Schwab Removes U.S. Stock, ETF and Options Commissions

https://pressroom.aboutschwab.com/press-release/corporate-and-financial-news/conjunction-chuck-schwabs-new-book-invested-schwab-remove

by lxm • 7 years ago

274 275 7 years ago

pressroom.aboutschwab.com

sjg0074• 7 years ago

So do they front run then?

mieseratte2• 7 years ago

Of course not! They just sell your data to the people who do.

Lazare6• 7 years ago

If you have no idea what you're talking about, why even comment?

They don't sell the data, they sell the orders, and the people that buy the orders and execute them aren't front-running them either. You can only front-run an informed trade, and the entire reason they're buying the orders is because they're uniformed.

Nobody is front running some guy day trading AAPL on their lunch break. Not just because it's illegal and easy to catch (although it is both of those), but because it's mathmatically not even possible. If your trade is not, on its own, meaningfully moving the share price, you can't be front run.

lbotos3• 7 years ago

They use Payment for Order Flow: https://en.wikipedia.org/wiki/Payment_for_order_flow

(Just like Robinhood - https://support.robinhood.com/hc/en-us/articles/360001400766...)

devicetray0• 7 years ago

Could you break this down for me? As a small-time investor, how much am I getting screwed when I use say, Robinhood?

sjg0074• 7 years ago

So what is payment order flow at the ELI5 level? If I sell at a limit $10, what happens? If I buy at $10, what happens? Does that make me uninformed? Does someone buy my order and fill it because they have stock at 9.99 ? Is this a function of level 1 vs level 2 quotes or ?

cpwright• 7 years ago

The largest amount of revenue comes from the interest spread on cash balances that people have in their accounts.

Lazare6• 7 years ago

Of course not. That's 1) deeply illegal and 2) wouldn't even be profitable.

Edit: I love how I'm getting downvoted for stating the truth. Nothing gets people with no knowledge of financial markets as irrationally excited as HFT and payment for order flow.

tptacek5• 7 years ago

I think you're pretty much completely on the right side of this and your other comments on this thread have been really strong, but this comment would be much stronger without the coda about downvoting, which (1) contravenes a guideline on the site and (2) really just invites spite voting.

Fomite3• 7 years ago

They make most of their money from interest on parked cash (they also offer managed portfolios and the like, but I've never felt the need).

turk73• 7 years ago

Paypal's original patented business plan was to do this, too.

natvert• 7 years ago

Feeling the competition from Robinhood app?

evancox100• 7 years ago

Commissions were only 7% of Schwab’s revenue. The real money is in 1) net interest on money in settlement funds, and 2) payment for order flow. For details see e.g. Matt Levine’s most recent news letter.

mikeg8• 7 years ago

“Only” 7%... that is definitely real money and they would have probably preferred to keep it coming in

wnissen• 7 years ago

For those not up on Matt Levine or where to find his newsletter: https://www.bloomberg.com/opinion/articles/2019-10-02/the-tr...

tptacek5• 7 years ago

Are we sure the PFOF money was as material as the commissions were? Are we sure PFOF is really how Robinhood makes their money? There are other weird side hustles that e.g. make Robinhood money based on how many of their users hold and trade meme stocks, for which they collect short lending fees.

patio113• 7 years ago

Schwab discloses their PFoF in their annual reports. It is 1.4% of their annual revenue. Page 31 of their 2018 10-k or, if you want a search string, Ctrl-F for "Order flow revenue was $139 million during 2018, $114 million for 2017, and $103 million in 2016. "

brobinson• 7 years ago

And Interactive Brokers' new "Lite" version.

oplav• 7 years ago

E*Trade and Ameritrade followed suit:

https://techcrunch.com/2019/10/02/robinhood-e-trade-schwab-a...

tmaly2• 7 years ago

E*Trade got a bailout from Citadel back during the mortgage crisis in exchange for selling order flow.

mortehu• 7 years ago

Most retail brokerages do this, and the information is regularly made public by law.

https://www.schwab.com/public/schwab/nn/legal_compliance/imp... shows that Schwab sends less than 1% of orders to exchanges.

mixmastamyk2• 7 years ago

Schwab is an ethical company, in stark contrast to most banks and other financial institutions, that view their customers as revenue opportunities to be harnessed for maximum profits. Happy customer for years.

anon1m0us3• 7 years ago

I was a happy customer for a long time until they broke their web interface to the point I couldn't use it anymore. I tried everything. Finally I tracked down the bug to a particular line of javascript, emailed customer support with exact instructions how to fix it.

They did nothing. Never fixed it, so I had to move to another broker that had working software.

saryant2• 7 years ago

I had that same problem (pointed out a stale cookie issue that prevented me from logging in). They fixed it and tossed $50 in my account.

slg• 7 years ago

They also used to truncate passwords at 8 characters without making that clear to the user. If you are someone who uses a passphrase you might have set your password to "PasswordCorrectHorseBatteryStaple" and entered that whenever you logged in, but anyone could access your account by just entering "Password". I tried on multiple occasions to be escalated to or referred to someone who would care, but no luck.

kevindong• 7 years ago

I've found that their website does just randomly break in a browser occasionally (like several times a year). As in, I will not be able to load even their homepage. It'll generally resolve itself within a few hours and in the interim, the iOS app works fine.

Definitely concerning though.

gargoyl• 7 years ago

Yeah, I still like Schwab, but their web interface has gotten much worse. Until about a year ago, it was spartan and blazing fast. For getting things done, it was way better than any other bank or brokerage website I'd seen. Then they moved to an AJAX laden monstrosity that makes a million requests to render a single page. It's slow and clunky, and in some browsers it doesn't work at all.

therealrootuser5• 7 years ago

I don't know that I personally would use the adjective "ethical" to describe Schwab---that word can be taken so many different ways.

They are certainly a much better company to do business with than, say, Wells Fargo, and have largely avoided being completely terrible. Of course there was that nasty fiasco with the YieldPlus fund a few years ago...

mixmastamyk2• 7 years ago

Perhaps customer-oriented is closer to what I was thinking. Turns out you can also make good profits taking good care of them.

loeg8• 7 years ago

They're certainly one of the two best for-profit brokerages (the other being Fidelity). Vanguard is inherently customer-focused, unlike the for-profits. Schwab and Fidelity are great today, but a future CEO/board could come in and decide to squeeze customers, and then you're somewhat stuck. Moving funds is difficult and if ERs are bumped, you have to balance taking a capital gain against the ongoing ER cost.

astura2• 7 years ago

I've never had difficulty moving ETFs between brokerages.

vonmoltke• 7 years ago

Vanguard is inherently customer-focused, unlike the for-profits.

Vanguard is for-profit; it's just that every investor in a Vanguard fund is a part owner.

maliker• 7 years ago

Probably a good time to mention this* excellent piece on how they make money.

In short: it’s interest on cash deposits. Not payment for order flow.

* https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...

prostoalex• 7 years ago

To be fair to Schwab, they keep advertising SWVXX on sign-in page, which yields 2.02%, but getting in/out does take a day to settle.

dehrmann• 7 years ago

1) this doesn't affect settlement times (which are another scam the industry pulls) 2) that's a mutual fund, so it just works differently.

Fomite3• 7 years ago

And they've done a good job convincing me to park my cash there - they're also a convenient and responsive bank.

H8crilA2• 7 years ago

And probably also a lot on short fees on the securities they lend out. Cheap brokers lend out the securities you own to short sellers, short sellers have to pay interest for such privilege (there's essentially an OTC market for the % rate). Note that this is not much different from earning interest on lending out cash.

Respectable brokers pass at least some of the short fees to the investor. Interactive Brokers, which I use, pays back around 50%.

gibybo• 7 years ago

This only applies if you have a margin account, right?

PhantomGremlin• 7 years ago

And probably also a lot on short fees on the securities they lend out.

That depends on the actual security.

Currently at Schwab it is free to short a very liquid stock or ETF, because Schwab has access to a very large supply. Which means Schwab only passes along a very de minimis amount to the lender. I assume they eat this amount out of their commission.

They do of course charge appropriate fees for hard-to-borrow stocks. Every stock has a different fee.

This will probably change once Schwab stops charging commissions. Their fine print on that announcement says "Stock Borrow fees still apply". So those fees will apply to more/all stocks going forward?

southerndrift3• 7 years ago

Does this mean that using those brokers means that I 'nakedly' own those shares? I.e. if I actually pick a successful share and the price explodes, the shorter or the broker cannot buy it back and I end up owning nothing?

With all the people shorting Tesla, who will own Tesla if Tesla succeeds and the price explodes?

js2• 7 years ago

If you want to recover the interest spread on Treasury MM funds for yourself, Fidelity makes it trivial to buy 4-week Treasury bills[1] which auto roll (repurchase at maturity). Interest is state income tax free and Treasuries are the safest place you can park cash.

1. Any duration offered of course. You can do this at Schwab and Vanguard too with varying degrees of ease and convenience. https://thefinancebuff.com/treasury-bills-cd-money-market.ht...

ethbro• 7 years ago

This blew my mind when I discovered it.

It's essentially a "literally get the best (short term, stable) for your savings, always."

And it's cash-equivalent, so can be purchased and held in any cash management Fidelity account.

The only caveat I've found is that the online tools for interacting with orders can be a bit hit or miss. But just calling into their fixed income desk will get someone to do what you need ASAP. And that you have to schedule buys on Treasury's schedule. (Thursdays, so enter orders on Wednesdays, I think?)

But past that, just setting up several non-overlapping auto-buys is a great way to get good interest on a < 2 week liquid account.

And say to hell with all those "reward checking" criteria.

yskchu• 7 years ago

Probably a good time to mention this* excellent piece on how they make money.
In short: it’s interest on cash deposits. Not payment for order flow.

Are you sure Schwab don't sell order flow?

"Order flow revenue was $139 million during 2018, $114 million for 2017, and $103 million in 2016."

https://content.schwab.com/web/retail/public/about-schwab/sc...

The one broker that is clear that that doesn't sell order flow is Interactive Brokers

kelnos3• 7 years ago

The point is that while of course they do make money from order flow, it's usually actually a small part of their revenue. Most of the revenue comes from interest on cash deposits (and other things), so even dropping trade commissions to zero won't materially reduce their profits.

Schwab's total 2018 revenue was over $10B; I expect they're more worried about losing potential and existing customers to the likes of RobinHood than they are about 1% of that revenue.

justinzollars• 7 years ago

This is great news for small investors like me. I like to constantly buy, but the etrade fees were cutting into my margins. Their numerous tax integrations kept me attached to the platform. I won't be moving to RH

dbiue94894• 7 years ago

For an unsophisticated rube investor (not trader) like myself, who wants to put a little bit of every paycheck into equities, RH is a superior product.I can wake up the morning my paycheck posts, transfer funds, and buy a couple of shares in seconds using my phone/tablet while I am in bed. Clean, simple, easy.

I looked into other products, but felt that none of them addressed my particular use case. Felt like they were designed for someone very different than myself. Anyway, if there is some good alternative I don't know about (which is extremely likely), please suggest.

saryant2• 7 years ago

Plain old mutual funds. You can buy Vanguard funds fee-free from Vanguard in whatever dollar amount you like. Been that way for decades.

therealrootuser5• 7 years ago

Just this morning when I woke up, I opened the Vanguard app, bought some shares of VTI, then got out of bed and went on with my day. You can do the same exact thing with the Schwab app (I have accounts at both).

One reason I dislike Robinhood is that it seems to encourage speculative trading behavior as opposed to a proven long-term investment strategies. I don't care about free commissions much, because the only equities that I care about (index fund ETFs) are already available for free. I don't care at all about buying individual stocks. I don't care about buying cryptocurrencies either. And I don't care about cash management (y'know Robinhood, I have a real bank account that is actually FDIC insured, unlike the half-baked "savings" accounts you tried to sell us on) So for me, I actually greatly prefer using a more traditional brokerage that offers me exactly what I want and has a proven track record.

novok• 7 years ago

Schwab makes it even easier if your paycheck goes into their bank account. You don't even have to wait for a transfer :)

I don't like their cash balance for their robo-investor. But then again most "robo-investors" are 100-500 line python lambda scripts that run on timer if a hypothetical trading api module existed

neilv• 7 years ago

For Bogle-style[1][2] total-market low-ER index investing, free trades of ETFs is nice -- slightly more of each purchase goes towards shares, and that compounds, over a few decades.

I happen to be married to Fidelity already. Their great support, even when I've been poor, means that I'll show some loyalty if I'm ever rich. But it's nice to know that Schwab, Vanguard, TD Ameritrade, etc. are also out there for people.

[1] https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investment_...

[2] https://www.bogleheads.org/wiki/Charles_Schwab

Fomite3• 7 years ago

I'll say that I've been with Schwab since I was...15 or so...and they've always treated me like a customer who mattered.

taurath• 7 years ago

I can call at 2am PST and get a nice british support rep in about 1.5 rings. They’ve never given me a reason to think about leaving.

rurp• 7 years ago

I recently created an account with Schwab after trying and failing to setup one at Fidelity. For some reason that I could never get a clear answer on, every single transfer I scheduled from my regular bank failed. This has never happened with any other institution and Fidelity's support was absolutely no help.

I finally gave up and asked them to close my account and was told a flat "No, that's not possible". I went back and forth with support on this for a while and was consistently told that it's literally impossible to close an account, even at a direct customer request for an account that has never held any funds. Overall it was a very poor experience with a lot of wasted time.

Schwab on the other hand made it quick and painless to setup and fund an account, and so far I have had nothing but good experiences.

anon1m0us3• 7 years ago

This is actually making me consider investing again.

Scoundreller3• 7 years ago

What are you doing now?

anon1m0us3• 7 years ago

Cash and real estate. I realized after all the investing and while I did beat the market, I realized if I invested in myself I could get 1000x returns rather than 1.10x returns.

So I got out of the market, started a bunch of different businesses. A couple stuck and now I'm working on another one that will need a lot of cash in the near future, so that's where I leave it.

arthurcolle4• 7 years ago

Innovation! Are they selling order flow like Robinhood?

adrr2• 7 years ago

Why does it matter if a broker is selling order flow?

arthurcolle4• 7 years ago

Aren't "hackers" interested in underlying implementations?

This is Hacker News after all!

pgwhalen• 7 years ago

Every broker sells orderflow, so yes.

Havoc• 7 years ago

Every broker sells orderflow

Nope

IB does not sell its order flow to another broker to handle and route.

https://gdcdyn.interactivebrokers.com/Universal/servlet/Regi...

vincentmarle• 7 years ago

Does Schwab allow you to buy fractional shares? That's the only reason why I'm not using Robinhood.

zigzaggy3• 7 years ago

Wait, you can buy fractional shares on RH??

skinnymuch• 7 years ago

I read it as OP is looking for that. RH lacks it.

tmaly2• 7 years ago

IB offers fractional shares.

danbrooks• 7 years ago

Yes, Schwab does allow fractional shares.

jboydyhacker6• 7 years ago

There is no such thing as a free lunch. Marketing trades either by Schwab or others is extremely misleading since Schwab is one of the brokers that sells your order flow.

What's better- paying $5 bucks to trade or losing a % of your total order to someone like Citadel or routed to certain exchanges at a lesser price? If your trade size is even remotely decent in size you will lose a lot more on restricted order flow.

The SEC needs to require the disclosure of this practice because most people don't realize that in exchange for "free" they are getting nuked every single transaction all the while thinking they are skirting the system.

Like the old saying - if you look around the table and wonder who the patsy is-- you're the patsy!

zigzaggy3• 7 years ago

Which is why I always use limit orders. If I pick a price I don’t really care if someone front runs it or not. I’m getting it for my target price so everyone’s happy.

perl4ever4• 7 years ago

The problem is the vast majority of people have essentially no sense of what they should pay other than the current price. You could ban market orders, but that doesn't completely solve the problem of not having an objective yardstick.

cheriot• 7 years ago

Are there empirical estimates for how trades routed through Citadel and other intermediaries differ from trading directly on the exchange?

I've read elsewhere that a large volume of small trades lets them sell to large entities the ability to avoid all the HFT players. It's less about making money on the small trades.

thedufer3• 7 years ago

I'm not sure what kind of differences you're asking about, but they're required to give at least as good of a price as the exchange is offering, and in many cases they give a better price

tptacek5• 7 years ago

Citadel wants your orders because they can safely quote you lower prices, since you’re retail and not Vanguard unloading a position that will blow through every price on the book and leave them holding the bag. So this complaint doesn’t make a lot of sense.

anonu• 7 years ago

Payment for order flow (pfof) is demininis revenue for both sides.

Look at Schwab's income statement: pfof is less than 1 percent of it's $5bn 2018 revenue. On the other side, the traders or internalizers, they must pay to buy this order flow and it's a competitive landscape. The money they make on the flow barely covers what they pay for it. Markets have become very efficient.

My sources: Schwab annual report. Also I used to internalize trades at a big bank. I still know some people at the big shops who still do it.

jboydyhacker6• 7 years ago

Right they make all their money on margin. Most people are not trading a lot- but if you do- you will get fleeced- especially with any kind of a complex order.

fancyfish• 7 years ago

The rumor that the investor is getting fleeced has been debunked, and on the contrary, the investor is potentially getting better execution and price than otherwise. Schwab, Robinhood et al are registered brokers subject to Regulation NMS and have a duty to seek the best execution reasonably available for customer orders.

Your order is not changed, and no HFT is paying Schwab to be able to execute at worse than the publicly quoted price.

Schwab is heavily regulated as a broker and required to execute your trade at at least the National Best Bid and Offer (NBBO).

[https://www.sec.gov/reportspubs/investor-publications/invest...]

jboydyhacker6• 7 years ago

Not true. Step 1- open accounts at Schwab and then IB. Put in say a complex butterfly order at the exact same time at both brokers and see the difference in price you get. It adds up to millions pretty quick.

lordgrenville2• 7 years ago

You need to read Patrick McKenzie's (of Stripe) excellent analysis of this topic called 'How Discount Brokerages Make Money'

https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...

jboydyhacker6• 7 years ago

I've read it- It's very true profits at Schwab in aggregate are from margin loans often sitting in accounts with no activity but that doesn't have anything to do with what happens to people that trade. It's a totally different question.

Most people at Schwab are not trading a lot every month- usually their&L.

The way to properly do the analysis is run the same trades through a robinhood or a Schwab Vs IB which hardly does this nasty practice. If you have investments of any size the amount of money lost dwarfs anything in his analysis.

So while his analysis is excellent it doesn't have anything to do with the specific question at hand.

ausjke• 7 years ago

Etrade just did the same, so called competition.

besides all competitors had a really bad day on the stock market.

whalesalad6• 7 years ago

As a side note I use Schwab as a checking account and it’s incredible. Zero fees. Reimbursement of ATM fees. Easy overdraft protection from the brokerage account. I love them as a bank.

This is even more reason to love them.

I’ve used Chase, Citi, was a Simple customer for a long time... and Schwab blows all of them out of the water.

ndaiger• 7 years ago

Great customer service, too. Punch in your account number and you get a smart human immediately. No scripts.

Consultant32452• 7 years ago

I will second Schwab as an amazing bank. I would also add Fidelity as a great option in this same space. I use them now, only because my employer 401k is there and it keeps everything in one place.

axaxs• 7 years ago

Important to note: they are one of the very few banks who do reimbursement of ATM fees not just in the USA, but worldwide!

mlthoughts2018• 7 years ago

Is it really few? I’ve never had a bank that didn’t. Three university federal credit unions, then later TD Bank.

an_account• 7 years ago

Lots of smaller regional banks pay ATM fees, as they don’t want to run their own fleet of ATMs. And they have local branches when you need it, like for a cashiers check.

arcticbull5• 7 years ago

HSBC premier does too.

whitepoplar4• 7 years ago

Story time: when I was fresh out of college, I deposited a check to my Schwab bank account via mobile deposit, but realized that I wasn't going to have enough time for the funds to clear before I needed to write a check from my account to my new landlord. I called Schwab customer service, not really thinking that they would do anything, but to my surprise, the banker said "Let's fix this for you!" and suggested that we conference call the counterparty check's bank to verbally confirm the funds, at which point he manually cleared the funds into my account and told me "You're good to go!" Schwab has some of the best customer service I've ever experienced, even for new (i.e. poor) grads ;)

drevil-v23• 7 years ago

That sounds pretty dubious to me. Either you deposited a check from your account held at a different bank or a check someone else gave you drawn on their account.

If it was your own account, then during the conference call you had to give out your personal information to identify yourself as the account holder at the other bank, all while the Schwab agent is listening in..

Or if it was someone else's account then that other bank's agent should never have discussed anything to do with that account with you and certainly not with some random other person (the Schwab agent) listening in.

zaroth3• 7 years ago

I don’t know if this is general policy for all accounts or if there’s some balance threshold to enable it, but these days Schwab will instantly clear up to $10,000 of checks deposited via Mobile Deposit.

If for whatever reason you don’t have overdraft protection, they will send out an email if an ACH presents which would cause an overdraft and they give you until 10:00am the next day to transfer in funds to cover it.

mbostleman• 7 years ago

I read this yesterday and was really interested in the idea. I am looking to move my small business checking account from my current bank which is the poster child for everything that is wrong with brick and mortar banks. I dug a little further in to Schwab and for business accounts, the minimum balance is $250k. Bummer.

numbers• 7 years ago

Seriously considering switching to Schwab from US Bank and USAA

loeg8• 7 years ago

USBank is awful, dump that shit. I don't have any quelms with USAA, but I happened to luck into their 2.5% everything credit card while it was still being offered and will stick with them as long as they don't discontinue that.

RandomBacon• 7 years ago

I would keep USAA, I've always had good experiences with them. They've even implemented a suggestion I had into their app (talked with customer service who said they would forward it to the appropriate team).

Also one time when I had an issue with MobileDeposit, the first person I spoke with immediately forwarded me to the right person who could see the image of the check I tried to submit and suggested I turn the check upside down and take the picture (that worked btw, the routing and account numbers were printed on the page border).

They also had Coinbase integration for several years now (fwiw).

tempsy• 7 years ago

As far as challenger banks go I’ve found SoFi Money to be really good. 1.8% APY and unlimited ATM fee rebates worldwide as well. I haven’t found anything more generous, Schwab included given the APY.

SteveNuts• 7 years ago

I'm curious, do they have an option for automated/recurring investments? Like can I set an account to purchase an ETF on a schedule?

hughes• 7 years ago

Short answer: Yes.

Long answer: You can set up automated transfers to your investing account. In order to set up automated investments, you must submit a paper form, which can trigger recurring purchases from your account's cash balance, or from direct deposit.

Spooky232• 7 years ago

Agree Schwab is an awesome bank account.

Their one and only flaw that is a killer for some is the ACH hold policy — they hold all incoming transfers for at least 4 business days in many cases.

You can get in a pickle if you don’t realize it and have a tight timeline to transfer funds at tax time or whatever.

cortesoft3• 7 years ago

As others have pointed out, you can call customer service and they can often get the hold cleared while you are on the phone. They will conference in the other bank to verify.

financethrwway• 7 years ago

There is no hold period for funds pushed to Schwab (aside from the ACH delay from the bank that is the source of the funds).

xycodex• 7 years ago

Schwab gives you a few free domestic wires a quarter I think, I ran into this situation as well which got me out of such a pickle

mountainofdeath2• 7 years ago

I only think that applies for accounts opened in the last 90 days and/or with limited assets. I have been a customer for years and have a substantial amount in my brokerage accounts with them and all my ACH transactions clear the next business day; rarely two business days.

maximente• 7 years ago

how was schwab better than simple? simple offers better checking interest by a lot, as far as i can tell; i'm tempted to switch because of that, keeping schwab for foreign ATM usage

whalesalad6• 7 years ago

I don’t use my checking account as an investment account. Yes Simple has a higher interest rate but my checking account only ever has whatever it needs to fulfill rent and bills. Everything else gets allocated elsewhere.

I’m also married so this is a joint account. Last time I checked Simple doesn’t provide joint accounts. That might have changed.

windexh8er2• 7 years ago

While I will agree that Schwab is decent I, personally, would rate them about equal with Fidelity. That being said Schwab didn't want to be in this spot, they were forced. Robinhood, Webull, etc have pushed all of them to this end game. And now ETrade and the rest are stuck with slumped stocks and have no choice but to follow suit.

mountainofdeath2• 7 years ago

Robinhood et. al. can't hold a candle to the breadth and depth of what the others offer. I will concede the simple interface is very easy for complete amateurs to get started.

StevePerkins3• 7 years ago

Similar story with Fidelity.

Honestly, I just don't understand why people bother with traditional banks at this point. Pretty much all of the major brokers offer cash management accounts that are equivalent of online banking. Pretty much all with standard:

- No fees

- No minimum balance

- Free checkwriting (usually free physical checks for that matter!)

- ATM fee reimbursement (at least anywhere in the U.S., if not internationally too)

- Free debit cards

- Direct deposit

- Deposit paper checks by taking a picture with a phone app, etc etc etc.

The only possible downside that I can think of is that I'd have to deal with a little extra hassle if I wanted a cashier's check. But even then, it would simply take an extra day or two. And it's not like I'm closing on a new home purchase all that frequently.

Nevertheless, people that I talk to get weird and SCARED when I talk about it. Even my wife keeps a separate checking account at a physical bank, because she just likes knowing that a brick-and-mortar building is there. I don't get it myself, but human nature can be odd when it comes to money.

loeg8• 7 years ago

Typically, brokerages don't give you any interest on checking. Now, banks haven't really either since 2008, but prior to that you could make a few dollars a year on checking interest.

https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone... is fascinating if you enjoy this kind of stuff.

perl4ever4• 7 years ago

Well, what if your broker goes out of business? Like, is FDIC insurance chopped liver? The head of the SIPC has stated publicly that your cash is not covered except if it is deposited to buy securities.

Your friendly broker really wants your cash, because at this point keeping most of the interest is their best source of income.

detrino2• 7 years ago

If you have bank of america you can link your bofa and merrill accounts. They even give you bonuses on your credit cards of +25/50/75% cash back for balances over 25/50/100k in assets between both.

ggm3• 7 years ago

The only possible downside that I can think of is that I'd have to deal with a little extra hassle if I wanted a cashier's check.

Almost everything wrong with consumer banking in america is contained, or stems from the ability to refer to cheque as a neccessary and normal thing in modern day finance.

I tore up my last cheque book ten years ago, I have had to resort to Western Union three times now (once a year) to send money to Her Majesties Customs and Excise for my UK pension topup, its the only thing I still do that way, and if the UK stopped using a closed-loop domestic clearing house and opened up SWIFT I'd do this via the IBAN immediately.

Cheques are cool. They're also horrendously stone age and the "yes but..." are the collected history of insanity that is american banking.

Jimmy Stewart, holding the fort at the friendly credit union on christmas day...

apexalpha• 7 years ago

This just sounds like my bank, although I'm in Europe. Why are US banks so behind?

loeg8• 7 years ago

You've described any bank worth being a customer of. Monthly fees are a huge red flag (even if you can avoid them with hoop-jumping). USAA (just for ex.) also reimburses ATM fees. I'm not a fan of "overdraft protection" in general, but maybe Schwab provides a relatively non-predatory version of it.

Citi's nickname is "shitty." I forget what put me off about Simple but in general debit cards don't enjoy the strong consumer protections that credit cards do in the US.

cortesoft3• 7 years ago

While you are technically correct, I don't think you should be so dismissive... a majority of Americans are using banks that DONT offer those things, so pointing them out is a good thing for people to hear, and to demand of the bank they use.

ac292• 7 years ago

Agreed, my credit union does all those things and pays 10x more interest than Schwab (2% vs 0.20%). That being said, its easy enough to get ~2% in a money market as well, so there's no compelling reason to keep more than a few months expenses in a checking account.

If you're with one of America's 4 largest banks (Chase, Bank of America, Citigroup, Wells Fargo), expect a bad time.

inferiorhuman2• 7 years ago

but maybe Schwab provides a relatively non-predatory version of it

They will pull from your brokerage account, if you have insufficient funds they'll take out a margin loan and I think the only fees there are interest.

ING did something similar where they'd only charge you interest for overdraft stuff.

cortesoft3• 7 years ago

Same experience for me, with some additional positive experiences when we bought our house. Had to go into a branch to wire money for escrow. Was pretty empty, and the person there was super helpful, walking me through everything and making sure I triple checked I was wiring the money to the correct place.

Great experience so far!

rcpt2• 7 years ago

One thing I love about Simple that I've never been able to do with Schwab is get notifications on every transaction in my checking account. With Simple that helped me catch some fraud immediately

whalesalad6• 7 years ago

My strong opinion is that you should not be using your debit card for anything at all whatsoever except for cash withdrawls from the ATM.

I use credit for 100% of all transactions so that there is an abstraction between my money and where I use it.

balls187• 7 years ago

Sounds like pretty much every credit union out there.

vinay4272• 7 years ago

That's simply not true. Find a credit union, for starters, that has unlimited no-fee and fee-reimbursed withdrawals from any ATM worldwide. This is better than any bank I've found in other countries I've been to or lived in.

Then find one that also has no-fee overdrafting on margin, etc.

breakerbox• 7 years ago

I can confirm Schwab banking is the real deal! No fees ever. Reimburse ALL atm fees (even those pesky international scammy ones that are like $10 a pop). Effectively wherever you are in the world, you are in network with Schwab ATM's. Used them as an exchange student all over the place.

The biggest plus IMO is if you travel a lot. You get, from what I have experienced, no currency conversion fees, and no mark up on the exchange rate. They basically give you the Visa official exchange rate which is very good!

dillondoyle• 7 years ago

Can confirm, highly recommend! I spend a few months abroad a year and get hundreds in ATM rebates and even more in forex/transaction fee value. Though I wish I got more interest on cash balances.

EDIT: the biggest benefit though is the customer service. A US based person answers with no wait time and they deal with VISA for me. So much better and I'm not even high net worth by their standards!

However I also have a 'play' Robinhood account and if Schwab can roll out a better mobile app I would 100% move those equities over.

gubby• 7 years ago

The Schwab mobile app has recently been updated (unsure exactly how recently), and it has got substantially better since I first tried it a couple years ago.

avainlakech• 7 years ago

I agree. Have been using them for years. Excellent customer service too.

MiscIdeaMaker99• 7 years ago

I've been using Charles Schwab Bank now for about 10 years, and I love it, as well. They had the reimbursement of ATM fees back then and still do, which is amazing.

User23• 7 years ago

In a similar vein, many people don’t realize that you can actually negotiate commissions with your broker. You can even negotiate margin interest rates. The higher the total value of the account the better a deal you can get. Just like cable companies, brokerages have retention incentives.

yalogin• 7 years ago

Are they competing with robinhood or are they trying to put pressure on E*TRADE and ameritrade? Why did they do this?

kelnos3• 7 years ago

Etrade and Ameritrade did end up following suit and slashed their commissions to zero as well.

But yes, I expect they're afraid of losing customers to RobinHood. Given that brokerages typically make very little on commissions (the real money comes from interest on cash deposits), dropping commission fees is probably a great move.

chrisweekly• 7 years ago

I'm a Schwab customer and concur w/ positive comments here about high-quality retail customer service, eg for relatively "normal" investors / account holders (ie, 6 figures AUM, not 7+).

But.

It's worth reading Michael Lewis's "Flash Boys: A Wall Street Revolt" [for several reasons] before nurturing too many warm-n-fuzzies for Schwab or Fidelity or any other mainstream big bank. Maybe you fellow HN readers are more aware than I was, but I'd guess when most of you hear "high-speed trading" you think about performance optimization and interesting technical challenges. It's mind-boggling how blatantly and comprehensively / systematically the financial "markets" have been captured by the interests of a tiny few, who literally steal from pension funds. To say it's rigged is an understatement. Must-read for anyone who thinks they know how Wall St works -- or cares to.

tptacek5• 7 years ago

That book is terrible. Use the search box to find numerous critiques.

harryh• 7 years ago

Read the rebuttal:

Flash Boys: Not So Fast - An Insider's Perspective on High-Frequency Trading

https://www.amazon.com/Flash-Boys-Insiders-Perspective-High-...

rdtsc• 7 years ago

Schwab is great. Been their customer for more than a decade. I use them for checking, retirement and regular investment. Highly recommend them.

jklein11• 7 years ago

I have been a Schwab customer for over 10 years. I can’t speak highly enough about their service. I wouldn’t think of using a different checking account. I have only had two issues

1. At least 5 years ago I had a 6 digit password. If I typed in my password plus some extra digits I was able to log in. That never felt right to me.

2. I had just gotten a new debit card and was traveling outside of the us. When trying to activate my debit card via there international number it wouldn’t pick up my key pad. The customer support person seemed to think it was a known issue. I couldn’t just read the number to them for some reason. It was very annoying.

Over all I have had an excellent experience with Schwab

jpeeler• 7 years ago

I thought the same thing about #1 until I read this: https://security.stackexchange.com/questions/214814/why-can-...

Perhaps/hopefully the same thing is being done with Schwab.

(As you can see from the URL, I got that link from the overflow newsletter.)

manigandham8• 7 years ago

TDAmeritrade and Etrade also announced $0 commissions in response.

Both brokers also had severe drops in their stock price, with TDA losing about 20% in a day. Seems the entire retail brokerage industry changed within 48 hours.

lentil_soup• 7 years ago

Does anyone have any recommendations for similar brokers in Europe? All the ones mentioned here seem to be mostly US targeted

patd• 7 years ago

If you're looking for cheap transactions, Degiro (EU based) or InteractiveBrokers (US based) are probably the best options.

With Degiro you can get 20€ of free commission when you sign up with a referral

patrickmcnamara• 7 years ago

Degiro has free commission on a bunch of popular ETFs as well.

cfontes• 7 years ago

I actually work on one that is trying to do it, www.getbux.com

Netherlands and Germany for now.

mariushn• 7 years ago

Revolut started to allow trading 1 month ago, but only for Metal cards customers so far. Hope others (Monese, Monzo) will follow.

aphexairlines• 7 years ago

Freetrade in the UK does this.

C1sc0cat2• 7 years ago

Interactive Investor in the UK

ajhurliman• 7 years ago

I had to re-read the title a few times; the word "Commissions" is so far away from the verb I thought they were shuttering many of their business lines at first.

SnowingXIV• 7 years ago

Another strong recommendation for Schwab. The customer service has been stellar for years. I do hope they invest more into their UI and mobile app. That's the only thing that's slightly lacking. It's usable though. I've tried Simple and other "tech" banks and they've been terrible in comparison. Simple was a disaster there was a period where people couldn't login to access their accounts multiple times over a week because of their 2FA system having issues.

You know what the response was? Sorry you're locked out, we can't do anything about it, wait a few days.

Schwab Removes U.S. Stock, ETF and Options Commissions

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