I had been using Presidential bank as my main checking account for several years since 2002. Recently, I reviewed the situation and decided to make a switch. Presidential bank has a good checking product but I found it lacking in the following:
- While the APY is moderately competitive (currently 4.5%), even better alternatives are available.
- The above APY is limited to the first $25k only. The APY beyond $25k drops significantly to 2.75%. This makes the consolidation of liquid reserves troublesome.
- Direct deposit is required to earn the 4.5% APY interest rate.
I looked and compared offerings from several online banks and even brick & mortar banks in my area. In the end, I decided to move my main checking needs to Fidelity brokerage. The following are the reasons:
- Balances earn top yields using Fido’s money market fund (MMF). I use FSPXX, a California AMT tax-free MMF. For me, this fund spots a higher yield than even Vanguard’s MMF after taking AMT into consideration. (Note: Non-core MMFs might have minimum balance ($2000) fees but this can be easily avoided by enrolling into an auto-investment, typically $100 every 3 months or something like that).
- Free and extremely fast (next business day) ACH transfers to linked bank accounts. Many banks and even Vanguard have much slower ACH processing times. In addition, there doesn’t appear to have a limit to the number of ACH links that I can set up.
- Money can be transferred using ACH from external accounts. For example, from the Vanguard website, I can pull money out from the Fidelity account into Vanguard. Note that you typically cannot do this with MMFs. For example, you cannot pull money out from Vanguard’s Prime MMF from an external institution. (Note: There is an offering from Vanguard that let’s you do this for free but you need to have at least a million dollars with Vanguard to get it).
- Unlimited check writing with no check minimum amount limitation. Most mutual fund’s MMFs have check writing minimums, for example this is $250 for Vanguard MMFs.
- Free Billpay through the CheckFree system (one of the better billpay systems).
- No direct deposit requirement.
- Check card provided (moot point, since I do not intend to use it).
There are a few negatives that I can think of. These are
- Lack of ability to deposit paper checks easily; for that I use a savings account (APY 5%) at a local credit union.
- Need to manually buy into FSPXX. Otherwise, any money deposited goes into FCFXX which has a lower yield. This is usually not a problem since whenever I submit an ACH-in, I would submit a purchase request for FSPXX at the same time. Note: sale of FSPXX to cover debits (e.g. ACH withdrawals, checks, billpays, etc) are automatic.
Bonus : At the time of this post, Fidelity is still offerring a $100 sign-up bonus for new households with a $10,000 deposit. Link HERE.
Related internet resource : FWF’s Fidelity MMF discussion.