As a side note I use Schwab as a checking account and it’s incredible. Zero fees. Reimbursement of ATM fees. Easy overdraft protection from the brokerage account. I love them as a bank.
This is even more reason to love them.
I’ve used Chase, Citi, was a Simple customer for a long time... and Schwab blows all of them out of the water.
Story time: when I was fresh out of college, I deposited a check to my Schwab bank account via mobile deposit, but realized that I wasn't going to have enough time for the funds to clear before I needed to write a check from my account to my new landlord. I called Schwab customer service, not really thinking that they would do anything, but to my surprise, the banker said "Let's fix this for you!" and suggested that we conference call the counterparty check's bank to verbally confirm the funds, at which point he manually cleared the funds into my account and told me "You're good to go!" Schwab has some of the best customer service I've ever experienced, even for new (i.e. poor) grads ;)
I don’t know if this is general policy for all accounts or if there’s some balance threshold to enable it, but these days Schwab will instantly clear up to $10,000 of checks deposited via Mobile Deposit.
If for whatever reason you don’t have overdraft protection, they will send out an email if an ACH presents which would cause an overdraft and they give you until 10:00am the next day to transfer in funds to cover it.
I read this yesterday and was really interested in the idea. I am looking to move my small business checking account from my current bank which is the poster child for everything that is wrong with brick and mortar banks. I dug a little further in to Schwab and for business accounts, the minimum balance is $250k. Bummer.
That sounds pretty dubious to me. Either you deposited a check from your account held at a different bank or a check someone else gave you drawn on their account.
If it was your own account, then during the conference call you had to give out your personal information to identify yourself as the account holder at the other bank, all while the Schwab agent is listening in..
Or if it was someone else's account then that other bank's agent should never have discussed anything to do with that account with you and certainly not with some random other person (the Schwab agent) listening in.
Counterparty was a family member, also on the phone line, and who provided their permission to both Schwab and their bank to do it. My point still stands. It was highly unconventional and Schwab didn't have to do it, but they did in order to help me out. I'm sure it's not standard practice, and I wouldn't count on another banker doing the same, though Schwab has a knack for being customer-friendly.
Jesus F Christ.. that's even worse than my original scenarios! Now you have a family member whose personal information has been compromised to a random Schwab agent and even to you..
To me this would be a huge red flag.. the fact that Schwab apparently allows their customer service agents to play loose and fast with sensitive financial PII.
Source: I worked at a Global Top 20 bank for many years and this would absolutely be a fireable offence and the employee would be lucky not to be dragged into court by the bank and the government.
It’s a balance of funds inquiry. Before you can discuss that kind of information about an account you need to identify the person as the account holder. I can’t call your bank and ask if you have enough funds to cover a cheque you wrote.
I totally understand where you're coming from, and it gives me pause when I think about it now, but I will say that in the moment it came across as a good faith effort and really did save the situation.
> If it was your own account, then during the conference call you had to give out your personal information to identify yourself as the account holder at the other bank
Not necessarily. Banks can call, using the account information on the cheque, to verify funds available. (The cheque writer's bank can then call the cheque writer, separately, to get consent.)
I did this to clear a paycheck to cash when a cash-strapped college student.
The drafting bank always tells the depositing bank if those funds are available, which is what they did here: it’s how checks work. You would discover the same information yourself, when it cleared or didn’t.
If you take a check to the drafting bank, they’ll check the funds in the account right then and there and either pay you or tell you there are insufficient funds.
All that happened is they did it on the phone rather than through a clearing house or in person, but the exact same information was exchanged:
1. The account number and amount on the check was reported to the drafting bank, which both the depositor and his bank knew from the check already.
2. The drafting bank confirmed those funds were available, which would have been revealed when the check cleared or didn’t through other means.
Having a bank call another bank to clear a check isn’t uncommon — I’ve had it done with payroll checks for the same reason, that I needed to pay rent.
Honestly, I just don't understand why people bother with traditional banks at this point. Pretty much all of the major brokers offer cash management accounts that are equivalent of online banking. Pretty much all with standard:
- No fees
- No minimum balance
- Free checkwriting (usually free physical checks for that matter!)
- ATM fee reimbursement (at least anywhere in the U.S., if not internationally too)
- Free debit cards
- Direct deposit
- Deposit paper checks by taking a picture with a phone app, etc etc etc.
The only possible downside that I can think of is that I'd have to deal with a little extra hassle if I wanted a cashier's check. But even then, it would simply take an extra day or two. And it's not like I'm closing on a new home purchase all that frequently.
Nevertheless, people that I talk to get weird and SCARED when I talk about it. Even my wife keeps a separate checking account at a physical bank, because she just likes knowing that a brick-and-mortar building is there. I don't get it myself, but human nature can be odd when it comes to money.
The only possible downside that I can think of is that I'd have to deal with a little extra hassle if I wanted a cashier's check.
Almost everything wrong with consumer banking in america is contained, or stems from the ability to refer to cheque as a neccessary and normal thing in modern day finance.
I tore up my last cheque book ten years ago, I have had to resort to Western Union three times now (once a year) to send money to Her Majesties Customs and Excise for my UK pension topup, its the only thing I still do that way, and if the UK stopped using a closed-loop domestic clearing house and opened up SWIFT I'd do this via the IBAN immediately.
Cheques are cool. They're also horrendously stone age and the "yes but..." are the collected history of insanity that is american banking.
Jimmy Stewart, holding the fort at the friendly credit union on christmas day...
The former is what you're describing. The latter is where the bank takes the funds from you then itself guarantees the piece of paper. Much more like an arbitrarily denominated bit of cash often used in large transactions in the States when (1) a seller doesn't trust the buyer too much or (2) the seller wants the funds to clear more quickly.
Also, regular checks are great. There's something about having to physically take time to spend money via a goofy little ritual that makes it easier to save the stuff.
Cashier's cheques are needed in the US because of fundamental distrust between financial institutions. Funds clearing more quickly... Because the process is locked to physical paper moments and could be milliseconds but no because cheques.
If there is so much distrust between buyer and seller,why hasnt western financial civilization in europe tanked by now?
I get cashier cheques aren't personal cheques but the underlying logic of why they exist is because of legacy reasons which are inefficient and reinforce bad behaviours.
When I bought my apartment in Spain, I had to get a Cashier's check for both the deposit and the final purchase.
There's apparently still some utility in them in parts of Europe. When I challenged it (I had to pay 80 EUR for the check!) I was told that a bank transfer could be reversed or canceled, and that Cashier's checks prevent that from happening.
I don't see this situation changing until the banks get together with the central bank and create a unified escrow system to replace Cashier's checks.
As of now, they don't see the benefits of changing to a new system outweighing the costs.
I'm not originally from America either so cheques do seem super ancient to me. That said, it's more convenient to pay my housekeeper and lawn guy with cheques instead of regular trips to the ATM. They're not venmo or google/apple pay kind of people either.
Why not wire transfer? Here bank transfers are very cheap (free for most people unless you do a lot) and usually take a few hours at most (at some banks are instant).
If someone requests anything else as payment for rent you can be fairly sure they try to evade taxes on it as wire transfer is both the most convenient, cheapest and the safest way to pay.
Wire transfers in the US are expensive for most checking accounts. In the $20-40 range per payment. Also people don't usually carry around their account numbers for receiving payments.
Are you talking wire transfers or ACH payments? ACH is typically a much slower method of transferring money (1-5 business days) though it is generally free to do so. ACH also carries all of the risks associated with checks save the risk of losing a piece of paper before you can deposit it.
Wire transfers can happen almost immediately but typically cost $20-40 for one, or sometimes both, parties involved.
Most banks allow you to transfer between accounts at the same bank for free, and faster than ACH transfers because they can settle it quickly when its internal.
Fair enough, but venmo/google/apple pay is even more convenient than wire transfers and they're not into those either. Checks/Cheques are just a cultural norm in America.
I got a cheque a few weeks back from HMRC and it was the first one I'd personally seen in over 10 years - it seemed like something from a different age.
If you have bank of america you can link your bofa and merrill accounts. They even give you bonuses on your credit cards of +25/50/75% cash back for balances over 25/50/100k in assets between both.
They increase the cash back by 75% of whatever it already was. So if you were getting 3% back (currently, for their Cash Rewards card, that can be 1 of the following categories: gas, online shopping, dining, travel, drug stores, or home improvement/furnishings), you'd now be getting 5.25% back.
Which is a complete rip-off. You could easily get 2% interest on that $100k you're leaving with them by just leaving it with a better bank. For that to be worth it, you'd need to get at least $2k cash back on that credit card. At 5.25% (which is only for that 1 category you chose!) you'd need to burn through $38k/year... i.e., you gotta $100 a day on that card.
Except even if you somehow were planning to spend $100/day on that one lucky category, your cash back would be an order of magnitude lower, because they'd only give you that cash back on the first $2,500 in purchase, i.e. you could only earn $131 at most. So you're losing out on at least $2,000 to earn at most $131. Terrific deal!
The more optimal method is to leave 1-3 months worth of expenses as cash and put the rest of the money in something like VTI. You don't want a market crash to erase half of your emergency fund at the exact moment you need it.
Emergency funds should be in FDIC insured savings accounts, that pay at least 50 basis points less than the fed funds rate.
Also, you should have a stash of cash you can find at home in case of power outage or network loss and you can’t get money from the bank. And guns and canned food and clean water.
You can still get 2% interest on that buy buying treasury ETFs, or 1.56% currently by asking them to open a preferred deposit account for you, which is essentially a savings account with a high interest rate. You dont have to keep it in cash.
Typically, brokerages don't give you any interest on checking. Now, banks haven't really either since 2008, but prior to that you could make a few dollars a year on checking interest.
Not sure where you're getting that from. My Fidelity cash management account sweeps any idle balance into a money-market fund. I don't have any first-hand experience with Charles Schwab, but their website indicates that their checking accounts likewise accrue interest with no minimum balance.
Of course, interest rates are currently so low that it's basically a moot point. And I hardly ever have let any idle cash sit around without sweeping it into a short-term bond fund, or something better than the money market default.
Fidelity's Cash Management account is really designed for folks who are keeping up to $1.5MM in their cash account, with the funds swept between multiple banks to ensure the entire balance is FDIC insured. The interest rate is appalling, but it's appalling everywhere.
I feel like I'm discussing climate change, where there are multiple perceptions of reality competing for attention.
Other people in this thread report that Schwab pays interest on checking account balances. Schwab's website clearly states that their checking account accrues interest. There's a footnote link there, but the fine print simply says that the rate can change over time.
Of course, just as I don't understand people using a traditional bank these days, I likewise don't understand letting a large cash balance sit in checking account. The best interest rate you're going to see these day is probably sub-1%.
So why leave excess money sitting around in a checking account, when sweeping it into even a short-term U.S. bond fund would provide 2x-10x the return with no additional risk? (i.e. if U.S. Treasuries default, then money market accounts are probably screwed too anyway)
How much are people keeping in checking accounts to make that worth it?
Realistically it's better to move as much as possible to a dedicated savings/investment/brokerage account instead, and if you're doing that then why not just write checks against a single combined account?
That normally is actually a better strategy. I love that Schwab lets you overdraft your checking account with no fees (if you choose), and they first try to pull cash out of your brokerage account before borrowing on margin.
I haven’t received a physical paycheck from an employer since 2004.
I haven’t written a physical check since probably 2007. But as noted, cashier’s checks are a completely different product.
I’ve had mobile deposit from my US bank since 2010.
And various banks have offered ATM fee reimbursement (capped at a certain amount) since 2010.
Maybe the issue isn’t that US banks are so behind, but rather the age/year of when folks entered the US banking system and were first exposed to these things themselves versus what they were taught in a classroom.
Most of my contractors (house) charge 2% more for visa/mc so I give them checks. I pay my car insurance by check in person because my bank and insurance company routinely lose automated payments of any kind. In person I usually pay with ApplePay or a chip CC, and routinely refuse to shop at places (looking at you Pei Wei) who refuse to accept Apple Pay or chip cards. The cash in my wallet sits there for months.
I moved to the US as an adult ten years ago and the banking system was surprisingly behind - I finally understood why PayPal existed, for instance. And I had to write my first check - lots of them!
Well, what if your broker goes out of business? Like, is FDIC insurance chopped liver? The head of the SIPC has stated publicly that your cash is not covered except if it is deposited to buy securities.
Your friendly broker really wants your cash, because at this point keeping most of the interest is their best source of income.
Cash management accounts are better for large balances than FDIC accounts at banks for the most part. Since the brokerage abstracts where the balances are actually stored they split your large balances over a number of FDIC accounts and you get up to $1.5M in FDIC cover at some places instead of $250K. If you’re thinking of Robinhood they just did a bad job of execution, and shockingly thought SIPC alone would do, and that’s what angered the SIPC head.
It's often true that the funds aren't covered until they're in the custody of the partner bank. This is the case for some of the neobank cash accounts. Not sure about Schwab tho.
You've described any bank worth being a customer of. Monthly fees are a huge red flag (even if you can avoid them with hoop-jumping). USAA (just for ex.) also reimburses ATM fees. I'm not a fan of "overdraft protection" in general, but maybe Schwab provides a relatively non-predatory version of it.
Citi's nickname is "shitty." I forget what put me off about Simple but in general debit cards don't enjoy the strong consumer protections that credit cards do in the US.
Agreed, my credit union does all those things and pays 10x more interest than Schwab (2% vs 0.20%). That being said, its easy enough to get ~2% in a money market as well, so there's no compelling reason to keep more than a few months expenses in a checking account.
If you're with one of America's 4 largest banks (Chase, Bank of America, Citigroup, Wells Fargo), expect a bad time.
First Tech and BECU both do this, pretty sure the smaller credit unions like Verity and People's CU also reimburse ATM fees and offer high yield checking & savings accounts.
First Tech does not reimburse ATM fees worldwide. Unless things have changed in the last year, they do add a 1% transaction fee for using a foreign ATM. For this reason, I now use a Schwab checking account for international travel.
While you are technically correct, I don't think you should be so dismissive... a majority of Americans are using banks that DONT offer those things, so pointing them out is a good thing for people to hear, and to demand of the bank they use.
I didn't intend to come across as dismissive; apologies. I understand how it reads that way.
I intended to make a more general statement about relatively good banking products, while GP's note only talks about Schwab in particular. I.e., yes, Schwab is a good option, and there are lots of other good options. (Lots of bad ones too.)
I totally agree that a lot of people don't know these things or have good personal finance knowledge in general, and agree that raising awareness of what constitutes a reasonable banking product is a good thing.
but maybe Schwab provides a relatively non-predatory version of it
They will pull from your brokerage account, if you have insufficient funds they'll take out a margin loan and I think the only fees there are interest.
ING did something similar where they'd only charge you interest for overdraft stuff.
>if you have insufficient funds they'll take out a margin loan
That's not my experience with them. I've had them as a checking/brokerage account for 10+ years. I tend not to keep much money in checking so I run into timing issues once a year or so - where a check I wrote will present before the funds to cover it arrive in my account. I've definitely had them pull from the brokerage cash, but not from savings. They have never opened a margin loan to cover it.
Also not my experience. Accidentally had a timing issue once, and was overdrawn for a week before an ACH more than covered the difference.
On day four they called me to make sure I was aware. I explained that I had already started a transfer several days earlier, and they said "no problem" and thanked me for being a customer.
No overdraft fees, no pulling from my brokerage account, no margin loan. Never heard anything about it ever again.
It's happened to me a couple times as I don't keep cash in my brokerage account. To cover the checking account, they'll pull from the brokerage account, and if there's insufficient cash in the brokerage account, they take a margin loan. vOv
Lots of smaller regional banks pay ATM fees, as they don’t want to run their own fleet of ATMs. And they have local branches when you need it, like for a cashiers check.
Their one and only flaw that is a killer for some is the ACH hold policy — they hold all incoming transfers for at least 4 business days in many cases.
You can get in a pickle if you don’t realize it and have a tight timeline to transfer funds at tax time or whatever.
As others have pointed out, you can call customer service and they can often get the hold cleared while you are on the phone. They will conference in the other bank to verify.
I only think that applies for accounts opened in the last 90 days and/or with limited assets. I have been a customer for years and have a substantial amount in my brokerage accounts with them and all my ACH transactions clear the next business day; rarely two business days.
The specific circumstance was that I initiated an external ACH transfer from a Schwab Bank Checking account, which pulled funds from a remote bank, there was a default 4 day hold.
I don't keep alot of money in the bank accounts, but have a non-trivial relationship on the brokerage side.
Other banks (Credit Union, Capital One) typically clear these in 24-48 hours. It's not a "deal breaker" for me, and Schwab is an awesome bank, it's just a gotcha that can be problematic in some circumstances. If you have a business and pull money from one account to another, etc your process needs to keep it in mind!
Can confirm, highly recommend! I spend a few months abroad a year and get hundreds in ATM rebates and even more in forex/transaction fee value. Though I wish I got more interest on cash balances.
EDIT: the biggest benefit though is the customer service. A US based person answers with no wait time and they deal with VISA for me. So much better and I'm not even high net worth by their standards!
However I also have a 'play' Robinhood account and if Schwab can roll out a better mobile app I would 100% move those equities over.
The Schwab mobile app has recently been updated (unsure exactly how recently), and it has got substantially better since I first tried it a couple years ago.
I can confirm Schwab banking is the real deal! No fees ever. Reimburse ALL atm fees (even those pesky international scammy ones that are like $10 a pop). Effectively wherever you are in the world, you are in network with Schwab ATM's. Used them as an exchange student all over the place.
The biggest plus IMO is if you travel a lot. You get, from what I have experienced, no currency conversion fees, and no mark up on the exchange rate. They basically give you the Visa official exchange rate which is very good!
One thing I love about Simple that I've never been able to do with Schwab is get notifications on every transaction in my checking account. With Simple that helped me catch some fraud immediately
This is the right answer. Credit cards offer much more protection than debit do. Much safer to use, and in the event of fraud you are out the money on debit until resolution but on credit you’re not.
If you don’t have the credit you can just keep paying the balance as quickly as you need to from your cash accounts (once a week or once every few days). If you have the cash to pay for things, then you have the cash to pay for the credit used to pay for things.
Totally. To put it in programmer terms a credit card is really just a queue that has a penalty for keeping items in the queue too long. You can pay it off as often as you want. The size of the queue in that case isn’t as important. But once you have a larger queue, you have more time/convenience to pay it down.
Schwab does have notifications for using the debit card. The issue is that credit card payments and other ACH transactions don't have alerts.
My other accounts notify for every transaction and even the interest credited at the end of the month.
And you can't pay everything with credit cards: landlords, the IRS, utilities, ... there are services like Plastiq but then you have to pay the overhead too.
While I will agree that Schwab is decent I, personally, would rate them about equal with Fidelity. That being said Schwab didn't want to be in this spot, they were forced. Robinhood, Webull, etc have pushed all of them to this end game. And now ETrade and the rest are stuck with slumped stocks and have no choice but to follow suit.
Robinhood et. al. can't hold a candle to the breadth and depth of what the others offer. I will concede the simple interface is very easy for complete amateurs to get started.
As far as challenger banks go I’ve found SoFi Money to be really good. 1.8% APY and unlimited ATM fee rebates worldwide as well. I haven’t found anything more generous, Schwab included given the APY.
Same experience for me, with some additional positive experiences when we bought our house. Had to go into a branch to wire money for escrow. Was pretty empty, and the person there was super helpful, walking me through everything and making sure I triple checked I was wiring the money to the correct place.
I will second Schwab as an amazing bank. I would also add Fidelity as a great option in this same space. I use them now, only because my employer 401k is there and it keeps everything in one place.
how was schwab better than simple? simple offers better checking interest by a lot, as far as i can tell; i'm tempted to switch because of that, keeping schwab for foreign ATM usage
I don’t use my checking account as an investment account. Yes Simple has a higher interest rate but my checking account only ever has whatever it needs to fulfill rent and bills. Everything else gets allocated elsewhere.
I’m also married so this is a joint account. Last time I checked Simple doesn’t provide joint accounts. That might have changed.
I've been using Charles Schwab Bank now for about 10 years, and I love it, as well. They had the reimbursement of ATM fees back then and still do, which is amazing.
Long answer: You can set up automated transfers to your investing account. In order to set up automated investments, you must submit a paper form, which can trigger recurring purchases from your account's cash balance, or from direct deposit.
Peper form, really. Is there anybody else from big boys that would allow to define a basket of ETF's and auto-invest deposited money to it fee free? I know only of m1finance.com
For some reason nobody does that. Vanguard can sort of do it with mutual funds only.
I would keep USAA, I've always had good experiences with them. They've even implemented a suggestion I had into their app (talked with customer service who said they would forward it to the appropriate team).
Also one time when I had an issue with MobileDeposit, the first person I spoke with immediately forwarded me to the right person who could see the image of the check I tried to submit and suggested I turn the check upside down and take the picture (that worked btw, the routing and account numbers were printed on the page border).
They also had Coinbase integration for several years now (fwiw).
USBank is awful, dump that shit. I don't have any quelms with USAA, but I happened to luck into their 2.5% everything credit card while it was still being offered and will stick with them as long as they don't discontinue that.
I have them for my business account because I couldn’t find anything better for a small business. The experience sucked from day one going to the branch but at this point I don’t want to waste time setting up an account elsewhere. I also receive wire transfers for most of my consulting work so going back and bothering all my customers to change routing numbers is a burden I don’t want to put on them unnecessarily.
That's simply not true. Find a credit union, for starters, that has unlimited no-fee and fee-reimbursed withdrawals from any ATM worldwide. This is better than any bank I've found in other countries I've been to or lived in.
Then find one that also has no-fee overdrafting on margin, etc.
This is even more reason to love them.
I’ve used Chase, Citi, was a Simple customer for a long time... and Schwab blows all of them out of the water.