Online brokers are mostly used to buy and sell stocks and other types of investments, but they are also a good option for your checking account.
Some online brokers offer checking accounts that include free checking, mobile banking, online bill pay, or unlimited chargeback ATM access.
What is a broker checking account?
A broker checking account is a checking account offered by a broker. Many brokers offer these accounts, usually sending your funds to a FDIC-licensed bank. (FDIC) Insured.
Brokerage checking accounts have similar features to bank checking accounts, but they may have additional benefits that standard checking accounts may not offer, such as:
- ATM withdrawal fee reimbursement
- No foreign transaction fees
- free check
The standard deposit insurance limit for your checking account with the city’s FDIC member banks is $250,000 per depositor, per FDIC-insured bank and property class. Options such as adding another depositor to your personal account can increase your FDIC coverage.
However, some broker checking accounts make it easier to get additional FDIC insurance by transferring your uninvested cash balances to other FDIC member banks — especially if you’re the only person listed on the checking account. Make sure you understand where your money is going and how to insure.
Pros and Cons of Brokerage Checking Accounts
Here are some of the pros and cons of a brokerage checking account.
- Brokers generally do not have minimum balance requirements.
- You can be reimbursed for using ATMs from different banks.
- Broker checking accounts may offer free checking.
- Some accounts may work with more than one FDIC bank to provide additional insurance coverage.
- Brokers tend to offer lower annualized returns (APY) on savings, money market, and interest checking accounts than the best online banks.
- Brokers often don’t have cash handlers in brick-and-mortar stores.
- Brokerage accounts do not offer all the services that traditional banks offer.
- Brokers may not offer other products such as mortgages and other loans.
- Brokerage firms may not have weekend or evening hours of operation.
How to Choose a Broker Checking Account
Free ATM access, ATM fee reimbursement, and no monthly fees should be on your checking account must-have list. Free checks and debit cards are also standard amenities. Mobile deposits are another feature your broker checking account should have.
Your ability to buy and sell stocks directly from your broker checking account varies from broker to broker. For example, if you open a High Yield Investor Current Account with Charles Schwab, a Securities Account is automatically opened. The two are linked, but you don’t actually make transactions from a checking account.
But with Fidelity’s Cash Management Account, you can trade and bank from the same account.
Greg McBride, chief financial analyst at Bankrate and CFA, says it’s convenient to have your reviews under the same roof as your wealth. Scanning your account allows you to quickly invest your funds instead of transferring them.
But there are some caveats. If a small amount of money means your broker checking account isn’t free, look around. McBride said it makes more sense to extend the wider network to credit unions, online banking and community bank accounts.
Comparing brokerage checking accounts
Here’s a rundown of some of the best brokerage checking accounts offered:
|BROKERAGE||MONTHLY MAINTENANCE FEE||ATM FEES||DEBIT CARD||CHECKS|
|Fidelity (cash management account)||None||Reimbursed for any ATM charges in the U.S.||Visa debit card is available||Free standard checks|
|Schwab Bank (high-yield investor checking account)||None||Unlimited fee rebates at ATMs worldwide||Schwab Bank Visa Platinum debit card is available||Free standard checks|
|TD Ameritrade (cash management account)||None||Reimbursed for any ATM charges in the U.S.||Visa debit card is available||Free standard checks|
Is a Broker Checking Account Right for You?
A broker checking account can be a great way to save money. But sometimes it’s wiser to keep checking and brokerage accounts separate, says Timothy Kenney, a board-certified financial planner at Seawise Financial in Cardiff, Calif.
“This is especially true for people who like to trade stocks,” Kenney said. “If you have three to six months’ worth of emergency funds in your savings account at the bank, it’s easier to mentally split it into an emergency fund and you can ignore it. When those three to six months’ worth of savings go into When you have a brokerage account and you follow Tesla stock, it can be very easy to use it for things that are not intended to be used.”
Those looking to use a brokerage checking account for high savings returns may find a savings account or a money market account a better option. CDs can also give you higher returns when it comes to long-term savings.
“It’s not worth building up money in a checking account,” McBride said. “There are better returns when you use your money more efficiently in other savings accounts and investment products. The appeal of a checking account is its convenience, especially when it can be done without balance requirements or ongoing fees. when doing so.”
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