I am currently on vacation and may not offer posts as frequently as usual.
More brokers are offering high-yield checking accounts to compete with ING Direct’s Orange Checking. Offering competitive checking accounts helps the brokerages increase their assets without having to pay a significant portion of its earnings out as interest. Right now, E*Trade is offering 3.25%, Charles Schwab is offering 4.25%, and soon Fidelity will through its hat in the ring by offering 3.5%.
To make it worthwhile for traditional checking customers to switch despite the lack of ATMs belonging to the brokerage, the investment companies often reimburse customers for ATM fees when presented with a receipt.
A recent article in the Wall Street Journal mentions Fidelity’s plans but admits that these accounts are not always the best option for the bulk of your money, thanks to the higher interest offered on savings accounts.
Right now, I have no-fee checking accounts with ING Direct and Wachovia, but only the ING Direct account earns interest. I am not very concerned with the amount of interest earned as most of my cash is held in money market (savings) accounts and only keep funds in my checking account as necessary. I like ING Direct for its interest, however, and am using this account more often. I like my Wachovia account for its accessibility for deposits and cash withdrawals; there are ATMs everywhere in my home area. There are other options, as many banks could provide the same service, but I’ve had no reason to change. This is the same account I’ve had for the last 15 years through a number of mergers and acquisitions.
I don’t plan on using a checking account at a brokerage. The work I’d need to do in order to get reimbursed for ATM fees (collecting receipts and sending them in) does the opposite of my overall objective for this year, the simplification of my finances.
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In my experience, either you have a brand name company that requires unreasonable minimum’s to obtain the checking, or an obsure online-only place that requires a little bit of faith to go for it. I am using HSBC’s savings and have been very content with it. I’m moving my roth from sharebuilder to etrade so I might actually give their checking a chance.
I have been with Schwab checking since it came out and it has been great. The service is good with free overdraft, ATM’s, easy account linking, and no hassle with moving money back and forth from a savings account. Yes I may be out some interest because of higher savings rates but all of my money is earning interest so it evens out.
At a Fidelity brokerage account:
You can get a 3.11% 7-Day yield on FNYXX (New York Tax Exempt Money Market), tax equivalent yield 5.41%.
Also Fidelity Cash Reserves offers a 7-Day Yield of 4.99%
Instead of Overdraft you can use margin against your securities. ACH transfers in and out are quick. Checks, no problem. Bill pay is free. No ATM rebates, but I just do a transfer to a bank account that does ATM rebates instead.
I’m failing to see the advantage of the 3.5% new offering by Fidelity, other than perhaps FDIC.
Fidelity says they will refund ATM fees the same day a withdrawal is made, therefore, I don’t believe you need to collect & submit receipts. It’s done automatically.
First of all, atm rebates are automatic and unlimited with the “My Smart Cash” account…there are no receipts to send in…Secondly, you can purchase a 5% plus MM Fund within “My Smart Cash” or if you have a seperate brokerage with them, use any MM Funds you have in the other account (using their “Cash Manager” feature)...
With or without the 2nd brokerage account, My Smart Cash will automatically use your MM Fund to overdraft (with no charge) evry single debit you do in the My Smart Cash Checking..so in effect, you can keep a 0 Balance in it, and overdraft everything for free, from you 5% plus MM Fund, thus turning this into a 5% Checking with Unlimited free atm access….
And there are no receipts to mail in, you get free checks all the time, great Checkfree Bill Pay and a debit card as well….Plus Fidelity’s outstanding customer service.
This is a bad deal??? I have it now and I LOVE IT..best banking set up i ever had….