Checking Account vs. Full Service Brokerage Account

2 Mar 2008 by Chetan Shah.

More and more brokerage companies like Fidelity, Schwab etc. are offering Full Service Brokerage accounts which act like a checking account also. I.e : they enable the account holder to do ATM Cash withdrawal, write checks, bill pay, overdraft protection and even credit cards.

In addition to that most of the full service brokerage account offer very attractive interest rates for the money sitting in their checking accounts. Like as of this writing Schwab was offering 3.01% and Fidelity was offering around 3.25%.

With all this features available from a full service brokerage account, I cannot think of any reason why we need to have a regular checking account with XYZ bank which offers less than 1% interest for the cash sitting in your checking account.

Lot of people may argue that brokerage companies need a huge “minimum balance” in order to prevent monthly charges. As of this writing Fidelity needed $2500 for its The Fidelity Account and Schwab needed $0 for its Bank Checking plus Brokerage account
Another point of concern maybe the ATM fees charged by the bank who owns the ATM machine, as neither Fidelity nor Schwab has their own ATM machines. These fees are refunded by brokerage so even if ATM machine states the bank will charge you $2 as service charge, you will be refunded this amount.

As an additional benefit, having an account with a brokerage firm like Fidelity which needs $2500 as a minimum balance at any time, will force an individual to save money for their emergency needs.

Bottom line, there is no reason why the money should be sitting in a regular checking account when most of the brokerage houses are offering all the features of a regular checking account PLUS a very decent interest rate on your liquid cash.

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