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.
Banking Deal: Earn 1.75% APY on an FDIC-insured money market account at CIT Bank.
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.
Updated June 22, 2016 and originally published August 6, 2007.