With traditional bank interest and reward checking mostly gone, and online banks cutting rates even on their savings products, it’s not a good time for the rate-chasers of the world. There are some exceptions to this, however, if you choose to do your checking with a brokerage firm.
Despite downturns in the stock markets, and low interest rates, both of which must have hurt their overall business, online brokerages still offer viable options when looking for a new checking account. Here’s a look at the three best we found, with a breakdown of their perks and shortcomings:
Fidelity’s Cash Management Account has no minimum opening or average balance, or monthly fees. It comes with a debit card, and Fidelity even reimburses customers for ATM surcharges. It offers free checks, and a mobile app that features mobile check deposit. And it even earns interest, though here the market has hit Fidelity a bit harder than others: the APY is only 0.07%.
Still, that’s better than Bank of America’s savings account, which is astonishing, so no complaints from us.
Charles Schwab‘s High Yield Investor Checking is a slightly better product than Fidelity’s, as far as interest rates are concerned. It offers 0.15% APY, requires no minimum balance, and charges no fees. And, like Fidelity’s account, it reimburses users for ATM fees they incur with the Visa debit card issued with the account. It even comes with free checks, and like Fidelity’s, iPhone and iPod apps with mobile deposit.
Last but not least, E*Trade‘s Max-Rate Checking Account offers the same rate as Charles Schwab’s checking account, but only for accounts with balances above $5,000. Below that, and you’ll earn only 0.05% APY, which again, is as good as a Bank of America savings account.
The E*Trade account requires a $100 minimum opening balance, and comes with a Visa debit card. Like the other two, it also reimburses customers for ATM fees, and gives out free checks (though only the first book is free). The E*Trade account can get pricey if it’s not closely monitored; there is a $15 a month fee for having a balance below the minimum, though no fee for accounts that maintain an average balance above $100.
All of these offer arguably better value than traditional bank savings accounts, not only because they have higher APY than both, but also because all offer ATM fee refunds – thereby circumventing the biggest problem online banks face. And they’re all FDIC insured up to $250,000, just like a regular bank account.
They have taken a substantial hit in recent years due to the Federal Reserve’s monetary policy and market conditions, which have pushed interest rates to record lows. In 2007, they boasted interest rates more than 20 times their current yield. According to this Wall Street Journal story, Fidelity offered 3.5% APY, Schwab offered 4.25% APY, and E*Trade offered 3.25% APY just three and a half years ago. Still, because their business model is so fundamentally different from big banks, brokerages have weathered the low interest rate and Dodd-Frank storm looking better than most competitors.