Is Charles Schwab's checking account the future of banking?

Share
More
Is Charles Schwab's checking account the future of banking?

Banking is broken. It’s easy to forget how ludicrous the situation is: You’re letting the bank hold your money, but if you don’t maintain the correct balance, they’ll charge you a fee. If you want to withdraw money, but don’t do it from the right ATM, there’s a fee. If you want a paper check to actually use your money, there’s a fee. Why should the bank charge you fees for the privilege of accessing your own money?

When banks make money from account fees instead of value-added services, it’s good evidence that something is going wrong. The incentives are so misaligned that Wells Fargo created over two million fraudulent accounts in order to harvest fees from unsuspecting customers. You’d think that banks would find a better way to make money. And while they do make money in other ways, the large traditional banks seem to need to squeeze every last fee out of customers to compete with each other.

The Charles Schwab High Yield Investor Checking account, on the other hand, has no monthly fee, unlimited ATM rebates, 24/7 customer service, and no minimum balance requirements. I’ve had an account for several years, and I love it. That’s more than I could say for my accounts at Chase or Wells Fargo, which I have already closed. Let’s dive in and learn how Schwab does checking differently.

Schwab Checking: The advantages

The Charles Schwab High Yield Investor Checking account has all the benefits and flexibility of a VIP banking account, but with none of the fees, minimum balances, or extra hassles.

Unlimited ATM rebates

With a standard ATM card, if you withdraw from an out of network ATM, you’ll be charged a fee. With Schwab, these fees are automatically refunded—even when you withdraw overseas. Last year I was traveling in Japan and needed some cash. At my old bank, I would’ve been charged a hefty fee to withdraw from a local ATM. Schwab not only charged me nothing for the transaction, they even automatically refunded the ATM fee charged by the Japanese bank.

No minimum balances

Schwab has no minimum balance. Yes, you read that right. Popular checking accounts like the Wells Fargo Everyday Checking account and the Chase Total Checking charge you a fee of around $10 a month if you dip below a $1,500 balance—even for a single day. With Schwab, there are no fees regardless of how high or low your balance is. This not only gives you peace of mind, but also allows you to move money between accounts without worrying about fees.

A decent interest rate

At the time of this writing, your balances earn a 0.13% interest rate, which, by historical standards, hardly qualifies as a positive, but is actually pretty good given today’s interest rate environment. Both the Chase Total Checking accounts and the Wells Fargo Everyday Checking accounts offer a ridiculous 0% interest rate.

Amazing customer service

Last but not least is Schwab’s 24/7/365 customer service. It’s fantastic and it’s always available. You can reach a real person on the phone every hour of every day of the year, even at 5AM on Christmas morning. In addition to year-round phone support, their live chat is always open. Their customer service has always been very helpful and responsive, although you’ll likely almost never have to interact with them. With Schwab, everything just works.

Schwab Checking: The disadvantages

It’s hard to find anything I dislike about checking with Schwab, but here’s what you need to be aware of before you set up an account.

There’s only one physical bank branch

The main disadvantage of the High Yield Investor Checking account is that there is only one physical bank branch, and it’s located in Reno, Nevada. Unless you live nearby, you’ll be depositing by mail, wire transfer, or electronic deposit. Why is this?

Schwab is able to offer ATM rebates and no-fee checking because they keep their overhead costs low. Operating bank branches is expensive, and doing everything online is the price you pay for a no-fee account. If you want that personal feel of walking into a bank and talking to a teller, you’re out of luck. However, if you’re like me you’d rather do everything on your phone anyway, so I personally consider this to be an advantage.

You’ll need to open a brokerage account

One last thing. To get the checking account you are required to also open a Schwab One brokerage account. But, since it is free to open and doesn’t have to be funded, it’s really just a formality. If you don’t want to use it, you don’t have to—and having it won’t cost you anything.

Banking spotlight

Feature Charles Schwab Simple Chase Wells Fargo
No monthly fee YES YES NO NO
Free ATM use YES SOME NO NO
No min balance YES YES YES YES
Free checks YES YES NO NO
Full Service Investment Options YES NO YES YES
Physical locations NO NO YES YES

Charles Schwab High Yield Investor Checking: The verdict

The Charles Schwab High Yield Investor Checking account is the way modern banking should be. ATM rebates mean you don’t have to worry about where you withdraw your money. No minimum balance requirements mean you don’t have to religiously watch your account, and 24/7 phone and chat support means you can get customer service on your own schedule. Unlike rival accounts offered by Chase or Wells Fargo, you’ll actually earn interest on your account, and you don’t have to worry about being charged fees just for storing your money.

There are a few all-digital banking upstarts that offer similar low-to-no-cost services, such as Simple Bank. However, while Simple offers access to a large network of fee-free ATMs it doesn’t offer ATM fee reimbursement so you can withdraw your cash anywhere in the world without worry. Simple’s interest rate is also much lower, and they offer only a few options for savings instead of access to a full-scale investment portfolio.

There might be a better checking account on the market, but if there is, I haven’t heard of it. The Schwab High Yield Investor Checking account is the future of checking, and I highly recommend it.