September 19, 2019

How Brokerage Checking Accounts Compare to Normal Checking Accounts

Brokerage AccountsEverybody wants your money, but thankfully most places like banks and credit unions want it in a manner that will benefit both themselves and you. And so far this financial system seems to be working, as both parties are happy and profiting. Now brokerage firms want in on the action and they are offering sweet incentives to lure people away from the traditional options. To compete with banks and other institutions they are providing things like free checking accounts, ability to pay bills online, cutting edge mobile banking apps for smartphones and tablets, and ATM withdrawal reimbursements. But is it worth investing in a brokerage checking account?

The Advantages

Just like banks, brokerage firms can offer Federal Deposit Insurance Corp coverage of up to $250,000 per checking account. Brokerages also have less overhead expenses to deal with, meaning they have more resources to put towards creative and effective advancements in their system of operations. One of the biggest incentives is being able to have a checking account free of charge, something which most normal banks cannot offer anymore. The fee structures and balance requirements that come with brokerage accounts are also very competitive with those of banks and credit unions.

The Disadvantages

The downside is that brokerage firms, as of now, have no interest in being exactly like your normal bank. This means that there can be delays in clearing and less flexibility in checking. And apart from the free checking account, most brokerages are not offering any other kinds of banking services. Many may have an absence of bank checks, safety deposit boxes, foreign currency exchange, and other things like free notary services. Brokerages are more of a place for you to invest your money than a place for constant deposits and withdrawals, and in that aspect they may be more like a money market account.

Other Aspects to Consider

Here are four other very important factors to think about when you are deciding on a brokerage versus a bank:

  • Access to cash – Something that every consumer should be concerned about is the availability of free Automatic Teller Machine (ATM) access. No one wants to be charged a fee every time they need to get some cash out. Some brokerages do offer free ATM reimbursements, but others may not be as lenient.
  • Extra fees – Brokerages have many of the same fees that regular banks have, such as charges for going under the minimum balance requirement or accidentally spending more than you have (overdraft). Wire transfer fees and fees for writing too many checks in a month are other charges that most people don’t think about. Make sure you read through the fine print of the terms and conditions and that you understand everything concerning fees and the fee schedule.
  • Helpful customer service – As mentioned before, brokerages aren’t trying to be your day-to-day banking alternative, and so the quality of their customer service is certainly something you will want to look into before investing anywhere. One way to scope things out is to call the toll free number a couple of times in a week to see how long it takes them to respond and how helpful they are with your questions. Also check out their website on the Internet to see how easy it is to navigate and what sorts of online options they offer, such as 24/7 assistance and online bill pay.
  • Brokerage Checking AccountsPayment of interest – The level of interest you’ll be getting on your account is definitely another aspect you should look into. Many free brokerage checking accounts come with a tiered system of interest, with the higher rates being reserved for those who can afford the high yield accounts and their higher minimum requirements. One benefit that brokerages have which banks don’t is the ability to offer tax-free money market funds. These are a great way to earn straight interest and profit.