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Similar story with Fidelity. Honestly, I just don't understand why people bother with traditional banks at this point. Pretty much all of the major brokers of

Similar story with Fidelity. 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.

loeg 7y ago
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. https://www.kalzumeus.com/2019/6/26/how-brokerages-make-money/ https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone... is fascinating if you enjoy this kind of stuff.
- StevePerkins 7y ago
  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.
  - trimbo 7y ago
    Schwab got rid of sweeps. Really makes Fidelity a lot more appealing if you keep a lot of cash in there.
    - StevePerkins 7y ago
      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. https://www.schwab.com/public/schwab/banking_lending/checking_account https://www.schwab.com/public/schwab/banking_lending/checkin... 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)
  - toomuchtodo 7y ago
    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.
- therein 7y ago
  Schwab has interest on its checking accounts as well. I've been using them for over 5 years and couldn't be happier.
- manigandham 7y ago
  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?
  - C1sc0cat 7y ago
    Depends how big your portfolio is I have about £4k in my UK one this is a bit high but its normally about a grand
- arcticbull 7y ago
  Cash management accounts actually pay really good interest rates these days. Personally I’d rather invest my cash and borrow against it on margin haha
  - vinay427 7y ago
    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.
    - arcticbull 7y ago
      That's actually fantastic. I just signed up for an Interactive Brokers debit card, which I'm hoping will do the same thing.
perl4ever 7y ago
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.
- xxpor 7y ago
  These accounts are FDIC insured. They're real bank accounts.
  - perl4ever 7y ago
    The FDIC accounts that Fidelity advertises are with real banks[1] which are not Fidelity per se. They're just tightly integrated. This all seems very like "why don't you just use the cloud instead of an old fashioned server?" [1]https://accountopening.fidelity.com/ftgw/aong/aongapp/fdicBankList?type=fcma https://accountopening.fidelity.com/ftgw/aong/aongapp/fdicBa...
- arcticbull 7y ago
  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.
- astura 7y ago
  You misunderstand, the cash in these accounts are kept in an FDIC sweep, so it's FDIC insured.
  - acjohnson55 7y ago
    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.
detrino 7y ago
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.
- bonestamp2 7y ago
  So, let's say I keep $100k in my emergency fund account... what exactly does 75% cash back for my credit card mean?
  - darkerside 7y ago
    Not sure why you're downvoted. Parent is worded in a very confusing way.
  - mehrdadn 7y ago
    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!
    - lotsofpulp 7y ago
      > 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. The optimal method is to invest the $100k in VTI or even a money market fund. You don’t have to leave it as cash.
ggm 7y ago
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...
- bonestamp2 7y ago
  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.
  - bluecalm 7y ago
    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.
    - manigandham 7y ago
      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.
      - Gwypaas 7y ago
apexalpha 7y ago
This just sounds like my bank, although I'm in Europe. Why are US banks so behind?
- oogali 7y ago
  I live in the US... 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.
  - coldcode 7y ago
    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.
  - lazyasciiart 7y ago
    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!

loeg 7y ago

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. https://www.kalzumeus.com/2019/6/26/how-brokerages-make-money/ https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone... is fascinating if you enjoy this kind of stuff.

StevePerkins 7y ago
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.
- trimbo 7y ago
  Schwab got rid of sweeps. Really makes Fidelity a lot more appealing if you keep a lot of cash in there.
  - StevePerkins 7y ago
    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. https://www.schwab.com/public/schwab/banking_lending/checking_account https://www.schwab.com/public/schwab/banking_lending/checkin... 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)
- toomuchtodo 7y ago
  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.
therein 7y ago
Schwab has interest on its checking accounts as well. I've been using them for over 5 years and couldn't be happier.
manigandham 7y ago
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?
- C1sc0cat 7y ago
  Depends how big your portfolio is I have about £4k in my UK one this is a bit high but its normally about a grand
arcticbull 7y ago
Cash management accounts actually pay really good interest rates these days. Personally I’d rather invest my cash and borrow against it on margin haha
- vinay427 7y ago
  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.
  - arcticbull 7y ago
    That's actually fantastic. I just signed up for an Interactive Brokers debit card, which I'm hoping will do the same thing.

perl4ever 7y ago

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.

xxpor 7y ago
These accounts are FDIC insured. They're real bank accounts.
- perl4ever 7y ago
  The FDIC accounts that Fidelity advertises are with real banks[1] which are not Fidelity per se. They're just tightly integrated. This all seems very like "why don't you just use the cloud instead of an old fashioned server?" [1]https://accountopening.fidelity.com/ftgw/aong/aongapp/fdicBankList?type=fcma https://accountopening.fidelity.com/ftgw/aong/aongapp/fdicBa...
arcticbull 7y ago
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.
astura 7y ago
You misunderstand, the cash in these accounts are kept in an FDIC sweep, so it's FDIC insured.
- acjohnson55 7y ago
  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.

detrino 7y ago

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.

bonestamp2 7y ago
So, let's say I keep $100k in my emergency fund account... what exactly does 75% cash back for my credit card mean?
- darkerside 7y ago
  Not sure why you're downvoted. Parent is worded in a very confusing way.
- mehrdadn 7y ago
  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!
  - lotsofpulp 7y ago
    > 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. The optimal method is to invest the $100k in VTI or even a money market fund. You don’t have to leave it as cash.

ggm 7y ago

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...

bonestamp2 7y ago
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.
- bluecalm 7y ago
  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.
  - manigandham 7y ago
    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.
    - Gwypaas 7y ago

apexalpha 7y ago

This just sounds like my bank, although I'm in Europe. Why are US banks so behind?

oogali 7y ago
I live in the US... 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.
- coldcode 7y ago
  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.
- lazyasciiart 7y ago
  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!