Why can't I get a "demand account" at Vanguard?

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Why can't I get a "demand account" at Vanguard?

Postby Bongleur » Tue Jul 23, 2013 6:30 pm

Or at any other brokerage or mutual fund company?

The only option for keeping your cash or a margin account is a Money Market account -- which is actually a loan to someone.

Such loans entail a risk which I might not want to take -- the SEC just issued some guidance on that:

U.S. SEC urges money funds to be prepared for tri-party repo defaults
http://www.reuters.com/article/2013/07/ ... 1B20130722
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Re: Why can't I get a "demand account" at Vanguard?

Postby G-Money » Tue Jul 23, 2013 6:38 pm

I don't have an answer, but if credit/default risk is a concern, why not roll T Bills? If Uncle Sam defaults . . .
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Re: Why can't I get a "demand account" at Vanguard?

Postby dbr » Tue Jul 23, 2013 6:45 pm

Umm, because Vanguard isn't a bank.

It certainly isn't hard to link your brokerage accounts to a bank account and move money electronically at will.

There are companies that include both banking and investment services. USAA is an example I know of.

In general you may not find a completely smooth interface in the form, for example, of directly depositing share sales into a checking or savings account, but that may even be possible some places.
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Re: Why can't I get a "demand account" at Vanguard?

Postby stlutz » Tue Jul 23, 2013 7:03 pm

Actually, after the Reserve money market fund broke the buck back in 2008, many brokerages switched to using FDIC-insured bank deposits instead of money market funds.
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Re: Why can't I get a "demand account" at Vanguard?

Postby BrandonBogle » Tue Jul 23, 2013 7:14 pm

My Vanguard brokerage account is linked to my Wells PMA, so I don't even have holdings in Prime MM and instead my cash and any funds to buy or sell and go through that account. Vanguard just credits or debits my demand account accordingly.
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Re: Why can't I get a "demand account" at Vanguard?

Postby dbr » Tue Jul 23, 2013 7:22 pm

BrandonBogle wrote:My Vanguard brokerage account is linked to my Wells PMA, so I don't even have holdings in Prime MM and instead my cash and any funds to buy or sell and go through that account. Vanguard just credits or debits my demand account accordingly.


Another example of a bank that also runs an investment company, and in this case there is a convenient interface with Vanguard. USBank, Citi, BoA, etc. all do the same in different flavors. Which ones a person might actually want to use as an investment company is a different question, but accounts can be linked, as we are saying. Just to make sure there is not confusion, it is certainly possible to transact in Vanguard funds and ETFs at any variety of investment companies in addition to Vanguard, and some may prefer that.
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Re: Why can't I get a "demand account" at Vanguard?

Postby Spirit Rider » Tue Jul 23, 2013 7:25 pm

You can. Fidelity has their Cash Management Account and Schwab has their High Yield Investor Checking Account. Both are FDIC accounts. However, you will not get very good interest rates.

Probably other brokerages have similar accounts.
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Re: Why can't I get a "demand account" at Vanguard?

Postby dbr » Tue Jul 23, 2013 7:37 pm

Spirit Rider wrote:You can. Fidelity has their Cash Management Account and Schwab has their High Yield Investor Checking Account. Both are FDIC accounts. However, you will not get very good interest rates.

Probably other brokerages have similar accounts.


I wonder how the OP would define a "demand" account and whether or not these accounts meet that definition. I'm not saying they do or don't. I did notice an explanation that the FDIC insurance on these accounts involves some kind of process of Fidelity placing money in real FDIC accounts at cooperating real banks that the Fidelity customer does not see directly. Not that there is anything wrong with any of this, but Fidelity is still not a bank and that has to matter somehow.
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Re: Why can't I get a "demand account" at Vanguard?

Postby Default User BR » Wed Jul 24, 2013 11:14 am

I'm not entirely sure what the OP is looking for. As far as FDIC-protected sweep accounts, Sharebuilder has the best I've seen. It's paying 0.5%, which is competitive with many online checking accounts. I don't know if it's possible to write checks or that sort of thing.

http://www.sharebuilder.com/sharebuilder/pricing-sweep-rates.aspx


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Re: Why can't I get a "demand account" at Vanguard?

Postby Spirit Rider » Wed Jul 24, 2013 11:15 am

dbr wrote:
Spirit Rider wrote:You can. Fidelity has their Cash Management Account and Schwab has their High Yield Investor Checking Account. Both are FDIC accounts. However, you will not get very good interest rates.

Probably other brokerages have similar accounts.


I wonder how the OP would define a "demand" account and whether or not these accounts meet that definition. I'm not saying they do or don't. I did notice an explanation that the FDIC insurance on these accounts involves some kind of process of Fidelity placing money in real FDIC accounts at cooperating real banks that the Fidelity customer does not see directly. Not that there is anything wrong with any of this, but Fidelity is still not a bank and that has to matter somehow.

You are right, I'm not sure exactly what the OP meant by a "demand" account. I took it to mean that the cash was not placed into a security and would be available on demand.

If you request an ACH transfer to another financial institution (such as a B&M bank) by 4:00pm ET, it will be in that account by SOB the next day. I don't know what could be more "demand" than that.

You are correct Fidelity is not a bank. The cash is swept between up to three banks and your account. This actually triples your FDIC limits. For new accounts these are the current sweep banks:

FIFTH THIRD BANK
WELLS FARGO NA
BANK OF AMERICA
CITIBANK NA
THE BANK OF NEW YORK MELLON
US BANK
GOLDMAN SACHS BANK USA

When you open your account, these banks will be automatically selected for you. However, you can optionally restrict the bank list to your preferred choices. I have not done this, but you might want to if you already have significant deposits in one or more of these banks. FDIC limits are by institution. Or maybe you just prefer not to have your money in a particular institution. Note: you do not and can not have any direct interaction with the program accounts at these banks, it is just the behind the scenes location.

I don't have to worry about this, because I use this as my active account and only keep about one month's expenses there. I have the majority of my pay direct deposited into this account. I'm not sure why, but the deposit arrives one day before pay day which is when deposits to my B&M bank and credit union arrive. This behavior was the same even when changing employers.
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Re: Why can't I get a "demand account" at Vanguard?

Postby Phineas J. Whoopee » Wed Jul 24, 2013 11:21 am

For what it's worth, Schwab runs an honest-to-goodness, real FDIC-insured bank. I happen to use it, but not because it pays high interest. I keep about a month's expenses in savings for liquidity purposes; and I use them for my primary checking account (free, interest bearing - minimal right now of course, refunds ATM withdrawal charges, no foreign transaction fee). For online access they offer a free, optional VPN token. I've been happy with their banking service.

To get access to their bank you have to open a brokerage account, but you don't have to use or fund it in any way, and there are no fees. I do not use mine.

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Re: Why can't I get a "demand account" at Vanguard?

Postby rustymutt » Wed Jul 24, 2013 11:54 am

I have minimal amounts of cash in those MM accounts at Vanguard. I keep most of our cash in short term corporate bonds, or I-bonds. The cost of those MM accounts floor me. I wish they'd design an account with debit card privileges.
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Re: Why can't I get a "demand account" at Vanguard?

Postby Bongleur » Fri Jul 26, 2013 6:59 pm

I define a demand account as an account where the money is NOT actually any sort of loan to the bank. The bank merely administers the safekeeping of my money. A bank failure will not impair my claim to the money in any manner, because the bank (and thus their creditors) has absolutely no claim upon that money.
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Re: Why can't I get a "demand account" at Vanguard?

Postby BrandonBogle » Fri Jul 26, 2013 7:11 pm

Bongleur wrote:I define a demand account as an account where the money is NOT actually any sort of loan to the bank. The bank merely administers the safekeeping of my money. A bank failure will not impair my claim to the money in any manner, because the bank (and thus their creditors) has absolutely no claim upon that money.


That's good at a high level, but keep in mind that most deposit agreements have a clause similar to this one
Additional Information Concerning Demand Deposit Accounts.
Your Demand Deposit Account consists of two subaccounts: a checking subaccount and a savings subaccount. All of the provisions of the Deposit Account Agreement apply to the Account as a whole without reference to the subaccounts, except as provided in this section.
Periodically, for internal operational reasons, we will trans- fer funds in the checking subaccount to the savings sub- account when such funds are not needed to pay Checks, Debits or other Items drawn on your Account. In determin- ing the amount of funds to be transferred to the savings subaccount, we may establish a threshold balance in the checking subaccount and transfer any funds in excess to the savings subaccount. We may also sweep the entire balance into the savings subaccount during the weekend when no Items will post to your Account. Checks, Debits and other Items will be paid from the balance in the checking subac- count. If the total amount of Checks, Debits and other Items presented for payment exceeds the balance in the checking subaccount, sufficient funds will be transferred from the savings subaccount to the checking subaccount to bring the balance in the checking subaccount back up to the threshold balance. These transfers to and from the savings account will be the only transactions on the savings subaccount. In accordance with Regulation D of the Board of Governors of the Federal Reserve System, no more than six transfers per calendar month will be made from the savings subaccount. If a sixth transfer is made, all funds in the savings subaccount will be transferred to the checking subaccount for the remainder of the calendar month. At the end of the month, we will transfer funds in excess of the threshold balance from the checking subaccount to the savings subaccount and the process will recommence. These transfers will occur solely on our books and will not appear on your Account statement and will not affect the fees or features of your Account. You have no direct access to the savings subaccount, only to your checking account.


Note that the bank keeps any interest earnings from the "savings" account. It's part of how the banks determine if how "profitable" of a customer you are. In essence, you are giving them an interest free loan. Some include options to opt out of this sub account sweep. In any event, even the sub account is FDIC insured and "your" money, so it's just a behind the scenes trick to increase ther profitability.
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Re: Why can't I get a "demand account" at Vanguard?

Postby Kevin M » Fri Jul 26, 2013 10:54 pm

Bongleur, can you tell us why you care? In other words, why not just use a bank account linked to your Vanguard account? If it's an IRA, then I understand your concern, but for a taxable account, there's no longer any need to use a money market account at Vanguard.

For an IRA, I think your only super-safe options at Vanguard are to use T-bills, short-term CDs, or a treasury money market account.

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Re: Why can't I get a "demand account" at Vanguard?

Postby Langkawi » Fri Jul 26, 2013 11:11 pm

Kevin M wrote:Bongleur, can you tell us why you care?

Remember that this the guy who freaked out at receiving a rebate in the form of a prepaid card.
http://www.bogleheads.org/forum/viewtopic.php?f=11&t=99625

Looking at the terms, I see this is just a sneaky attempt to involve me in an account which has monthly fees & can create a negative balance. Since their phone number is a fake (can't reach a human) I'm sending a letter telling the jerks to close the account & send me a check.

No, I won't be "done with it" when the balance reaches zero.
They have CREATED A DEBIT CARD ACCOUNT and it charges a $3 a month fee. Might be fun to refuse to pay them when they bill me, but then they would [profanity deleted] with my credit rating. THIS is the problem.
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Re: Why can't I get a "demand account" at Vanguard?

Postby umfundi » Sat Jul 27, 2013 12:10 am

Kevin M wrote:Bongleur, can you tell us why you care? In other words, why not just use a bank account linked to your Vanguard account? If it's an IRA, then I understand your concern, but for a taxable account, there's no longer any need to use a money market account at Vanguard.

For an IRA, I think your only super-safe options at Vanguard are to use T-bills, short-term CDs, or a treasury money market account.

Kevin

I gave up using a money market account at Vanguard (or anywhere else) when I discovered how relatively illiquid it actually is.

I requested a transfer to my checking account early on a Friday evening. Monday was a holiday. The funds did not reach my checking account until after close of business the next Thursday. I found the same delay with my GMAC Ally Bank FDIC insured account as with Vanguard's money market.

Yet, I can transfer funds from my checking account to pay a credit card bill instantly, 24/7.

Yes, I know they told me, and they are meeting legal requirements. I just happen to think it's a question of customer service.

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Re: Why can't I get a "demand account" at Vanguard?

Postby livesoft » Sat Jul 27, 2013 1:18 am

To answer the question in the title, I am going to a make a WAG: Because it is against the law --- specifically the Investment Company Act of 1940 as amended, etc. Right?
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Why can't I get a "demand account" at Vanguard?

Postby dbr » Sat Jul 27, 2013 10:01 am

livesoft wrote:To answer the question in the title, I am going to a make a WAG: Because it is against the law --- specifically the Investment Company Act of 1940 as amended, etc. Right?


Well, that is what my positing, third in the thread, meant to say.

Hidden behind this is that Vanguard is a godsend to the ordinary people because they have created low cost, well managed funds that give us a fighting chance against the rapacious tendencies of everyone else. What Vanguard is less, and doesn't need to be, is a financial services company, as in providing banking services. Other organizations may do that better.
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Re: Why can't I get a "demand account" at Vanguard?

Postby Bongleur » Sat Jul 27, 2013 4:14 pm

OK so if Vanguard can't do it because they are not a "bank" then why can't I find a BANK that will do it?

>That's good at a high level, but keep in mind that most deposit agreements have a clause similar to this one

That sounds like what they usually call a Money Market Checking Account. The "savings" sub-account is invested in money market paper. Hence loaned to the bank.

I just want the bank to safeguard my money and pay checks written on the account. I will pay them for the service, but I will not LOAN them the money. The fine print of every account type leaves me believing that I am loaning them my money.

Do the SEC rules define "demand account" in some specific, non-weasel manner? Or have another term for what I want?
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Re: Why can't I get a "demand account" at Vanguard?

Postby Kevin M » Sat Jul 27, 2013 4:20 pm

umfundi wrote:I requested a transfer to my checking account early on a Friday evening. Monday was a holiday. The funds did not reach my checking account until after close of business the next Thursday. I found the same delay with my GMAC Ally Bank FDIC insured account as with Vanguard's money market.

Yet, I can transfer funds from my checking account to pay a credit card bill instantly, 24/7.

Yes, I know they told me, and they are meeting legal requirements. I just happen to think it's a question of customer service.

Keith

This is standard: 2 business days for an ACH transfer. Same between any two banks and/or credit unions in my experience, and I do lots of ACH transfers.

I believe if you sell any Vanguard fund and have the funds deposited directly to your linked bank account, it will take the same two business days (ditto for dividends).

But yeah, I wouldn't use a Vanguard money market account as a checking account to pay credit card bills. I suspect if you have a Vanguard Advantage account, it might work the same as your checking account, but I'm not sure; although I have one, I haven't taken advantage of any of the features in a few years, since there's no point in leaving money in a money market account paying next to nothing.

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Re: Why can't I get a "demand account" at Vanguard?

Postby bayview » Sat Jul 27, 2013 4:25 pm

Bongleur wrote:...That sounds like what they usually call a Money Market Checking Account. The "savings" sub-account is invested in money market paper. Hence loaned to the bank.

I just want the bank to safeguard my money and pay checks written on the account. I will pay them for the service, but I will not LOAN them the money. The fine print of every account type leaves me believing that I am loaning them my money...

Please forgive my continued confusion, but why? Why do you refuse to loan them money? What's the issue?
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Re: Why can't I get a "demand account" at Vanguard?

Postby Kevin M » Sat Jul 27, 2013 4:33 pm

With any bank account, you are loaning them the money. They take the money you loan them and loan it to someone else at a higher rate. How else do you think banks make money? I am totally confused about what you are saying. :confused

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Re: Why can't I get a "demand account" at Vanguard?

Postby mikestorm » Sun Jul 28, 2013 7:09 am

Kevin M wrote:With any bank account, you are loaning them the money. They take the money you loan them and loan it to someone else at a higher rate. How else do you think banks make money? I am totally confused about what you are saying. :confused

Kevin


Correct.The bank keeps 10% of the sum total of these deposits on hand in cash to be in compliance with the Fed's reserve requirement then uses the rest for their own purposes. Time accounts (CDs) and savings have even lower requirements due to transaction limits placed on those accounts.

The reserve requirement is lower also for thrifts. Fidelity and Schwab probably each bought a small thrift for its charter to offer the services folks describe above.

As for the OP, no such thing in this country to finda bank with 100% reserve requirement. The closest thing to it is buying money orders from Wal-Mart every week for your needs.
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Re: Why can't I get a "demand account" at Vanguard?

Postby mikestorm » Sun Jul 28, 2013 7:20 am

I clicked through the OPs article. I now see he means he wants Vanguard to offer retail/thrift deposit products. FWIW so do I. They do offer the VanguardAdvantage account, but I don't qualify. Also not enough info on Vanguards website to determine what type of account it is under the hood.

As others have mentioned, Fidelity and Schwab have these services.
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Re: Why can't I get a "demand account" at Vanguard?

Postby Phineas J. Whoopee » Sun Jul 28, 2013 11:47 am

Hi Bongleur,

It seems you're asking for Full Reserve Banking. I don't think it exists in practice, but you can mostly roll your own.

Rent a safe storage space in a full-on vault, which preferably would be at a bank. Be sure to check to see the rental agreement doesn't say cash is forbidden. The bank might insist you open a checking account (which as noted previously is a loan to the bank - no two ways about that under Fractional Reserve), but just do whatever the minimum required is. You'll use it occasionally anyway.

Put whatever money you're concerned with into checking. Notify the bank you mean to make a large cash withdrawal, so they can be sure they have enough of it on hand. Withdraw stacks of $100 bills. Put them in your safe storage space (at a bank doing so wouldn't require you to leave the building carrying all that money). You probably won't be able to buy commercial insurance to cover cash, and unless the bank was clearly negligent, if somebody breaks in anyway and steals it you'll likely have no recourse. Maybe you should use four or five banks to spread the risk around.

Whenever you get a direct deposit, go to the bank and withdraw cash, and put it in your safe deposit box.

Whenever you want to pay a bill get some cash, walk to the teller, deposit it in your checking account, and pay immediately online.

Yes, the bank will have a little bit of your money in a deposit account at all times, but you're just using it as a transit spot. And if the transit spot never needs more than $250,000 in it at any given moment it will be fully FDIC insured.

Sorry I couldn't think of anything simpler. You could use money orders purchased for cash instead of checking I suppose, and mail them rather than using ACH transfers.

[Edited to add.]
I think some posters (and I was among them initially) were thinking about demand deposits, which in the US are checking accounts and their ilk (NOW accounts and the like). I realize you said demand account, which at Wikipedia is a synonym for a transactional account, but in the US that works out to be checking anyway. After your clarification it was easier for me to understand what you were looking for.

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Re: Why can't I get a "demand account" at Vanguard?

Postby Phineas J. Whoopee » Sun Jul 28, 2013 1:55 pm

mikestorm wrote:...
Correct.The bank keeps 10% of the sum total of these deposits on hand in cash to be in compliance with the Fed's reserve requirement then uses the rest for their own purposes. Time accounts (CDs) and savings have even lower requirements due to transaction limits placed on those accounts.
...

What you say is true. I'd like to clarify the details a bit further.

What you've called cash includes physical notes and coins in its vault, plus funds the institution has on deposit with its regional Federal Reserve Bank. It can order physical currency to be delivered by armored car the next day, and in some vicinities the same day; which is debited from its Fed balance. Reserves are defined as their Fed account, which includes borrowings of excess reserves from other banks and also borrowings from the discount window; plus their vault cash.

The US reserve requirement is on all "demand deposits," which in practical terms means checking accounts (and their Credit Union and Savings and Loan equivalents - which functionally are similar but legally different); and on other accounts (savings; money market accounts; and time deposits - CDs) only if they're owned by households, not businesses.

Saying 10% is close enough for most intents and purposes, but the rule is more complex. A Chief Financial Officer at a financial institution would have to pay attention to that.

The reserve requirement on savings accounts, money market accounts, and time deposits for businesses is zero.

I personally see the (non-shadow) banking system as having considerable headroom, now; plus I'm a household, so it doesn't bother me. In the worst case banks are allowed to require several days notice before paying out from other-than-checking accounts, which further protects the system (if not the convenience of the depositor in question).

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Re: Why can't I get a "demand account" at Vanguard?

Postby Bongleur » Thu Aug 01, 2013 3:14 pm

"banks are allowed to require several days notice before paying out from other-than-checking accounts"

What I want is the variety of checking account that requires them to pay immediately. They have so many weasely, marketing phrases in their types of account names that I' not positive I'm getting what I want. What is the correct, legal, SEC term for "a checking account where they have to pay 100% back to me on demand?"
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Re: Why can't I get a "demand account" at Vanguard?

Postby umfundi » Thu Aug 01, 2013 5:19 pm

Bongleur wrote:"banks are allowed to require several days notice before paying out from other-than-checking accounts"

What I want is the variety of checking account that requires them to pay immediately. They have so many weasely, marketing phrases in their types of account names that I' not positive I'm getting what I want. What is the correct, legal, SEC term for "a checking account where they have to pay 100% back to me on demand?"

Immediately, three days after the next business day, or eventually?

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Re: Why can't I get a "demand account" at Vanguard?

Postby Bongleur » Thu Aug 01, 2013 10:34 pm

[/quote]Immediately, three days after the next business day, or eventually?
Keith[/quote]

When I walk up to the teller with a withdrawal slip.
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Re: Why can't I get a "demand account" at Vanguard?

Postby Cyclone » Thu Aug 01, 2013 11:08 pm

Maybe a little off topic (but then I'm not clear what the topic is), but Charles Schwab Bank is not some tiny operation. It's the 20th largest bank (or rather bank holding company):
http://www.ffiec.gov/nicpubweb/nicweb/Top50Form.aspx
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Re: Why can't I get a "demand account" at Vanguard?

Postby Phineas J. Whoopee » Fri Aug 02, 2013 11:06 am

Bongleur wrote:"banks are allowed to require several days notice before paying out from other-than-checking accounts"

What I want is the variety of checking account that requires them to pay immediately. They have so many weasely, marketing phrases in their types of account names that I' not positive I'm getting what I want. What is the correct, legal, SEC term for "a checking account where they have to pay 100% back to me on demand?"

There is no SEC or US legal term for such an account. The concept is called Full Reserve Banking (link repeated for the reader's convenience).

As I said, there are none. Perhaps you've identified a business opportunity to make you rich. You might have to lobby for a change in legislation first; or even run for office yourself.

There is no wait for your own $100 bills you keep in your safe deposit box, as I suggested might be mostly functionally equivalent to what you're asking for. When choosing a safe keeper, be sure to inquire into their vault access hours, in addition to their ordinary business hours. Vault access may be more restricted.

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Re: Why can't I get a "demand account" at Vanguard?

Postby BrandonBogle » Fri Aug 02, 2013 12:01 pm

Closest thing Op will find is a non-interest bearing "Demand Deposit Account". However, the post further up about most banks using a subaccount so they can generate interest on those funds for themselves was specifically for non-interest bearing DDAs. That bank has a separate, nearly identical section for interest-bearing NOW accounts (basically, interest-bearing checking accounts).

A DDA doesn't have a "time-to-wait" for withdrawal of funds, but there can still be a logistical roadblock. Depending on the brick and mortar location, they may not have the necessary funds to do a withdrawal. When I sold my car a few months back, the BoA branch we went to did not have sufficient funds available to cash the check. This will vary by location though (the other BoA down the street did have enough physical cash).
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Re: Why can't I get a "demand account" at Vanguard?

Postby Phineas J. Whoopee » Fri Aug 02, 2013 12:13 pm

BrandonBogle wrote:Closest thing Op will find is a non-interest bearing "Demand Deposit Account". However, the post further up about most banks using a subaccount so they can generate interest on those funds for themselves was specifically for non-interest bearing DDAs. That bank has a separate, nearly identical section for interest-bearing NOW accounts (basically, interest-bearing checking accounts).

A DDA doesn't have a "time-to-wait" for withdrawal of funds, but there can still be a logistical roadblock. Depending on the brick and mortar location, they may not have the necessary funds to do a withdrawal. When I sold my car a few months back, the BoA branch we went to did not have sufficient funds available to cash the check. This will vary by location though (the other BoA down the street did have enough physical cash).

In the United States those are checking accounts; are loans to the bank even if the depositor extends the credit at zero interest; and under extraordinary circumstances (you've mentioned one example) may not be available for immediate withdrawal.

There was a time during the recent financial crisis when accounts with the characteristics you've listed were insured to any amount, not just $250,000, but that provision has expired.

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Re: Why can't I get a "demand account" at Vanguard?

Postby BrandonBogle » Fri Aug 02, 2013 12:59 pm

Phineas J. Whoopee wrote:
BrandonBogle wrote:Closest thing Op will find is a non-interest bearing "Demand Deposit Account". However, the post further up about most banks using a subaccount so they can generate interest on those funds for themselves was specifically for non-interest bearing DDAs. That bank has a separate, nearly identical section for interest-bearing NOW accounts (basically, interest-bearing checking accounts).

A DDA doesn't have a "time-to-wait" for withdrawal of funds, but there can still be a logistical roadblock. Depending on the brick and mortar location, they may not have the necessary funds to do a withdrawal. When I sold my car a few months back, the BoA branch we went to did not have sufficient funds available to cash the check. This will vary by location though (the other BoA down the street did have enough physical cash).

In the United States those are checking accounts; are loans to the bank even if the depositor extends the credit at zero interest; and under extraordinary circumstances (you've mentioned one example) may not be available for immediate withdrawal.

There was a time during the recent financial crisis when accounts with the characteristics you've listed were insured to any amount, not just $250,000, but that provision has expired.

PJW

Yup. I agree the Op is looking for full reserve banking account. But since he won't find this, a non-interest DDA will be the next best available option to meet those needs.

Ultimately though, I personally do not feel it is a problem as long as your stay within FDIC limits for coverage. Everything in life comes with a tradeoff, this is not different.

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Re: Why can't I get a "demand account" at Vanguard?

Postby Bongleur » Tue Aug 06, 2013 7:13 pm

Could probably settle for a contract where the bank charges me for the service of holding & accounting for my cash in safe storage (ie putting it on deposit with the Fed) and I give them 1 day notice for withdrawals above a certain amount.
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Re: Why can't I get a "demand account" at Vanguard?

Postby umfundi » Tue Aug 06, 2013 7:29 pm

Bongleur wrote:Could probably settle for a contract where the bank charges me for the service of holding & accounting for my cash in safe storage (ie putting it on deposit with the Fed) and I give them 1 day notice for withdrawals above a certain amount.


Why is this different than embedding a safe in the floor of your (attached) garage? You can get those - impossible to remove without a demolition crew.

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Re: Why can't I get a "demand account" at Vanguard?

Postby Bongleur » Wed Aug 07, 2013 11:44 pm

If the bank burns down the money is accounted for, not lost.
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Re: Why can't I get a "demand account" at Vanguard?

Postby georgewall42 » Thu Aug 08, 2013 2:42 pm

I'm having trouble understanding why a demand checking account doesn't work for you.

You have essentially instant access to your money just about any time. The IRS, the grocery store, the mortgage company, the landlord, the credit cards all accept your personal check as payment for any amount. If you need cash, you have ATM's. And the ability to go to just about any bank and cash a check, up to a certain limit. The money is insured up to $250K, which you can get around if you open up more than one account at different banks (easy enough).

If you ever needed access to all your money, you can get a bank check drawn on your account. If you needed it in cash, you can almost always do that pending enough notice (usually 1 to 2 business days) to the bank. Unless you're buying illegal substances on the black market, or need to post bond for someone arrested for murder, you're unlikely to need to come up with $250K of cash instantaneously.

The fine print in the banking agreements is their to cover the bank in case of bizarre and unusual contingencies. Even in 2008 individuals were able to get their cash when they wanted it. I wouldn't worry about it; as you see, the alternatives either don't exist, or come with some serious problems of their own (fires do happen).
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Re: Why can't I get a "demand account" at Vanguard?

Postby Easy Rhino » Thu Aug 08, 2013 3:56 pm

Bongleur, it seems like it would be easiest to just live with a FDIC-insured bank deposit sweep at a brokerage. This is hopefully good enough as long as you don't go over FDIC limits.
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Re: Why can't I get a "demand account" at Vanguard?

Postby Bongleur » Sat Aug 10, 2013 1:58 am

I think what I want used to be called a "savings bank." Only allowed to invest in ultra safe things like govt bonds; high cash reserve requirements.

If Treasury Direct had a quick cash-out time it would do.
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Re: Why can't I get a "demand account" at Vanguard?

Postby umfundi » Sat Aug 10, 2013 4:06 am

Bongleur wrote:I think what I want used to be called a "savings bank." Only allowed to invest in ultra safe things like govt bonds; high cash reserve requirements.

If Treasury Direct had a quick cash-out time it would do.

What's wrong with keeping cash in a safe in your house?

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Re: Why can't I get a "demand account" at Vanguard?

Postby Bongleur » Sat Aug 10, 2013 6:12 pm

I already answered that: If the bank burns down the money is accounted for, not lost.
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Re: Why can't I get a "demand account" at Vanguard?

Postby umfundi » Sat Aug 10, 2013 6:23 pm

Bongleur wrote:I already answered that: If the bank burns down the money is accounted for, not lost.

I guess I don't understand the risk that you're concerned about.

If you deposit your money in a bank account and they lend it out until you ask for it, isn't it "accounted for"?

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Re: Why can't I get a "demand account" at Vanguard?

Postby MnD » Sat Aug 10, 2013 8:51 pm

Schwab had 7 cash options. 4 FDIC insured bank products, 3 SIPC.
http://www.schwab.com/public/schwab/inv ... _solutions

Most brokerages have a US treasury money market option as well. The Vanguard one is closed, the Fidelity one appears to be open.
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Re: Why can't I get a "demand account" at Vanguard?

Postby Rainier » Sat Aug 10, 2013 9:05 pm

Bongleur wrote:I define a demand account as an account where the money is NOT actually any sort of loan to the bank. The bank merely administers the safekeeping of my money. A bank failure will not impair my claim to the money in any manner, because the bank (and thus their creditors) has absolutely no claim upon that money.


Doesn't exist as far as I know. Maybe a safe deposit box.

Why would a bank just choose to hold your money for free?
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Re: Why can't I get a "demand account" at Vanguard?

Postby Rainier » Sat Aug 10, 2013 9:11 pm

Bongleur wrote:I think what I want used to be called a "savings bank." Only allowed to invest in ultra safe things like govt bonds; high cash reserve requirements.

If Treasury Direct had a quick cash-out time it would do.


Nope, not true. That's not the way banks work now or in the past. Banks are in the business of earning money for their shareholders. Not just holding your cash and investing it in treasuries. They couldn't afford to keep the lights on if that's all they did.
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Re: Why can't I get a "demand account" at Vanguard?

Postby georgewall42 » Sat Aug 10, 2013 9:57 pm

Bongleur wrote:I think what I want used to be called a "savings bank." Only allowed to invest in ultra safe things like govt bonds; high cash reserve requirements.

If Treasury Direct had a quick cash-out time it would do.


"Savings banks" have used depositor's money to underwrite loans since the founding of the country.

Back in the 1800's and early 1900's, depositors large and small did lose money when their banks went belly-up; some of the "investments" banks made in those times would make the providers of mortgage-backed CDO's blush. FDIC insurance has made that point moot; given that your accounts are insured, your bank could invest all its funds in professional blackjack players as far as you, the depositor, are concerned. Of course, if it did that, the FDIC and possibly the Fed would want a talk with the bank's officers.
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Re: Why can't I get a "demand account" at Vanguard?

Postby Phineas J. Whoopee » Sun Aug 11, 2013 1:21 pm

Bongleur wrote:...
If Treasury Direct had a quick cash-out time it would do.

At the risk of prolonging this discussion, every dealing I've had with Treasury Direct has been completed on the next business day. Maybe the zero-percent certificate of indebtedness is your animal after all, as long as you trust a bank for just one night (plus whatever their checking minimum is, as noted upthread). Treasury won't even charge you the fee you said you were willing to pay. But if you're ready to do that, why not put, say, 50% in there, and use the rest to roll 4-week T-bills? Can't you wait even one week for 12.5% of your stake? The $5,000,000 limit for a non-competitive bid at an auction may or may not be a consideration for you.

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