Major Rate Increase: Charles Schwab's High Yield Investors Checking Account

Update 5/01/09: The yield has fallen from 1.00% to 0.75% APY. Refer to the bottom of the post for the rate history.

Charles Schwab increased the yield on its High Yield Investor Checking Account from 2.01% to 3.00% APY. The yield had been 2.01% since early May. The rate bump finally gets the yield back up to a respectable level for a "high yield" account.

Schwab launched this account in April 2007 with a yield of 4.25% APY. The account is under Charles Schwab Bank which is FDIC insured. To open the checking account, you first have to open the Schwab One Brokerage Account followed by the linked Schwab Bank Investor Checking Account. The typical $1,000 minimum is waived for the brokerage account when you also open the Investor Checking account. Also, there is no fee to open and maintain the brokerage account. The accounts can be opened online, by phone or at a branch.

I provided an overview of this account in this April 2007 post. Here's a new summary of the major account features listed at Charles Schwab's Checking Page:

• no minimum balance requirements and no monthly fees
• free online bill pay
• free checks
• ATM fees reimbursed worldwide

I have not opened this account, but several readers have. The list of features below are based on comments and emails I received from readers about this accout. There have likely been changes, so please leave a comment if you have a different experience.

• Deposits cannot be made at ATMs
• 2 Equaifax hard pulls done in application (from bank and brokerage account)
• ACH transfers via MoneyLink are free and there's no limit on the number of linked accounts
• MoneyLink ACH transfers are very fast
• You can now set up direct ACH transfers to/from your Schwab Investor Checking account. You need to mail in a paper form with a voided check for each account you are linking. And you cannot request a transfer online - you need to call up Schwab to request a one time or recurring transfer.

With the mixing of bank accounts and brokerages, it's becoming confusing to understand what's covered under FDIC. Money held in this Investor Checking Account is under Charles Schwab Bank, N.A. which is FDIC insured (FDIC Certificate # 57450). However, money held in the brokerage account is under Charles Schwab & Co. which is a separate company from the bank. Brokerage products are not FDIC insured.

Thanks to the readers who mentioned this new rate increase.

Update 9/21/08: Reader provided new details about setting up ACH transfer capability directly from the checking account.

Rate History:
05/01/09: 0.75% APY
01/14/09: 1.00% APY
12/02/08: 1.50% APY
10/11/08: 2.20% APY
09/17/08: 3.00% APY
05/07/08: 2.01% APY
04/01/08: 2.26% APY
02/05/08: 3.01% APY
10/01/07: 4.00% APY
04/25/07: 4.25% APY

Tags: Charles Schwab Bank, checking account