Too many cash accounts!

[Ken-Sheridan]

I have too many bank and investment accounts and want to simplify. Issues I'm contending with:

1. I want to keep ~$30k in an emergency fund with a decent yield

2. I need to be able to pay bills and have direct deposit, and, ideally, write a rare check.

3. My expenses are somewhat uneven month-to-month, e.g. from paying a six-month car insurance premium, plane tix to visit in-laws, etc. I want to have enough in my checking/bill-paying account that I don't need to check every two weeks that I won't overdraw by paying off a big credit card bill.

Right now, I have an overly complex system, mostly by accident. I have:

1. My checking account with a local bank (from when I got my mortgage years ago)

2. A Roth IRA and taxable brokerage account with Vanguard, where I currently keep my emergency fund.

3. A Schwab brokerage and investor checking account with little money in it from many years ago. Pros: no atm fees, free checks (though rarely needed), local branch. Cons: low yield on checking

I think it makes sense to get rid of the local bank account -- only momentum is keeping it open. But what to do from there? I want a very simple system where, again, I'm not continually checking to make sure that I have enough money in the right place to pay bills. Putting tons of cash in Schwab checking would save on constantly monitoring balances, but the yield is much lower than a decent MMF (at least lately). If I could keep myself to, say, one simple transfer a month on average -- to (or from) a checking/cash management account from (or to) a MMF -- that would work for me. Also, ideally, I wouldn't open yet another account. I would only do that if Fidelity would be a far superior offering that would save me considerable time in the long-run. Keeping the Vanguard and Schwab accounts doesn't seem too burdensome to me, and I already have my Roth with Vanguard.

Thanks for your help!

[alexbogle]

Fidelity cma .eets all of your needs and avoids your need to check balance.

[Ken-Sheridan]

Thanks! I forgot to add one more desideratum (which I'm guessing Fidelity would meet...): I don't want to spend time chasing yield. I want an account that will likely offer an attractive (if not the best) yield over time relative to other cash accounts/CDs/etc.

[jebmke]

If you keep the cash balance low enough you don't have to worry about yield.

[diy60]

This is hardly an overly complex array of accounts. I think at one point spouse and I had around 15 accounts at one time. But with that said, reducing complexity and consolidating is a good thing.

I have investment accounts at a brokerage company, and transfer funds periodically (maybe 6 times a year) to my bank. I use the bank for online bill pay, as well as the 2 or 3 checks that I write annually. I also use the Bank ATM card for cash withdrawals when traveling ex-US. Good luck.

[simplesimon]

Keep about two months expenses in your Schwab checking account and the rest in the Schwab MMF for your emergency fund and you're done.

It's clear that keeping your checking balance low to optimize yield is not working for you and it wouldn't be hugely financially beneficial anyways. There are much better ways to spend your time.

[mhc]

Last year I consolidated everything at Fidelity. I have been pleased with their CMA, brokerage, website, customer service, ....

Fidelity pays a good rate for cash in the CMA.

I also got a decent bonus for moving money there. They also have a local office if I ever need it.

I kept my local bank account open as a back up.

Here is the thread for going all in on Fidelity: viewtopic.php?t=266538

[Artsdoctor]

We've been using Fidelity for many years now, right after Vanguard canceled its Advantage program. It does everything a brick-and-mortar bank will do except for special services, such as cutting a cashier's check. International deposits can be challenging but it does work. We have other accounts at Fidelity so we technically don't use the CMA: a dedicated brokerage account provides all of the services we need. I have never once regretted setting it up.

[gotoparks]

I use a checking account at a credit union and keep two or three months of spending in it. I don't care about missed interest from higher rates. I guess it is a state of mind because there are many threads like yours that people are overly sensitive to not getting the best interest rate on the few thousand, they keep in checking accounts. I also have accounts at Vanguard and a Roth IRA at Fidelity.

[MtnTravel]

Right now, I have an overly complex system, mostly by accident. I have:

1. My checking account with a local bank (from when I got my mortgage years ago)

2. A Roth IRA and taxable brokerage account with Vanguard, where I currently keep my emergency fund.

3. A Schwab brokerage and investor checking account with little money in it from many years ago. Pros: no atm fees, free checks (though rarely needed), local branch. Cons: low yield on checking

I think it makes sense to get rid of the local bank account -- only momentum is keeping it open. But what to do from there? I want a very simple system where, again, I'm not continually checking to make sure that I have enough money in the right place to pay bills.

A few thoughts:

- Your setup is already simple. It's prudent to have a bank that is separate from your brokerage.

- How much do you keep in checking? If your average checking balance is $10,000 and you get a 4% checking account, that's $400 a year in interest before taxes. is that enough to deal with the compromises that come with a high yield checking/CMA?

- Unless something has changed, Schwab does not have local bank branches. The Schwab offices only handle brokerage/retirement accounts.

People praise the Fidelity CMA but do some research. Fidelity is not a bank. There are lots of threads on here about issues with the CMA. Everything works great until it doesn't. To me, it's not worth $400 a year to deal with the downsides of the CMA (long hold times, issues resolving fraud, etc.)

Option 1:

I would keep a local bank with enough cash for one month of expenses. Then consolidate everything else, including cash, at one brokerage. I like Vanguard and Fidelity because they offer true "sweep" funds where you don't have to deal with manually buying/selling. And it takes all of 30 seconds to log in and transfer money to my checking account. You should be logging into your accounts regularly to check for fraud anyway, so we're talking about a few extra seconds to check the balance in checking and initiate a transfer to top it up.

Option 2:

Go with Bank of America, Wells Fargo, or JP Morgan. Open a checking account and a self-directed brokerage account. It's all connected in one app/website. You keep your extra cash in a money market fund in the brokerage and transfer it to checking as needed. At least with BofA, if you "sell" money market funds in the morning, you can transfer them same day to checking. Plus, BofA and Chase are "real" banks so you get all of the protections and conveniences that come with that. Schwab is also a good option since they have a separate "real" bank, but I'd be concerned about having everything at one institution in case there was a technical issue that locked me out. I like having a separate bank and brokerage.

[snic]

I'm not that concerned about not earning the absolute highest interest rate on my local bank checking account. They do provide services I use, such as cashier's checks at no charge, a notary, ability to withdraw bills from a teller in any denomination (useful for gifts), etc. And as a local bank, the employees are really friendly and helpful. I figure they have to get paid for providing these services, so if I miss a couple hundred dollars per year in interest (at most), no big deal.

What concerns me more is having an easy way to transfer money from other, higher-yielding savings accounts and CDs to my local bank checking account. Some of these banks have very low daily ACH transfer limits. It may make sense to simply consolidate all these into one Fidelity account, from which one can buy CDs and treasuries and also earn a decent money market rate. Fidelity seems to have pretty high transfer limits. The only concerns are that the money market account is not federally insured and there are stories online of Fidelity arbitrarily reducing the transfer limit for some people, presumably because of some algorithm that predicts a high probability of fraud. And the CD rates available via Fidelity are not always as super high as the online retail banks offer. However, you can't beat the simplicity of buying CDs through a brokerage account.

So that would be my suggestion to the OP: keep your local bank account and move everything else to Fidelity or a similar brokerage.

[Ken-Sheridan]

Thanks for your thoughtful posts, everyone!

[typical.investor]

Putting tons of cash in Schwab checking would save on constantly monitoring balances, but the yield is much lower than a decent MMF (at least lately). If I could keep myself to, say, one simple transfer a month on average -- to (or from) a checking/cash management account from (or to) a MMF -- that would work for me.

Do know the Schwab brokerage serves as overdraft for Schwab checking.

I typically liquidate from a MMF in brokerage once a month before payments are due (mine are all bunched together - it's easy to request a new date for a credit card). That's it. When the cards pull from checking, Schwab pulls the money from brokerage. I mean you could manually transfer from brokerage to checking ...

[epictetus]

one other option : open an online high-yield savings account and link your checking account to it so you can move money back/forth from checking to savings as needed. keep X amount in checking and the rest of your emergency fund in the savings account.

i know that is adding an account instead of reducing accounts.

[CatsAreCute]

I typically liquidate from a MMF in brokerage once a month before payments are due (mine are all bunched together - it's easy to request a new date for a credit card). That's it. When the cards pull from checking, Schwab pulls the money from brokerage. I mean you could manually transfer from brokerage to checking ...

This is the way!

All of my credit cards pull on the same date each month. My other monthly payments hit within the same 5 days. I just calculate the amount each month and sell MMF to be ready.

It’s not difficult to earn good rates on cash at Schwab.