Should You Bank at Your Brokerage?

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With bank fees continuing to frustrate consumers, some brokerages are stepping in to fill what they perceive as a need. With technology making it possible for nearly anyone to open a brokerage account and start investing, it isn’t much of a surprise that some are beginning to wonder if it might be easier to simply bank with a broker.

And, with some brokerages offering great deals to banking customers, it can be a great way to avoid bank fees, and perhaps even earn a return on the money you keep in your checking account.

Perks of Brokerage Bank Accounts

Many brokerages offer free checking accounts to investors and non-investors alike. Some of these accounts require a minimum balance, but there are plenty that don’t require any minmums at all. You can also get access to your money using a debit card. Some of the brokerages, like TD Ameritrade and Fidelity, offer ATM fee rebates so that you aren’t paying anything to access your money.

Many brokerage accounts are truly fee-free, and they also often pay an interest yield. Most of the yields on checking accounts at brokerages are fairly low, in keeping with money market rates. However, TIAA-CREF has a bank that offers 1.25% on savings accounts. In today’s climate, that’s a pretty good yield. Many of the banks even offer FDIC protection, because the banks are separate from the brokerage account.

However, even with the separation between your brokerage bank account and your brokerage investment account, it’s still often possible to easily move your money around. This set up can make it easier to fund your investment account, and it might also facilitate transfers from your investment account into the FDIC protected bank account. Check into the process, and make sure that it suits your needs, and that it won’t be too easy to get into trouble with your investment account.

As Always, Shop Around

Any time you prepare to make a change, it helps to shop around. While brokerages are working toward to expanding their banking offerings, most brokerages are still fairly limited with their banking options. You probably won’t be able to apply for a mortgage; most of the offerings are limited to basic checking and savings accounts. But that’s not a bad thing if you are looking for a safe place to keep your money while avoid fees and possibly seeing better yields.

If it’s important to you to have your investment accounts at the same institution as your bank accounts, you will want to compare more than just the banking basics. You will also want to look at your trading options and costs at the brokerage. Consider all of the fees you are likely to incur, and consider the hassle involved in switching banks. If you find that the brokerage offers reasonable trades, free checking, and high yields on savings accounts, it might be worth your while to switch. Just make sure you understand what you are doing.

Would you be willing to bank at your brokerage?

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