Update 3/23/10: The rate has fallen to 0.50% APY. Refer to the bottom of the post for the rate history.
Charles Schwab has started a new savings account called the Schwab Bank High Yield Investor Savings. The yield as of 2/27/09 is 2.00% APY which is a little low for online savings accounts, but it has some features which may be appealing to certain people. Like the High Yield Investor Checking Account, this savings account has the following features:
- no minimum balance requirements and no monthly fees
- ATM fees reimbursed worldwide
- FDIC insured
- Provides an Electronic Funds Transfer (EFT) service for initiating ACH transfers to and from other institutions. An EFT form is required to set up a link. Once the link is set up, you have to call by phone to initiate the transfer.
There are some important differences between the checking and savings. Unlike the checking account, the savings account has:
- no check writing or online bill pay
- a limit of 6 non-ATM withdrawals (as required by regulation)
- no requirement that you must also have the brokerage account
Even though you can open this without a brokerage account, you'll probably want one. The brokerage account gives you the capability of using Schwab's MoneyLink service to initiate ACH transfers to and from other institutions. Readers have mentioned that MoneyLink transfers are fast. The MoneyLink online service appears much more convenient than the EFT service.
The current 2% APY is a little low compared to other online savings account rates. Schwab may have set it a little low with the intention of keeping it at 2% for a while even as rates continue to fall. However, Schwab High Yield Investor Checking Account doesn't have the best history of competitive rates. For much of last year, the checking account rate was only 2%, and it has been at 1% since mid January. So if you don't already have a Schwab account, this new savings account alone isn't that great. For those who already have the checking account, this savings account can make a good addition by providing a boost in your interest rate for the money that you don't immediately need to pay bills.
With the mixing of bank accounts and brokerages, it's becoming confusing to understand what's covered under FDIC. Money held in this High Yield Investor Savings 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.
My past reviews of Charles Schwab products:
- Charles Schwab High Yield Investor Checking Account review
- Charles Schwab Visa 2% Cash Back Credit Card
- Brokerage CDs at Charles Schwab
Thanks to the reader who commented on this new account in the Daily News & Deals post.
03/23/10: 0.50% APY
02/04/10: 0.75% APY
08/18/09: 1.05% APY
06/13/09: 1.35% APY
04/28/09: 1.75% APY
02/27/09: 2.00% APY