Charles Schwab Online Checking Looks Very Promising
Posted on By Jim at 27 May, 2007, 1:19 amI’ve been doing some research into online checking accounts the past couple days, and while doing so, I bumped into Charles Schwab’s Investor Checking account. What got my attention right away is its high interest rate - 4.25% APY. This is very near online savings account territory, as my ING Direct Orange Savings Account is yielding 4.50% APY right now. That’s only a 1/4 point difference, and we’re talking about a full-featured checking account, not just a money market limited to 6 withdrawals per month.
(Sidebar: EverBank’s online checking account is offering 6.01% APY right now, but that’s an introductory rate for the first three 3 months. After that, it drops to 3.41% APY for balances under $10,000. Schwab’s rate is more than 3/4 percent higher than that.)
Minutes after discovering them, Schwab now had my full attention — so I began to dig deeper. The very next thing I noticed was that their Investor Checking account comes as a package of two accounts: a checking account and a brokerage account. Upon learning that, I almost hit the back button, since I don’t do much stock trading right now and have no need for a brokerage account.
My disappointment was quickly turned around though when I saw that there were no minimums or junk fees on the brokerage account. With that being the case, the brokerage side of the package could just sit on the shelf without causing a distraction to the online checking account.
As I browsed Schwab’s web page on the new account, I found it was highly competitive with the other online checking accounts available from EverBank, BofI, etc. Some of the features I was looking for however weren’t spoken of on the web page, so I decided to give Schwab a call to find out more. My first impressions of their customer service were excellent as John (the customer service rep) was very knowledgeable and patiently answered my questions. John even gave me his direct extension and working hours so I could call him back if I thought of anything else to ask.
Below is what I know about Schwab’s account from a combination of the web page and my phone call with Schwab. Here are the highlights:
- ATM/Debit Visa Platinum Check Card included
- Unlimited ATM fee rebates. Schwab will refund all service fees charged by ATM operators to your Investor Checking account. Other online checking accounts cap the monthly amount they’ll reimburse.
- Free checks. Not just the first box, but all boxes thereafter. John says only one design to choose from, but for me that’s a non-issue.
- Free online bill payment
- Direct integration with Microsoft Money and Quicken
- No monthly limits on number of checks written, automated ACH withdrawals, deposits, etc.
- Direct deposit
- Postage-paid envelopes to mail in deposits
- Deposits can also be dropped off at any Charles Schwab brokerage office. This was a huge feature for me as I’m still not comfortable with the idea of sending a large check through the mail.
- Direct online linking to your accounts at other banks.
- Statements are retained online for 2 years
- Online check images
- No extra charge for paper statements
- No minimum balance to open or maintain either the checking or brokerage account
- Automated sweeps from your brokerage account. You can set a minimum balance threshold for the checking account, so that if it’s exceeded, money will automatically be transferred from the brokerage account to cover. What would make this feature even more powerful is if Schwab would offer an online savings account that could be “swept” in the same manner.
- Second level of overdraft protection from margin (if you have margin available)
- FDIC insured up to $100,000
Based on what I’ve learned, I’ve decided to take this account for a test drive. I sent in my paperwork to open up an account tonight, so as I get some hands-on experience under my belt, I’ll be sure to pass along any impressions as I learn more.
Click here to learn more about Schwab’s Investor Checking.
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Hi there,
I have a question about what you learned about Schwab. Why is it important to have “automated sweeps from your brokerage account”?
It seems that the checking account returns 4.25% APY and the brokerage doesn’t, so why not just leave all the money in checking and only fund the brokerage when you want to buy a stock?
Thanks for your writeup; Schwab does look interesting!!
Yes, that’s what I would do as well with the brokerage account. What would be ideal is if Schwab also offered a competitive Online Savings Account. Right now I have a weekly manual cash flow exercise of pulling down money from my Online Savings Account to my checking. It’ll be great that my checking account will now also earn interest, but my OSA is still higher (6% currently at FNBO Direct)… so I’ll still keep the bulk of my money there. An automated sweep from savings would be great to get me out of the manual cash flow exercise.
I have since learned that Schwab does have OSA’s and MMA’s that can sweep to its checking, but the yields on them are pretty uninspiring. They’re much lower than their checking account’s yield, so having the sweep available is cool, but it’ll go unused.
I have just gotten off the phone myself with a Mr. Phillip, and the information he share with me was priceless to say the least. I have just gotten into investments within the last year, and have pretty much gone through a handful of institutions offerring services for investments. The major benefits that I find with Schwab is that it gives you access to your money whenever you need it. At the same time there are no hidden charges and your are able to use both accounts to benefits each other. I personally live abroad and travel a lot for school and work. Through my phone call I learned that they have an international division which concerns itself with American citizens living outside of the US, so that everyone has the chance to benefit. I used to work in sale during college, and sometimes you tell the customer exactly what they need to hear to do your job. Whenever I asked Phillip a question that he did not have an answer for, he put me hold for a matter seconds while he verified information from management. They are quick and precise with handling their customers and honest (at least Phillip is!). This says a lot about the company and how they operate. He also took my information down so that he could follow-up with me and forward additional information, and he gave me the details of the international division in case I was able to get in touch with them before they had a chance to contact me. Although I am new to investments, this is by far the best institution I have come across since I first started looking into investments.
P.S. Usually gold and platnium cards have additional benefits and incentives to them like airline, hotel, car rental and sale packages. Does anyone know if this offers the same entitlement???
Ali S.