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.
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.
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.
A bit of Google searching appears to show that this is not an uncommon practice. [1]
https://www.consumerismcommentary.com/verify-funds-on-that-c...
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.
[1]: https://www.consumerismcommentary.com/verify-funds-on-that-c...
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.
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.
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.
https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone... is fascinating if you enjoy this kind of stuff.
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.
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/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)
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?
Your friendly broker really wants your cash, because at this point keeping most of the interest is their best source of income.
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/fdicBa...
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 optimal method is to invest the $100k in VTI or even a money market fund. You don’t have to leave it as cash.
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.
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...
Then again, we also have an app (Swish) similar to venmo allowing you to instantly for free send money to a phone number.
They’re free to and from Fidelity accounts. I’d guess the same for Schwab accounts.
Wire transfers can happen almost immediately but typically cost $20-40 for one, or sometimes both, parties involved.
Wire transfers [1]. (For most business accounts, wire transfers are also free.)
I never had a cheque book, but I have a faint memory of my parents using cheques back in the 1970s :-)
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.
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.
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 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.
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.
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.
If you're with one of America's 4 largest banks (Chase, Bank of America, Citigroup, Wells Fargo), expect a bad time.
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.
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.
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.
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.
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.
See: https://client.schwab.com/secure/file/P-7111230/Deposit_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!
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 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!
I use credit for 100% of all transactions so that there is an abstraction between my money and where I use it.
Also it really depends on your bank. I had my debit card details stolen on Simple, had my money back the next day and a new card overnighted.
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.
Great experience so far!
I’m also married so this is a joint account. Last time I checked Simple doesn’t provide joint accounts. That might have changed.
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.
I’ve been a USAA customer for a while. I get all the benefits OP stated. Would recommend them anytime.
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).
Then find one that also has no-fee overdrafting on margin, etc.