Charles Schwab: y/n?

May 8, 2010 4:58 PM

The Schwab High Yield Checking account sounds too good to be true. Is it?

I have a Bank of America checking account. I'm not crazy about it, and I'm interested in switching soon. I've seen the Schwab High Yield Checking account recommended a few times on AskMe, and it sounds awesome-- no minimum, no fees, 0.50% variable APY, ATM fee refunds, not Bank of America, etc.

The only catch is that they make you sign up for a Schwab One brokerage account at the same time. This isn't turning me off in itself, but I'm going to be living off a grad school stipend for the foreseeable future. Even though it's generous enough that I'll be able to have some semblance of a normal life, I'm pretty sure that investing is not something I'll be able to do. Those of you who've opened this account: can I really just let the brokerage account sit there unused? Is it otherwise a good account? Are there any other catches I'm missing?

posted by oinopaponton to Work & Money (20 answers total)

What about it really entices you? Credit unions usually have really good rates/deals (mine is a .5% return for my checking account and 1.5% for money market) and it has branches as well as ATMs.
Ing is pretty good, but not quite as good as Schwab. Ally has about the same deal it looks like as Schwab and it doesn't have the brokerage account requirement.

I guess what I'm saying is that BoA is a big FAIL in my opinion. Opt for either an online bank, as it looks like you are, or check out your local state credit union.
posted by TheBones at 5:10 PM on May 8, 2010

That doesn't sound like a particularly good deal. Ally Bank (formerly GMAC Bank) offers a similar deal with a much better APY — 1.29% APY, open with $0, no minimum, No monthly fees. Rates better than 0.5% APY aren't that unusual (e.g. American Express High-Yield Savings has an APY of 1.3 %, no fees, and no minimum balance). Many local credit unions are also offering good deals.

On preview, what TheBones said...
posted by RichardP at 5:14 PM on May 8, 2010 [1 favorite]

What seems too good to be true?

I have a savings account with Bank of Internet USA and right now their Interest Checking account rate is .81% APY plus ATM reimbursement. There are lots of online banks with equal or greater than the interest rate you mentioned without the investment requirement.
posted by rancidchickn at 5:15 PM on May 8, 2010

My local credit union checking account has a 0.5% return (6.17% on the first $500), but I agree than free ATMs – worldwide – are a great deal, especially if you travel abroad extensively. A Platinum Visa comes with all sorts of travel benefits that my credit union's MasterCard doesn't offer. Go for it.
posted by halogen at 5:21 PM on May 8, 2010

We did this at the start of the year with our accounts and so far it's been smooth sailing. You have to leave a smidgen of money in the brokerage account but there's been no pressure to actually use it. We've also earned more in interest in these few months then any of the other major banks ever offered.

The one downside is that you can't deposit checks directly (as opposed to transfers or direct deposits), you mail the check to them and the money shows up after a few days.
posted by greenland at 5:22 PM on May 8, 2010

You have to open a Schwab brokerage account, but you don't have to do anything with it. A friend of mine has one of these accounts specifically so he can use whatever ATM he wants. I have one because I have a Schwab brokerage account. Maybe I should use it!
posted by mkb at 5:23 PM on May 8, 2010

I have one of these accounts and it's great. If I'm leaving any interest on the table, I definitely make it up with ATM fee refunds. Also, Schwab's customer service is excellent.
posted by mullacc at 5:25 PM on May 8, 2010

I have a Schwab high yield checking account, a high yield savings (schwab) and a credit union account. Honestly, Schwab is my favorite bank/brokerage ever. The ATM rebate alone is worth it. I've had months where due to traveling I have had over $100 in atm fees. Schwab reimburses me, no limit. Their online interface is intuitive, comprehensive, and so much better than any CU's I've used; Frankly, my CU's (First Atlantic Federal CU) web interface is an embarrassment and certainly doesn't make me want to use it anymore than I have to. I really only have a credit union checking account so that I have a local place to make deposits that isn't a den of thieves. It is linked directly to Schwab via moneylink so on the off chance that I need to I can do that. But typically I just take a ride to a Schwab brokerage and deposit it there. All deposits are available the next business day (unless its a huge amount). I have one within 30 minutes of me, and perhaps 3 more within an hour so its not an issue. I have had a brokerage account with them for eons it seems, and my favorite thing about them is their customer service. Mrs chosemerveilleux and I don't have as much in our Schwab accounts now as I've had during better paid times in my life, but the people at Schwab always treat you like you're worth a million bucks. Years ago I had an investor account with PNC (from whom I switched to Schwab) and even though I had a very significant amount of money with them their ridiculously mediocre customer service and desire to nickel and dime one with fees led me to believe that PNC cared neither way about my going or staying. The interest rate that the HY checking is paying is pants now (the rate was as high as 5% since I've had the checking, which has been at least 3 years) but everybody's return now is negligible, so its neither here nor someplace else. Another thing I should mention is that I have never come across as many well informed/ trained employees as I have at Schwab. Honestly, every CU I have had (including my current one) was riddled with inconsistently trained and occasionally seemingly untrained staff. Not too different from your average big bank, minus the fees. I think that if you do most or all of your banking online you should definitely consider getting a Schwab account as your primary account, and a local CU as your face to face neighborhood bank. But I think that you'll find that you end up using Schwab almost exclusively. Because they are that much better. This is just my 2 Krugerrand, mind you.
posted by chosemerveilleux at 6:26 PM on May 8, 2010 [2 favorites]

I was in the same boat: switching from Bank of America to Schwab, living off a grad school stipend, not investing much. I love the account. The service is great, and you can get a Schwab credit card that gives 2% cash back on everything directly into that Schwab One investing account (which you can transfer to the bank account). Schwab is fairly new to banking, so they didn't have things like online transfer between checking and savings accounts until a month or two ago, but the 24 phone service has been fantastic, and the online service is still very good.
posted by heliostatic at 6:35 PM on May 8, 2010

in terms of benefits, it seems somewhat substandard to me - I've banked with FirstIB in Indiana for the past 10-ish years now, and they offer pretty much everything the Schwab guys do - 0.75% APY checking, ATM fee rebates, etc. there are fees involved but as long as you maintain an average balance of $500 you're good (I have my paycheck direct deposited there, so it ends up being free for me - I can't remember the last time I paid the monthly fee for the account). additionally, their online banking site allows you to scan checks in (if you have a scanner) and deposit them that way. no mailing, and no hoping that someone didn't decide to knock over the mail truck your check was on. (there are other internet banks that offer the scanning service - I'd recommend finding one that has it if you deposit a lot of checks.)
posted by mrg at 6:40 PM on May 8, 2010

I have Schwab. It's great, especially while I was overseas. I got charged exactly zero cents to use my Scwab card in ATMs in Laos, Cambodia, etc whereas my local credit union would charge around $8 per transaction. Guess which one I left in an ATM? Sigh.
posted by sacrifix at 7:12 PM on May 8, 2010

I have had that Schwab account for over a year now and I love it. However, the credit card heliostatic mentioned no longer exists.
posted by stevechemist at 7:55 PM on May 8, 2010

Three of my friends have Schwab and love it. Great features and great customer service. If I didn't have a full USAA account, I'd use them.
posted by alaijmw at 8:14 PM on May 8, 2010

Nthed. Have it and love it.
posted by roomwithaview at 10:06 PM on May 8, 2010

ETrade has a free checking account similar to Schwab. My CU has an interest bearing checking account which yields typically 0.25-0.5% APY. Getting paid to have a checking account is nice, but the APY is negligible pretty much everywhere, and even savings accounts are around 1.5% in the high end, which doesn't keep up with inflation and is taxable. The difference between 0.5% and 0.25% is not going to matter to most people unless you have a very large account balance in checking, which usually is not the best place to keep that much money anyway, nor is a savings account. But not getting hit with fees does matter to a lot of people, and I also have my money in a credit union and in a brokerage checking and savings account (though I also use their brokerage services). I'd rather invest in a tax-free no-fee fund and ladder my money than put it in a savings account or CDs, though I leave enough in savings for overdraft protection.
posted by krinklyfig at 10:43 PM on May 8, 2010

If you are looking for a high-interest, no-fee checking account have you heard of reward checking accounts? Even in the last year I have found ones that paid 4-5% interest per month. The requirements are usually that you use the debit card 10 times per month (I have even gone grocery shopping and asked for each item to be ringed separately) and 1 ACH withdrawal or deposit (e.g. direct deposit or transfer money from checking account to another account online like a brokerage). There is usually no requirement of how much money you have to spend per transaction. However, you are limited to earning the high interest on a maximum amount of $25,000 usually. I have two of these accounts and make an average of $140 in checking account interest per month.

However, these accounts are generally offered by small regional banks in exotic states like "Missouri" and "Kansas" so you have to do everything online. And, invariably after about 3-6 months of offering the high interest, the bank will lower the interest to 3.5-4%.
posted by KimikoPi at 7:39 AM on May 9, 2010 [1 favorite]

I have it, I use it only for ATM when traveling overseas (no fees whatsoever) because my local bank account also has ATM fee refunds and alllows me to easily transfer between my checking account and savings account there. The one thing I dislike is the pain of depositing things. I'm the opposite of you, though, I had the Schwab brokerage account and got the checking afterwards. I also have the 2% cash back credit card someone mentioned above (I just got it in September, so I'm surprised it's no longer available, it's awesome!).
posted by echo0720 at 8:07 AM on May 9, 2010

Response by poster: It sounds like there are lots of great options out there, but the rave reviews from people who already have the Schwab account have won me over. As long as I don't need to actively trade, I'm fine with the brokerage account-- maybe it'll be a good incentive to invest once I have a salary again. And the travel factor is something I didn't even think about, but that's awesome-- I'll be doing some international travel, so ATM refunds will be enormously helpful. Thanks, MeFi!
posted by oinopaponton at 12:37 PM on May 9, 2010

You don't have to do anything with the brokerage account. I also have the Schwab Visa with 2% cash back on all purchases, with the cash back deposited into that brokerage account (which is easily transferred back into your checking account if you don't want to trade).
posted by xiaoyi at 1:17 AM on May 10, 2010

If you are looking for a high-interest, no-fee checking account have you heard of reward checking accounts? Even in the last year I have found ones that paid 4-5% interest per month.
...And, invariably after about 3-6 months of offering the high interest, the bank will lower the interest to 3.5-4%.

KimikoPi, there's an error in those numbers you quote. No bank offers 4-5%/month (=60%-80% annualized returns).
posted by IAmBroom at 10:38 PM on May 11, 2010