Digit is like the tech age’s answer to the classic savings account. The automated savings plan puts users cash on lockdown based on their spending habits and income left at the end of a pay cycle.
Digit wants to reward users who save successfully by kicking cash rewards to anyone who manages to leave their money alone. Users will receive about $.05 for every $100 saved after three months.
These are rewards, Founder Ethan Block noted, not interest, because Digit can’t legally offer interest as they are not a bank. However, given that the average U.S. savings account offers a 0.17 percent interest rate, Digit’s cash rewards may be the more lucrative option.
A Digit account, once connected to a user account, will start pulling money from your savings account and dropping it into an FDIC-insured savings account. When consumers want their money back, they text Digit who sends it back to the users’ accounts.
The service is free thus far, and though their membership remains a secret, it is known that they have collectively saved $23 million — $1.3 million a week. The service, on average, helps users save around 5 percent of their income.
Digit is a a fairly low design operation. Other than a simple Web interface, the service is managed through text messages — though Block hinted to The Verge that a real app could be coming soon. The firm may also branch out into offering similarly automated services like paying down debt or saving for retirement.