Let me show you what kind of bank account you’re using now, and then let me show you what you are missing.
First, let’s look at a standard Bank of America (BofA) myAccess Checking Account.
- $12 monthly fee (unless you setup a monthly direct deposit or maintain a daily balance of $1,500)
- No minimum balance to open
- Earns no interest
- 18,000+ ATM
- Non-BofA ATM’s in the U.S. $2 fee (not including other fees from the ATM)
- Non-BofA ATM’s outside U.S. $5 fee (not including other fees from the ATM)
- $30 to order more checks
These features are pretty standard, and I could probably make them work for me. The occasional ATM fee was annoying. I was particularly irked when I ran out of checks and was forced to order a couple hundred new ones (for $30) when I rarely even used personal checks.
What put me over the edge was the bank’s decision to charge debit card users $5 a month. That was when I went looking for alternatives. I didn’t appreciate my bank trying to pull a fast one on me and then switching months later only after consumers protested.
What I found was a whole host of alternatives including credit unions, internet banks, and high yield reward checking accounts. As someone who values convenience and ease of use, I found credit unions to be a bit restrictive and high yield reward checking accounts to have too many requirements. I ended up settling on Schwab’s High Yield Checking Account (this is different than the high yield reward checking accounts).
Schwab is best known for its brokerage services. However, there has been a recent surge in the emergence of internet banks. These are banks that do not have physical branches. These banks save on the all the costs associated with having physical branches and pass them onto the account holders.
- $0 monthly fees
- No minimum balance to open
- Earns 0.15% APY on any balance
- Unlimited reimbursement of any ATM fees worldwide
- Free checks
- Mobile deposits of checks using my smartphone
This account earns me interest. 0.15% APY is much better than the 0% APY I was earning with BofA. Here’s a little calculator if you want to see what kind of money you’re missing out on. It may not be a lot of money, but hey, some money is better than no money at all. Later, I’ll talk about other vehicles of saving/investment that can earn you a higher interest rate.
My two favorite features are the unlimited reimbursements of any ATM fees world wide and the mobile deposits via smartphone.
I can use any ATM in the world to withdraw my money, and Schwab will reimburse me any and all fees. I could withdraw money from an ATM at a casino that charges some ridiculous fee of $8 per withdrawal, and Schwab will reimburse me that fee. I can withdraw my money across the world in Asia and Schwab will reimburse any fees I incur from the transaction. To be specific, Schwab adds up all the fees at the end of the month and they credit my account then (so its not instantaneous).
The mobile deposit feature allows me to use my iPhone to deposit checks. I simply take a picture of the back and front of the check, and the money appears in my account within a couple days (sometimes the next day). I think I mainly like this feature because its so cool, but it definitely is convenient since I still regularly receive checks.
There are two main cons to switching to an internet bank such as Schwab. One is that it is difficult to deposit cash. The only way you can directly deposit cash is to mail it to them. I don’t advise this route because your money may get lost in the mail. One option (if you need to make frequent cash deposits) is to keep or open an account that has physical branches. There’s nothing that says you cannot hold accounts with multiple banks. Then you could make cash deposit and then transfer it over to your internet bank. A second option is to give a trusted friend the cash and have them write you a check (which you can then immediately deposit via your smartphone).
The other con is that this may make transactions between you and a family member take longer. I was speaking with a friend about holding an internet bank account, and he told me that he was not looking to disincentivize his parents from sending him money in any way. Bank transfers within the same bank are often instantaneous whereas bank transfers between two different banks may take a couple days. If you’re dependent on your parents for money, you will need to keep transfer times in mind when you’re holding a bank account at another bank.
If you’re afraid of moving your money to a bank you are less familiar with the name, you should be reassured by the FDIC. Banks that are FDIC insured (including both BofA and Schwab) are guaranteed by the U.S. government up to $250,000. Hypothetically, if you had money in a bank account with Schwab (or any other FDIC insured bank) and that bank went bankrupt, the government would give you the full amount of your account as long as it is under $250,000.
Basically, unless you are moving more than $250,000, you shouldn’t worry about the safety of your deposit.
The other concern you may is customer service. Without physical branches, you cannot just drive to the bank and talk to someone about any concern you may have. The only way to speak to someone at the bank is to call them. I have called Schwab a couple times and all I can say is that they were good experiences. I did not have to wait on hold at all and the person on the other end of the line was very helpful. All of the reviews I found on the internet commented on Schwab’s overall good customer service.
If you are newly independent or will be on your own soon, now is a great time to pick a checking account. Don’t just settle for what you’re used to, you’re missing out! Pick a fantastic checking account that is convenient, offers great services/benefits, and earns you money.
Make it your choice and own it. Know what you’re getting yourself into, but also know exactly what you’re getting out of it that makes it so great (like unlimited ATM fee reimbursements).
I’ve done my research looking into the various types of accounts and the different possible banks out there. Schwab is one of the only (if not the only) to offer worldwide ATM fee reimbursement. I found the Scwhab account to have a great mix of features, interest rate, and convenience. I myself can live with the annoyance of money deposits because I don’t foresee myself having to make many cash deposits.
Right now, I still have the Bank of America checking account as a secondary account because it is still a student account that does not charge me any fees. I will most likely get rid of it after I’ve graduated. You too could have two checking accounts (although I shoot for one so it’s less of a hassle).
If someone in my family was connected with the U.S. military in someway, I probably would have heavily considered USAA, which offers similar features as Schwab.
This is a bit of a loaded post. Please comment if you have any questions or want my thoughts on why I chose Schwab over another possibility.