Schwab’s New 4.25% APY Checking Account

Going after 'lazy money' with 4.25% checking
By Jon Birger, Fortune Magazine senior writer
April 26 2007: 4:33 PM EDT
NEW YORK (Fortune) -- When Charles Schwab Corp. unveiled its new high-yield checking account Thursday, the most startling feature was its yield: 4.25 percent. With the average interest-checking account now yielding only 2 percent, you wouldn't think Schwab would have to double that to make a splash....The Schwab account includes free checking, free online bill-paying and free rebates on any ATM fees customers incur worldwide. While there are other checking accounts offering high yields - ING Direct has one with a 4 percent yield, and E-Trade's yields 3.25 percent - most have strings. ING's, for example, doesn't offer conventional paper checks, while E-Trade's has a $5,000 minimum account balance. Schwab's, on the other hand, is pretty straightforward.

The new checking account is clearly intended to attract new clients, something that's been a problem for Schwab of late. Even as Schwab's total client assets rose 18 percent last year, new-client assets increased only 4 percent. And the total number of active Schwab brokerage accounts actually fell, from 7 million to 6.7 million.

Each Schwab checking account will be automatically be linked to a brokerage account, into which customers can transfer funds in order to buy or sell stocks, bonds or mutual funds. Those who sign up for checking won't be required to trade, but Schwab still believes the account will serve as a gateway into the other brokerage and banking products Schwab markets.

"We wouldn't have offered it otherwise," Schwab said.


Read the full article here:

The catch that is not metioned in this article is the $1000 minimum balance.  However, this minimum is waved if you open a Schwab One brokerage account.  This account is definately something to consider if you travel a lot or use ATMs for convenience without going out of your way to use a no-fee ATM.  The ATM fees are rebated to you in one lump sum at the end of every statement period.  Schwab reserves the right to suspend said rebates at any time (of course).

I HIGHLY recommend that everyone move their money into higher yeild accounts so that as little of their money as possible is sitting making trivial interest (or worst no interest).

I personally use Citi Bank's e-Savings account which is earning 4.50% without monthly fees if you have an EZ Checking or better account with Citi.  You also own ThankYou network points which helps those already earning points with a Citi Credit Card.

Limitations with e-Savings is that it is offered exclusively online.  You cannot apply for it in a branch.  Additionally, while you can access your e-Savings balance from any Citi ATM without fees, you will be charged fees for using another bank's ATM.  On the plus side all 7-11 ATMs carry no fees for Citi card holders so there's almost always one near by.  If you use your Citi CheckCard or POS card, keep in mind the money is drawn from your CHECKING account not your e-Savings account and overdrawing on your Checking account can initiate fees.