Digit is an extremely useful new tool that my friend J. Money over at Budgets Are Sexy got me hooked on.
What is it?
Digit is a free service that automatically transfers money from your checking to a savings account for you. In short, Digit is like a sneaky best friend who saves money you will barely even notice is missing. Automated savings you won’t even miss? You can’t beat it.
How does it work?
You start out by linking your checking account to Digit through state of the art, bank-level encrypted systems. Thousands of banks have linked with Digit, trust me it’s just as secure as your major bank account.
You confirm your account and phone number via text message.
Over the course of the next few days, Digit learns your spending habits, the bills you pay regularly and your typical income. If/when it sees that you have extra money in your account, it automatically transfers that money into a savings account for you. These transfers are typically small, around $10-$20 on average. This is money that would otherwise dillydally in your checking account until you ultimately spent it.
Pretty awesome if you ask me.
- What if I was planning on using all of that money for an upcoming purchase? Digit isn’t set up to run you dry or leave you with the bare minimum needed to pay your bills. If you want to get your money back, you can simply transfer the money back by texting “Withdrawal”, and you will have the funds back in your checking in 1 business day.
- Is Digit free to use? Yes. It is 100% free service, regardless of how many transfers you make to take money out of the account.
- How frequently does Digit save for me? They say it depends on the user, but on average it is about 2-3 times per week.
- How much money does Digit save for me? The average is between $10 and $30, but they start out small, around $3-$4, while they are learning your spending habits. The transfers might stay that low depending on what your spending habits are.
- Do I have to keep a certain amount of money in my Digit account? Nope, you can have zero dollars in there and will still not be charged a fee.
- Is my Digit savings account secure? Your Digit savings account is FDIC insured up to $250,000, just like a typical bank account.
- Will my account ever get overdrafted? Digit has a “no overdraft” guarantee, so they cover all expenses if, by some very tiny chance, that ever happens to you. They have enough confidence in their system and technology to believe that it’s robust enough to know better. I love that.
- Why isn’t there an app? I wondered the same thing when I first started using the service. After using it, I think an app would be much more cumbersome than using text messages.
Text Messages though…?
I’ll show you what I mean. Here are some common text message commands you can use to make changes to your account. You get a response from Digit instantly:
Savings – lets you view your digit savings account balance
Balance – View your checking account balance
Recent – See your recent checking transactions
Bills – Take a look at your upcoming bills
Withdraw – Let’s you take money out of your Digit savings account
Save – you can manually move money into your Digits savings account
With a traditional bank, you’d have log into an account online or via an app
and put in all the criteria, and then transfer. That transfer with Digit
took me less time than it would for another app to load on my phone.
Pause – lets you temporarily put a stop to the automatic saving.
Settings – Adjusts how often Digit sends you your balance
Don’t worry, if you ever forget any of these, you can just text the word “commands” to Digit and you will be able to view all of them.
I must say, while text messages sound kind of boring, Digit goes about this in a very fun way. Check out the text I got when they completed the first transfer from my checking to new savings account:
Yes, that is a Scrooge McDuck GIF, with a pretty great Confucius quote. They had me at McDuck! 🙂
What are the downsides to Digit?
1. Your Digit savings account does not earn interest. While they are looking into being able to offer a certain percentage of interest towards these accounts, this is not currently in place. However, most bank accounts pay you a extremely tiny percentage of your savings anyways, so I think the benefits of them saving you money outweigh missing a few pennies here and there.
This is how the guys at Digit are keeping the company running. They are able to use these minimal funds from interest to keep the lights on in their building. I’m okay with that.
2. It does take a business day to get your money back. That’s honestly pretty fast to transfer money between two banks. For me to transfer money out of/into my Ally Bank account, it typically takes about 3 days for the transaction to be completed. As long as you’re being productive with your money and not transferring it back just to spend it, this might would be considered a good thing.
3. While they do plan to work with international banks, Digit is currently available to US customers only. They also are not able to link up with every bank yet, but do have about 2,500 they currently can work with.
Text Messages and Banking
Some other banks also offer balance and transaction history via text messages. But Digit makes this so much easier. Let’s say, you wanted to get your recent transaction history from Bank of America via text. You would have to text them this crazy mess:
To get the same information from your Digit account, you type this:
Ask the Founder & CEO
As you can probably tell, I’m an extremely happy Digit customer so far. I just had to reach out to their founder & CEO, Ethan Bloch, and ask him a few questions.
Q: Ethan, I’m dying to know. How did you come up with the idea for Digit? It’s brilliant!
There was never an ah ha moment with Digit. I had the idea that I wanted to help people achieve financial stability while at the same time driving the amount of time it takes you manage your finances as close to 0 minutes per year as possible. Over the course of 8 months I built 6 prototypes that tried to deliver on this notion and the 6th and final one was what eventually became Digit, an app that would totally automate your personal savings.
I have been obsessed with personal finance since I got my first bit of cash at my Bar Mitzvah. I invested most of this money and by age 15 I had seen my net worth triple and then go to 0, thanks to the Internet and telecom bubbles. This early experience of managing my own money set me on a lifelong journey in search of the truths underlying the financial realm.
This journey eventually led to a BSBA in finance (University of Florida), where I was a finance research assistant then a Fixed Asset accountant at Lockheed Martin, where I started a video show on Finance, which led led me to my first real job (Marketing) working for a financial startup (Cake Financial).
Q: Why do you personally think Digit has been so valuable for people?
Because it removes a mental burden while still delivering the reward.
Q: How does Digit know what money I won’t be using?
4 main factors influence how Digit saves:
- Your checking balance
- The next time you’ll get paid / have income
- Upcoming bills / recurring bills
- How much money you’ve been spending recently
From these 4 factors Digit tries to find an amount of money you won’t miss on a given day.
Q: What kind of plans do you have for the future of Digit that you can share with us? Does the future look bright for a Digit app?
Hah. No comment on the app. The future of Digit is a world where we’ve completely replaced the retail bank experience.
Q: What is your favorite thing about Digit?
If you aren’t sure what Ethan means by personality, make sure you go back and watch the video above. 🙂
After all is said and done…
Digit is great for people who know the value of saving, but don’t have the time to figure out how much to transfer, or can’t remember to actually transfer the money. Let’s be honest, this description fits a lot of us. Digit has still helped me stay honest with myself. While I do budget extensively, there are usually a few dollars I have left over after all is said and done, and Digit basically says, nope, you’re not going to be using these $3 so stop leaving them sitting in your checking account, we’re going to save them for you.
If you couldn’t tell by now, I love this product. Ethan and the team are great people looking out for humans like us who have trouble saving as much as we could. After signing up and seeing the power of Digit, I felt the like I couldn’t keep this to myself and had to share it with you all. Enjoy!
Just so we’re all on the same page, if you do sign up for digit through a link on this page, I do get a small “thank you” from digit in the form of $5. Trust me, I wouldn’t be recommending anything this heavily if I wasn’t over the moon about it. Digit is one of the most innovative apps I’ve come across recently, and I can’t wait to see what the future holds for it.