money easy and completely thoughtless by analyzing your spending habits and saving an ideal amount of money every day. The idea is automatically saving money without ever thinking about it.
Digit is one of several savings apps on the market today that help you save money without even changing your spending or saving habits. Digit is unique because it makes the process automatic and analyzes your spending to make savings painless. Here’s how Digit works and what you should know about getting started.
How Does Digit Work?
Digit is a micro-savings platform. That means it helps you save small amounts of money over a period of time. This micro-savings platform isn’t designed to help you with big savings goals like a down payment or retirement but it can be used to build an emergency fund, save up for a trip, or simply help you learn how to save money.
Digit has a simple premise: it transfers money from your checking account to the Digit savings account automatically every couple of days based on your spending. Digit analyzes your spending habits over time and transfers money based on what it determines you can afford. The amount that’s transferred will depend on your balance, upcoming bills, and more. The transferred amount may be as low as $2 per day or up to $30 or more.
Digit will review your bank account every day to determine if any money can be moved. In most cases, automatic savings withdrawals happen every 2 to 3 days. If extra money is available, the algorithm considers four factors to decide how much to transfer into your online savings account:
- Recent spending
- Upcoming bills and expenses
- Upcoming income. This can include regular paychecks as well as predicted irregular income.
- Checking account balance
Digit currently supports over 7,000 credit unions and banks in the United States. Credit cards aren’t compatible but Digit will consider credit card spending indirectly as long as your credit card bills are paid through your linked checking account.
Important Features of Digit
Digit has several unique features that separate it from other micro-savings platforms. Here’s what makes Digit special.
No Overdraft Guarantee
The last thing you want from a savings program is an overdrawn checking account and the high overdraft fees that come with it. Digit has an important guarantee: it won’t cause your checking account to be overdrawn with Digit’s savings withdrawals. If it does happen, Digit will reimburse up to two overdraft fees although this is not likely to happen.
If you use Digit for at least three consecutive months, you get a 1% automatic savings bonus. This bonus does not require reaching any account minimums and it’s paid automatically every 3 months. The 1% bonus will be based on your Digit account’s average daily bonus.
You can use the Digit app to set up your account and track your savings. The app is available for Android and Apple devices. You can also communicate with the service through text messages, performing all types of transactions like pausing savings, saving extra money, viewing upcoming bills, or checking your balance. Digit also has limited support on a browser but you can’t make withdrawals or deposits through their website.
Digit makes it easy to monitor and take control of your savings. The app will send you a text reminder every day to tell you how much it transferred from checking to savings with options to transfer money back into checking. You can also set several savings goals and use the new “Boost” feature to apply savings to a specific goal. As an example, if you have 3 active goals and the Digit algorithm determines you can save $6 one day, it will automatically allocate $2 toward each goal. If you boost one goal, it will get $3 added to it and the other goals will receive $1.50. Everything can be done with a simple text message to stay on top of your savings.
How to Set Up an Account
Setting up a Digit account doesn’t take more than 10 minutes. When you open a Digit account, you will need to link your primary checking account and set an account minimum balance by texting “minimum” to Digit. While Digit recommends a minimum checking account threshold of $200, you can choose any limit you like.
Once your account is set up, you will have a Digit savings account where your automatic withdrawals are stored. You can withdraw money from your Digit account whenever you like by transferring it back to checking or into a different savings account. There is never a minimum balance for your Digit account.
Withdrawing from Digit
When you want to withdraw money from your Digit account, you can message “withdraw” to specify how much money you want transferred back to your checking account. There are no fees or limits on withdrawals.
Choose Your Savings Amount
In addition to the automatic Digit withdrawals, you can choose to save more money whenever you like. To do this, you can text “save more” to Digit for higher withdrawals or you can make manual transfers into the Digit savings account at any time. For example, you can text Digit to save an extra $15 when you forgo the takeout dinner.
One of the newest features of Digit is its “Goalmojis” feature. You can use emojis to tell Digit what you want to save your money to help with goal setting and motivation. For example, if you are saving up for a new car, you would text a car emoji.
How Much Does Digit Cost?
Digit used to be a free service but it began charging a $2.99 monthly fee in 2017. When this monthly fee was added, Digit boosted its savings bonus from 0.2% to 1% to potentially give you a way to “earn” back your monthly fees. The downside is you would need to keep $3,600 in your Digit savings account to earn back the $36 annual fee you will pay.
The average Digit user saves about $80 to $170 per month. Still, the fee is worth it if you would have trouble saving otherwise. It can also be a small price to pay if it helps you develop better financial habits and get the motivation you need to reach savings goals.
Digit App Pros:
- It makes it easy to save money without changing your habits.
- Savings is automatic without any effort.
- Digit’s algorithm saves an amount of money every day that you won’t notice.
- You get a 1% annual savings bonus.
- Digit is easy to set up and use.
- You do not need a savings account and your account is FDIC-insured.
Digit App Cons:
- There is a $2.99 monthly fee. This is a big turn-off for many people as there are free alternatives.
- Digit only allows you to connect one checking account.
- Vague algorithm. While you may appreciate automatic and easy savings, you have no way of determining how much money will be transferred into your Digit savings account thanks to their vague savings algorithm.
- Customer support is limited. The only form of direct customer service contact is email with no live chat or phone number.
Alternatives to Digit
To help you make an informed decision, here are a couple of popular alternatives to Digit and how they compare.
Qapital also uses automation to help you save money but you have to set your own rules — it won’t figure out what you can afford for you. Qapital lets to set rules like setting aside a specific percentage of your paycheck or saving every time you shop at a specific store. You can also set up a “keep the change” rule that rounds up your spending to the nearest dollar and saves the difference.
Acorns works by rounding up your purchases and investing the difference in index fund ETFs which can be one of the best places to invest money. This app makes money by setting up a taxable investment account but it isn’t free: you will pay a flat $1 monthly fee unless your account is over $5,000, in which case the fee is reduced to 0.25% per year. You also pay an annual fee of 0.25% to 0.50% because ETFs come with their own fees. Find more information in this Acorns review.
Is Digit Worth It?
Digit is unique because it actually assesses your spending habits, bills, and income to determine how much you can safely afford to save without even noticing it. Many consider this to be one of the best personal budget software options available. There are other savings apps, most of which have a similar micro-savings format, but they tend to be much more hands-on. If you’re looking for a tool that introduces savings in a painless and simple way, it’s hard to beat Digit, despite its monthly fee.
Digit may not be a tool you use forever and it shouldn’t be used for major savings like retirement or a down payment on your first home. For things like that you may want to consider a Goldman Sachs savings account or something similar. Still, it’s a passive and low-cost tool that can help you save hundreds or thousands of dollars for something important or just for fun. The Digit app may be just what you’re looking for to become a saver, not a spender, and the positive effect can motivate you to take more active steps to save money.
Digit isn’t without its drawbacks, however. Its limited customer support and monthly fee are the biggest cons. If you can live with these limitations, Digit is worth a try. Learn more about how to begin investing and saving for your future or check out our recent take on Ally Investment reviews.