Digit Review: How to Painlessly Save Money With Digit

Not too long ago, Digit came on to the financial scene as a service to help you painlessly save money. In the company’s 5 month pilot period, it saved it’s users over $600,000. And in a time when statistics regularly show the poor savings rate in the U.S., this is a pretty big deal.

Investors are liking Digit as well. They got $2.5 million in seed funding from Google Ventures, Baseline ventures and a few other firms.

So what’s all the fuss about? What exactly is Digit? How does it work? And can it really help you boost your savings? Get the answers in this Digit review.

What Is Digit?

Digit is a web service that simplifies the process of saving money by taking small withdrawals from your checking and automatically moving them into a savings account. Essentially, it evaluates your spending habits, finds extra money that you can save and then deposits those small amounts into savings. The idea is that these withdrawals are generally so small that you won’t even miss the money.

For example, through analyzing your income and spending patterns, Digit may notice that it can take out a few dollars from your checking account and put it into savings because you won’t actually need that money to pay for any upcoming expenses. Over time, these small amounts can really add up, and it’s all done automatically without the user having to think about it.

How Does Digit Work?

The first step is to set up your Digit account by signing up online and linking your desired checking account to the service. As of March 2016 you can also download their smartphone app and set up an account that way.

From that point forward, Digit will run an algorithm every few days that analyzes spending and savings trends in your checking account. From there, they determine an amount of money they can take out of the account and put into savings.

When you start with Digit, you may see small amounts like a few cents here or a few bucks there being pulled from your checking account into a savings account. Once the app better understands your specific habits, it will hone in on numbers that work for you -- and you can always change settings to tell the program to save more for you.

When I first started using the service in the summer of 2015 Digit would only deposit around $2 into a their savings account every few days. As time has passed and as I’ve made more money, some of the automatic deposits into savings have been as high as $50.

And as far overdraft, their algorithm is designed to avoid that (but if it does, Digit promises to cover the cost). I’ve personally never had the service overdraft my account. In fact, I’ve noticed that Digit tends to automatically take out smaller withdrawals or spreads them further apart if my checking account goes below a certain number.

Another thing you need to know about how Digit works is that after the initial setup you can do everything via text. For instance, if you want to save more money you simply text “save” to their designated number. You are then prompted with the next steps via text.

It’s the same process with withdrawals, retrieving your Digit account balance, reviewing your checking account balance, viewing your upcoming bills and pausing your automatic savings.

You can see all of the appropriate prompts from your online account -- and you can use the online dashboard to manage Digit, too, in case just texting doesn’t feel comprehensive enough.

The Best Thing About Digit

What makes Digit different from just your regular automatic savings is that if figures out the amount it can save for you. It’s all based on your lifestyle, so it easily fits into your current financial plan and doesn’t require you to come up with a fixed amount every month.

Digit also really works. From December 2015 to February 2016 Digit saved me almost $500 that would have just sat in my checking account otherwise. (Granted, this was after I changed the settings so that it would be more aggressive.)

Another great thing about Digit is how it uses technology to make the process easy. Once you’ve linked your checking account, everything else can be done via text.

Each day Digit will send you a text with your current checking account balance. And each month, Digit will text you with a summary of how much it has saved you in during that given period.

What Are the Downsides of Digit?

Digit has an unusual interest rate payment structure which they call Savings Bonuses. Instead of accruing interest each month, you get 5 cents for every $100 you keep in the account for at least three months. If you have $100 in the account for at least 90 days you’ll get 5 cents, $200 in the account for more than 90 days will get you 10 cents, and so on.

These bonuses are paid out every three months and are contingent upon how much money you have in the account and for how long. Given that the interest rates on savings accounts and CDs are miserable anyway, Digit’s Savings Bonus structure isn’t that big of a con in the long run but it’s something to be aware of and understand.

Digit’s Referral Bonus structure may also help make up for it. You can receive $5 for each person you refer once they’ve made their first savings transfer into their Digit account. At this point, I’ve already made over $35 in referral bonuses. The more I share it, the more more money I make in bonuses.

Final Thoughts

While it won’t make you rich, Digit is a great tool to help you stash away any extra cash that may have gone unnoticed otherwise. Users have been able to start emergency funds, pay down debt, invest lump sums or pay for things like trips. Overall, it’s a great service to add to your financial toolkit.

About the Author: Amanda Abella is an Amazon bestselling author, speaker and personal finance expert who helps millennials make money their honey through online business. She has built an online brand that touches thousands each month and has been featured in Forbes, The Huffington Post, Seventeen Magazine and more.