by Harbinger2nd
As the title states, Schwab is pulling some pretty shady stuff right now. I decided to log into my Schwab account to check out my cash position and the interest rate accrued from being held in a MMF (Money Market Fund). According to Schwab’s own disclosure which you can find here
Cash not invested is generally held in a money market fund.
After 10 minutes of searching and what felt like an intentionally obscured feature (speculation), I was able to find through my statement that my cash was being held in a Bank Sweep account and not a MMF.
This is crazy as a bank sweep account only pays 0.45% interest rate instead of the 4.8% currently being paid out on MMF’s
IMO this means that Schwab is pocketing the difference and unless you specifically ask for your money to be moved into an MMF are being ripped off for over 4% APR even according to their own disclosure.
This seems to have been the case for months and I cannot say when this happened, but I do know my dad has a large cash position after selling out of TSLA a few months ago and from the time he sold in january to now, he has only been accruing the Bank Sweep interest rate and not the MMF rate. If it was just me I’d think I was being a crazy conspiracy theorist, but my dad has been a loyal customer for over 30 years and they even put him in the bank sweep account.
EDIT: Seems that this change was made more than 2 years ago. Still have no idea when it occurred, but its been a thing for much longer than I realized. Seems to be a key difference between Schwab and Fidelity too as Fidelity holds cash positions in their SPAXX MMF’s.