What Is a Brokerage Checking Account?
Checking accounts can make money management easier. If you’re investing through an online broker, you may have the option to open a brokerage checking account.
These accounts may come with features that are similar to what you’d get with traditional checking. That includes debit card access, online bill pay and mobile banking. But is a brokerage checking account right for you? Understanding how these accounts work can help you decide.
What Is a Brokerage Checking Account?
A brokerage checking account is a checking account that’s offered through an online brokerage. When you open a new investment account, you may be given the option to open a checking account as well. These accounts may also be referred to as sweep accounts or cash management accounts.
Your brokerage checking account is separate from your brokerage investment account. With a regular brokerage account, you’re depositing money that you plan to invest in stocks, exchange-traded funds (ETFs), mutual funds and other securities.
Depending on the brokerage checking account’s features, you may be able to:
- Pay bills
- Make purchases using a linked debit card
- Withdraw cash at ATMs
- Deposit checks via mobile check deposit
- Transfer funds from your brokerage checking to your brokerage investment account
Online brokerages may offer these accounts as a convenience to investors. For example, you may use this account to hold funds you plan to invest or to receive money from your brokerage account after selling an investment.
How Does a Brokerage Checking Account Differ from a Regular Checking Account?
Brokerage checking accounts share several things in common with regular checking accounts. Again, they largely function the same way in terms of being able to use them to pay bills, spend or transfer funds. But there are some differences that set them apart from checking accounts offered by banks or credit unions.
Regular checking accounts can charge a variety of fees, including:
- Monthly maintenance fees
- Overdraft fees
- Foreign ATM fees
- Check ordering fees
Brokerage checking accounts, on the other hand, are more similar to online checking accounts when it comes to fees. That means you may pay no monthly maintenance fees or overdraft fees. And your brokerage may reimburse you for some or all of the ATM surcharges you incur monthly.
Banks and credit unions may require you to make a minimum deposit to open a regular checking account. For example, you might need at least $100 to get started.
With brokerage checking accounts, there may be no minimum deposit required to open an account.
Minimum balance requirements
Regular checking accounts can have minimum balance requirements you need to meet in order to avoid a fee. For example, you may need to maintain a daily average balance of $500 to avoid a monthly service charge. With brokerage checking accounts, there may be no minimum balance requirements to worry about.
Both regular checking accounts and brokerage checking accounts can offer check-writing. The difference between the two is that regular checking accounts may charge fees for checks while your brokerage may give them to you free of charge.
Regular checking accounts and brokerage checking accounts can also offer debit card access. With either one, you can use your card to make purchases, pay bills or withdraw cash at the ATM. Both can also come with daily transaction limits on how much you can spend or withdraw.
When comparing regular checking to brokerage checking it’s important to consider ATM access. Some brokerages have their own associated banks where you can withdraw money fee-free but not all of them do. But brokerage checking may come with unlimited ATM fee reimbursements, something that’s harder to come by with regular checking accounts.
Banks and brokerages can offer interest checking though again, not all of them do. If you’re comparing brokerage checking accounts, be sure to consider the APY you might be able to earn on deposits.
FDIC coverage protects regular checking accounts up to $250,000 per depositor, per account ownership type, per financial institution. It’s possible, however, to get up to $1.25 million in FDIC coverage with a brokerage checking account if your brokerage partners with banks to increase your coverage limits.
Pros and Cons of Brokerage Checking vs. Regular Checking
Here are some of the pros and cons of choosing brokerage checking over regular checking.
- Brokerages may have no minimum balance requirements.
- Your brokerage checking account may offer foreign ATM fee reimbursements.
- Checks may be free with brokerage checking and you may have unlimited check-writing.
- You may enjoy enhanced FDIC coverage limits with a brokerage checking account.
- Choosing a brokerage checking account may mean forgoing branch banking access.
- You may have access to fewer features with a brokerage checking account.
- Brokerages typically don’t offer borrowing options like loans or credit cards, while banks can and do.
- Customer service availability may be limited.
Brokerage Checking FAQs
What is the difference between a brokerage account and a checking account?
A brokerage account is designed for investing. You can deposit money, then invest it into different securities. A checking account is designed to hold funds you plan to use to pay bills or make purchases.
Is a brokerage account a checking account or a savings account?
The short answer is that it’s neither. A brokerage account is an investment account offered by a brokerage. Checking and savings accounts are deposit accounts that are typically offered by banks or credit unions.
Should I link my checking account to my brokerage account?
If you don’t have the option to open a brokerage checking account, linking your checking account at your bank to your brokerage account could make sense. Linking them together can make it easier to transfer funds between them safely.
The Bottom Line
A brokerage checking account could be a good fit if you want a convenient way to add or withdraw money to a brokerage investment account. What’s important to keep in mind is how easily you’ll be able to access your money and what fees you’ll pay, compared to the checking account you already have. Taking a brokerage checking account for a test drive can give you an opportunity to see how well it fits your needs and lifestyle.