This app will help you save money you'll never miss - and pay you cash rewards, too
In case you haven't heard of it, Digit automatically saves a small amount of money that you won't even notice is missing from your checking account by regularly tracking your income and spending patterns. It transfers the money (typically $2 to $17 every 2-3 days) to a separate Digit account managed by partner banks, Wells Fargo and BofI Federal Bank, but users are allowed to withdraw their savings anytime they want through the app.
Until now, Digit didn't give any interest on the users' savings - instead, the interest was spent on running the app.
But that's about to change.
On Thursday, Digit rolled out a new feature called Digit Plus in which it gives users monetary rewards based on how much they save.
The Digit app will scan each user's account every week to look for the money that hasn't been withdrawn for three months, and pay a one-time cash reward. So let's say you had $1,500 in your account in the first month, saw it drop to $1,000 in the second month, then head back up to $2,500 in the third month. Then you'd get a cash-reward based only on the $1,000 you had in the account for all three months.
On a $1,000 in savings, Digit will reward about $0.50, which according to Digit CEO Ethan Bloch, is significantly higher than the $0.03 interest banks typically pay on the same amount. The new feature will be set as default, applying to every user, and the cash-reward will be sent straight to your Digit account.
Bloch says Digit is not allowed to pay out interest since it's not a certified financial institution. It's why he came up with a cash reward program instead, he said.
Bloch claims most of its users didn't care much about the interest so far because the interest amount they'd miss was so tiny anyway - and most of them weren't saving anything before they started using the app. Average Digit users save about a few thousand dollars a year, which means they'd be missing out on a couple dollars in interest, he argues.
Digit has been growing at a rapid pace. In February, when it first launched, it was saving about $1 million a month for all its users. Now, it says it's saving about $1.3 million every week in total.
Although Bloch didn't disclose the actual user numbers, it was high enough to convince some of the big name investors. In May, General Catalyst led a $11.3 million round, joined by Google Ventures and Baseline Ventures, bringing the total funding to $13.8 million.