Posted by William Charles on August 22, 2018
Bank Account Bonuses

Published on August 22nd, 2018 | by William Charles


[New Features] Discover Checking 1% Cash Back On All Debit Card Purchases ($3,000 Cap)

Update #2 (8/22/18): Discover sent out an email (subject: Your checking account just got better) with more details on the changes:

  • Freeze debit card: Temporarily freeze your debit card if misplaced
  • Auto Redemption to Savings: Enroll and automatically deposit your Debit Card Cashback Bonus into your Discover savings account

Update: Discover is informing account holders that Discover Cashback Checking is getting a new name and will be called ‘Cashback debit’ they also say some great new features will be added but don’t provide any details or a timeline unfortunately. Hat tip to reader Sina.


Original Post:

Discover made an update to their Discover checking account on December 13th, 2017. This account now earns 1% cash back on all debit card purchases with a monthly cap of $3,000 in spend ($30 cash back). There are some restrictions to what will earn the 1%, the following exclusions apply:

  • ATM Transactions, cash over portions of point-of-sale transactions, and Peer-to-Peer (P2P) payments are not eligible for cashback rewards. Purchases made using third-party payment accounts (services such as Venmo® and PayPal™) may not be eligible for cashback rewards.

Previously this account earned $0.10 for each debit card purchase, bill payment & check cleared (up to $10 per month). It’s possible to get 2-3% cash back on all purchases by using a credit card but this is still significant for a couple of reasons:

  • Not everybody has access to a credit card
  • Some purchases charge different fees based on whether you’re using a credit or debit card. For example when paying your taxes using a debit card is a flat fee of $~2.5 and using a credit card has a fee of ~2%.

Rewards earning debit cards used to be relatively common until the Durbin amendment came into affect, this limited the fees retailers could be charge for debit card processing. The old program is better for all purchases under $10 and the new program is better for all purchases over $10. Discover has offered a sign up bonus on their checking accounts before, but this hasn’t been offered for some time. They currently offer a bonus of up to $200 on their savings account.

Leave a Reply


newest oldest
Notify of

For small purchases(<5$), the current method is better.
Though for places not accepting CC, its good news for consumers

I can confirm that the current rewards checking will be replaced with this new structure too. I got a notification when locking into my account.

For comparison, the current system gives me $0.10 for each bill payment or cleared check, up to $10.00/month. This doesn’t make you rich, but personally, I consider this more useful than the 1% cashback.

Is there a minimum amount the billpay has to be? how do you maximize this by sending bunch of small billpays everyday?

Minimum for Bill Pay is $1 — no specific minimum to receive the reward.

Thanks doc. You the best

I will open up this account and use the debit card for buying $1000 money orders at Walmart, they cost 70 cents each and the cash back will be $10 so the profit is $9.30 for each money order. I will buy two $1000 money orders every day, giving me a daily profit of $18.60 and a monthly profit of $558. This will be my starting level, I will scale up after a successful month.

I have a good relationship with a small local credit union, I’ve talked to the compliance officer about my money order deposits and he is fine with it, all he has to do is skip my name in the report their AML software generates, he’s also talked to his managers and they are ok with it because I keep the money from the deposits in the account for about two weeks before I withdraw it so they are able to profit off investing/loaning my balance.

Scaling this up will increase my capital requirements because I need to keep the money from the money order deposits in the checking account for two weeks to make the credit union happy. I’m ok with removing money from a 1% savings account to give myself the needed capital though, this endeavor will return more.

One of the major factors that will make this much more capital intensive than credit card manufactured spending is that the money will need to be replenished to the discover checking account immediately to continue buying money orders. When I MS with credit cards, I can time the VGC purchases right after the statement closing date so I won’t have to pay back for 3-4 weeks, this greatly reduces capital requirements because I am able to let the funds sit in the checking account for two weeks without needing to pay the credit card back assuming everything is timed properly.

My Walmart cashiers will be in for a shock when I go buy 2 $1000 money orders but charge it all on one card instead of splitting it 4 ways, $500 on each VGC.

What is AML activity log?

Anti-money laundering.

Because of this I expect a cap. I think keeping the $10 a month would be reasonable, or upping it to say, $30 a month. Discover can be bright occasionally – like shutting down people who took too much advantage of that double cash back deal by buying gift cards.

Uhh. You don’t think that Discover will exclude PIN transactions?

lmao you have to be kidding, they’re not gonna count PIN transactions

Well Jack just laid out what we were all thinking.. haha

acting like he invented the light bulb or something

Well bummer, Discover states that purchase of money orders or cash-equivalents are not eligible for cashback rewards.

You can only get $10 cash back per month. For as big of a pain in my butt going to Walmart is (minimum 5-10 minutes waiting to check out), I don’t think that’s worth even close to $10. Especially when I’m not hitting Minimum Spend requirements…it’s just a lousy debit card. Also, the Examiners will see that AML report and question why the CU isn’t reporting you.

I’d be shocked if this works. Like most debit card rewards offers, it will probably exclude PIN transactions, and so buying MOs will not work. Chances are there won’t be much utility for people who read this blog. I’d be happy to be wrong of course 🙂

Yes, you’re right. Discover’s website states that purchase of money orders or cash-equivalents are not eligible for cashback rewards.

Structuring and money laundering?

Something tells me this won’t work. And if it does work, it probably won’t work for long. I could easily see discover coding money orders as not eligible for cash back.

Do you ever stop and think that what you’re doing isn’t profitable enough? I mean, daily trips to Walmart is bad enough, since I refuse to step foot in them anymore – but on top of that you are carrying the risk of holding on to a $1,000+ money order every day. All that profit over the course of months could go down the drain if someone decides to rob you – or if you drop it – or if you forgot it somewhere.

seems like a lot of time for a less than ideal profit. day trade crypticurrency for a day, theres a good chance youll make as much as that guy will running around avoiding the untouchables at walmart for months.

I’m interested in crypto but not sure where to start, what I’ve read goes over my head. Any good links that explain?

Your kidding, right? Day trading cryptocurrency means you are just as likely to lose and earn.

Exactly. A lot of people on this site really don’t seem to value their time.

I mean, some of these schemes are worse than minimum wage…

cool story bro

This is comedy gold.

Money orders don’t count toward cash back…

So has this plan worked out for you, or have you run into any snags so far? It does seem like a superior alternative to VGCs up to the $3K max reward from Discover.

Just looked at the Discover Checking website today (7/24/18) and the max reward is 1% on up to $3K of debit purchases a month for a maximum reward of $360/year. So, you would only be able to do a little bit of MS (3 MOs/month), but better than nothing. I guess you could always open multiple checking accounts with them…

Woah, this is amazing.

I’d think this would make things too easy..
I’ll definitely give it a shot when it begins. Hopefully they delivers what’s promosied.

This scheme is no good… The current scheme lets me earn $120/year for $1200 /year spent (0.1c per dollar). The new scheme I have to spend $12000/year to earn $120 (or 0.01c per dollar).

Your bill payments, debit card transactions and checks are rewarded for normal everyday transactions. As noted in the Deposit Account Agreement, we reserve the right to adjust the amount of your rewards or close your account due to irregular, unauthorized or fraudulent activity in your Checking Account. For example, splitting up one standard monthly bill payment into several payments to receive $0.10 per payment is deemed as irregular activity as it’s not standard bill payment practice. The same holds true for debit card transactions. Asking a merchant to swipe your debit card repeatedly for each item at checkout instead of using your debit card to make a complete purchase of items at one time is recognized as manufacturing transactions and not normal everyday debit card behavior.

Are you saying this or is this ALL in the terms somewhere?

It is in the Terms and Conditions of the Discover checking account.

They’re probably going to offer 5% back on transactions in the first week after signing up for this account. Can’t confirm this one way or another, but that’s the word on the street.

Their audience with this is millennials who are familiar with cash back, and who don’t write checks.

Why would you even need to go to the trouble of money orders if you can use cash app or venmo or paypal or even snapcash or facebook cash… I think all those programs accept debit w/ 0 fee.

Considering the amount he’s doing, I don’t think Paypal or Venmo allows that.

This is disappointing. I would put small transactions on this debit card in order to earn >3% (or >5%) cash back. I remember fondly their promotions of $0.20 per transaction.

I’ll be reduced to only one flat-rate rewards debit card: Salem Five eOne checking, $0.05 per signature-based transaction. Funny, I was just about to close my accounts there. I suppose I still will close the savings account, then maybe reopen it later at an updated, competitive savings account rate.

Does this mean we will no longer get 10¢ per bill pay or check? Not much but I normally got a couple bucks a month using discover bill pay.

If they convert existing customers, yes. But that is not clear yet.

Screenshot showing the changes after logging in:

Here are the terms applicable to the 1% cash back: “ATM Transactions, cash over portions of point-of-sale transactions, and Peer-to-Peer (P2P) payments are not eligible for rewards. Purchases made using third-party payment accounts (services such as Venmo® and PayPal™) may not be eligible for rewards.”

It’s so weird to me that people have Discover deposit products without a big error message at the top saying that you need to update personal information. Myself and Discover have been trying to update my personal information for weeks now, and nobody can figure out why it hasn’t been able to.

MIne went away when I updated my citizenship information

I would update my citizenship information if I could, but I am unable to.

If they take away the 10 cents per bill pay and check written, I will quit using Discover as my primary checking account. I knew this was unsustainable for Discover since I earn a few dollars per month, they are definitely losing money on my account. I doubt they will pay 1% on PIN based transactions so I don’t see anything useful about the new program. Time to find a new checking account.

I’ve got a notification about changes of the ToS: for existing accounts, the rewards structure will change to this new 1% of debit transactions on 11/01. I don’t see any reason why this wouldn’t apply to new accounts too.

I just applied for their rewards checking thinking I was going to use this card for small purchases <$5. After reading the 1% unlimited cash back, It was very disappointing. Until I learned my landlord allows me to pay my rent with a debit card.

My rent is around $700 a month and I can charge it to a credit card (2.75% fee) or a debit card. The debit card has a $1.50 flat fee no matter the transaction value.

I could pay my rent using the debit card and eat the $1.50 fee. since my rent is around $700 I should earn $7 cash back from doing this. Subtracting the debit card fees from my landlord leaves me on top with $5.50 from the cash back.

This could be VERY interesting, and if anybody else has to pay rent and their landlord accepts debit cards for a flat fee this could be a good way to go. Just open an account with discover and have automatic ACH transfers into the account sometime mid-month. Then schedule auto-payments with your landlord (mine uses a 3rd party payment processor) and you are making a tiny amount of passive income doing this, since after it's set up there is no active management that needs to be done.

Back to Top ↑