Is Schwab screwing you?

Once upon a time I used to have the cash in our accounts automatically swept into Schwab’s Money Market fund (SWVXX) while idle. That fund is now paying 4.38%. Some time ago, and I do not know when, they stopped doing that, replacing the sweep with an ultra-low interest repository paying a mere 0.44%.

The Wall Street Journal has the story in today’s edition:

As opposed to an endless bond ladder, I have a whole bunch of short term notes coming due in the next month of two, in addition to several which paid out in January. I picked this time to have actual cash “cash” because I thought it would be a better time to know whether the Fed was going to reach its “goal” and what the market reaction might be. (It’s not yet, but that’s not the point.)

Anyway, when I went to move the cash into SWVXX I was confronted with “ Schwab has eliminated sweep money market funds as a cash feature for most new and existing accounts. Limited accounts and account types may be eligible to have …” when using the Schwab app. It wouldn’t even let me move the money manually.

After getting a little huffy, I went in to the accounts on the web browser rather than the app, and sure enough, easy to move it and get 10-times the interest.

The journal details that Schwab (*and others) now make 30% of their income on giving you nothing and reaping the difference themselves.

Sneaky, and altogether crappy business practice, I’ll say. Don’t be lazy, check your brokerage account and see what they’re doing with your “cash”.


Or you can use Vanguard as your brokerage. Uninvested cash is automatically swept into the Vanguard Federal Money Market Fund. Vanguard money market funds yield more than the competition due to the rock bottom expense ratios.


I could, but I have some peculiar circumstances that make it better to have a brokerage with a local office. Although I do 99% of my finances online, that last 1% is very important to me. (Involves a family member.)

I just checked some of our accounts and (so far) Vanguard and Fidelity have not done this dastardly thing. I broked with Schwab 40 years ago and left them for some reason at the time. This would be a very good reason to leave them right now*.

Fidelity has local offices in various places. Maybe there’s one near you?

* I automatically expect to be ripped off by the fancy wall street firms (Morgan Stanley, Merrill Lynch, etc), but I do not expect it from those who started as discount brokerages (Schwab, Fidelity, etc). I just recently yanked an entire account from Merrill because I happened to notice that they stated charging me a monthly fee … despite them having promised me years ago to never do that. Goodbye Merrill.

All I care about is you can get the S word in the title or subject line but not in the body of a post. How many times have I started to say the S word and been rebuffed? Countless.

Just to comment on MarkR’s Fidelity comment:

I too have a couple Fidelity accounts, but they’re very small and I watch them closely after they screwed up BIG TIME: I showed up at their office to drop off a check for around $70k, got a receipt and left. Turns out… they actually deposited it in someone else’s account. After I “expressed my displeasure” upon examining my account at home a couple days later, they tranferred the money back to me… BUT THEY KEPT ME FROM ACCESSING MY MONEY for a few days. They had the money…but delayed my access anyway. Policy. Infuriating.

Why am I still there? Dunno… stupidity, I guess. But there’s very little money there any more. Barely $10k.

He is no fool who gives what he cannot keep to gain what he cannot lose.

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That is probably because a money market fund that was widely used, the Reserve Primary Fund, broke the buck and people lost money. So, to cover their own rear, if not to comply with a new Federal reg, made insured bank deposits the default sweep account.

I didn’t lose any money in the Reserve Primary Fund, because I had noticed the sketchy stuff they held a year before they collapsed, and moved my loot into an insured bank deposit alternative.


Just made the same discovery. It was a bit shocking. And at first it wouldn’t let me use those funds, but a couple of days later I managed to spend half of it. Of course, our Roth accounts have been sold about three time now (Datek, TDAmeritrade, and now Schwab).

I just asked the lady at Schwab. Apparently you can’t buy SWVXX with a phone. I had trouble with my iPad, but eventually got some of it through. Use a desktop, apparently; don’t know why.

I was on a desktop the whole time. Anyhow, thanks for the explanation, everyone.

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I also have TDAmeritrade and have not been moved to Schwab yet - Have you actually been moved? How did the transition go? Any glitches? I’ve been from E-Trade to Scott to TDAmeritrade and soon to Schwab.


The move seems to be happening in bits and pieces. I’m still logging into TDAmeritrade, but its characteristics are slowly evolving.

What characteristics have changed? I have noticed no changes to my accounts at this point.

I talked to my friend at Schwab, she says the full integration will take the rest of the year, she doesn’t know why. So it will come in drips and drabs apparently.

I also spent some time on their 800 number this morning; he figured out how to get the SWVXX bought. Quite a kludge, but it’s done. I have the cynical view that they don’t want people doing that because it’s more profitable for them if they don’t. Disappointing.