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Schwab's new policy
Old 05-16-2023, 03:52 PM   #1
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Schwab's new policy

I had a $104,000.00 treasury mature today. The money went into my cash account. I placed an order for a $105,000.C.D. ( I had another $1000.00 already in my cash account). The C.D. does not settle until 5/24/2023..In the past I could buy a MM with the $105,000.00 as long as I sold it before the new purchase settled. Now they take the money from my cash account as soon as the new order is placed so therefore I cannot buy a MM even if I wanted. I know it's not a lot of money and I probably would not have bothered anyway but the the fact that now Schwab gets the benefit of my $105,000.00 for a week leaves me somewhat unhappy..Am I just being nit picky?
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Old 05-16-2023, 04:19 PM   #2
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Looks like the banks are playing every angle now.


Posted this a few minutes ago in the CD thread.


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Originally Posted by Car-Guy View Post
FWIW

I just stumbled into another "gotcha" on brokered CD's. So I've been buying more and more CD's that pay interest (coupon frequency) on a monthly basis rather than at maturity... So far they have been paying off like a slot machine. Right on time and for the exact amounts I have calculated.

That is until now....I have one with a bank in North Carolina (through Schwab) and the first payment was due Sunday 5/14/23. So I expected to see my account credited by Monday 5/15/23. But nothing.... Okay so I call my AE at Schwab and he looks into it and tells me that Schwab doesn't credit accounts until they receive payment from the issuing banks. Well that makes sense but how can a bank delay making payments... Isn't that default or at least a violation of the CD agreement. Well as he dug further, it seems this is not rare. According to their contracts, the issuing banks have up to 2 weeks to make interest payments after the coupon date. (Well nobody told me and it's never happen to me, but now I know)... Sounds like a good way for a bank to "float" a lot of money....

So don't be surprised when an interest payment is due or your CD reaches maturity, it may be a few more weeks before you get your money...

Have a nice day.
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Old 05-16-2023, 05:23 PM   #3
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Originally Posted by lawman View Post
I had a $104,000.00 treasury mature today. The money went into my cash account. I placed an order for a $105,000.C.D. ( I had another $1000.00 already in my cash account). The C.D. does not settle until 5/24/2023..In the past I could buy a MM with the $105,000.00 as long as I sold it before the new purchase settled. Now they take the money from my cash account as soon as the new order is placed so therefore I cannot buy a MM even if I wanted. I know it's not a lot of money and I probably would not have bothered anyway but the the fact that now Schwab gets the benefit of my $105,000.00 for a week leaves me somewhat unhappy..Am I just being nit picky?
I don't think you're being nit picky. A quick calculation @5% of $105,000 for a week is around $100 which Schwab bank is pocketing instead of you. I recently transferred some old 401k money over to Schwab and realized that I'll make several hundred dollars less in interest because I primarily buy/rollover over 17 wk treasuries. So 3 times a year I have six figures sitting in a cash account for a week that pays almost nothing compared to Fidelity's Money Market sweep accounts which is currently paying around 4.7%. I'm also finding Schwab's customer service to be sub-par compared to Fidelity. I transferred enough money to qualifiy for Schwab's signup bonus but have had to call them twice about getting the bonus. If I have to call them a third time I'm going to look into transferring the assets to E-trade for their higher bonus and hopefully they have a decent money market sweep account similar to Fidelity.
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Old 05-16-2023, 06:02 PM   #4
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Well that’s a tough change.

I think Schwab initially switched to the bank core account when they dropped commissions for trading ETFs and stocks which ultimately prompted their competition like Fidelity to also remove trading commissions on same and even introduce zero cost index funds. This was back when MM funds were paying low interest rates so maybe the difference wasn’t very noticeable.

It will be interesting to see how this pans out in the long run.

I wonder if you had moved the money to a MM fund first if it would have made any difference? Or would the CD purchase been disallowed?
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Old 05-16-2023, 06:20 PM   #5
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I wonder if you had moved the money to a MM fund first if it would have made any difference? Or would the CD purchase been disallowed?
No idea..
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Old 05-16-2023, 06:42 PM   #6
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I have had money at Schwab for a few years as an alternative to Fidelity and Vanguard. I have index funds, a few ETF's and more recently money market funds. I started buying CD's and treasuries and found it very difficult to follow the money. I am never really sure what is available for purchases. Not really impressed with their money market funds, overall Fidelity and Vanguard have higher yields. I will probably direct more new cash to the other two, and stop volume purchases of cash instruments.
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Old 05-16-2023, 06:53 PM   #7
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I am never really sure what is available for purchases.
Should be easier now..If you are showing cash in your cash account it should be available for purchases..
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Old 05-16-2023, 07:01 PM   #8
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I did notice that Fidelity is paying 2.60% APY in their bank program core (FDIC-insured Deposit Sweep) which is used/available as a core/sweep account in some of their offerings like the Cash Management Account. So not nearly as painful as the Schwab 0.45% rate.

But you can also buy Fidelity MM funds in those same accounts and those are automatically drawn from when the core/sweep is depleted. This may be my favorite feature!

https://accountopening.fidelity.com/...tes?type=mySCA
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Old 05-16-2023, 07:05 PM   #9
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Should be easier now..If you are showing cash in your cash account it should be available for purchases..
With the uncertainty swirling around Schwab bank, I think it's prudent to pull back. The CD's and treasuries can be bought at the other two. I will revisit from time to time to see if I should reconsider.
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Old 05-17-2023, 09:59 AM   #10
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Well thatís a tough change.

I wonder if you had moved the money to a MM fund first if it would have made any difference? Or would the CD purchase been disallowed?
The CD purchase is allowed but there is a big notification on your screen that you don't have enough on deposit in the bank to cover the purchase.

That's why I responded earlier that it is a manual process. Place the order, move $ from MMF to Schwab bank to cover the purchase. Do it the same day.

The issue with Schwab, as one poster, noticed is that you can't try and time the deposit from a maturing coupon or CD to cover a new purchase. If you don't have the funds in the bank at settlement date, the purchase is cancelled.

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Old 05-17-2023, 10:56 AM   #11
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Quote:
Originally Posted by lawman View Post
I had a $104,000.00 treasury mature today. The money went into my cash account. I placed an order for a $105,000.C.D. ( I had another $1000.00 already in my cash account). The C.D. does not settle until 5/24/2023..In the past I could buy a MM with the $105,000.00 as long as I sold it before the new purchase settled. Now they take the money from my cash account as soon as the new order is placed so therefore I cannot buy a MM even if I wanted. I know it's not a lot of money and I probably would not have bothered anyway but the the fact that now Schwab gets the benefit of my $105,000.00 for a week leaves me somewhat unhappy..Am I just being nit picky?
I'm also a Schwab customer.

You may have a misunderstanding of what is happening. Or maybe not. I've been experimenting since I got the email from Schwab describing the change and don't fully understand the intricacies yet.

When you say "they take the money from my cash account as soon as the new order is place," do you mean that the cash actually is gone from the positions page or do you mean that it doesn't show as available to trade on the trading page or both?

My belief, based on a telcon with them and what I'm observing in in my own accounts, is that they've removed the cash on your trading page from showing as being available to trade status because you have an open order pending which consumes it. But, if you look on the positions page, your cash is still there in your account earning interest. They're just trying to make it clear that if you place an additional order and your open orders execute without you taking steps to cover, you'll either create a margin loan or a trading violation depending on the type of account you have.

I just entered an order to purchase MM shares after close today based on the cash showing on my positions page even though the "available to trade" on the trading page showed zero. It showed zero because the speculative open limit orders I have more than consume the cash in my account if executed.

I am wondering if your situation where your cash is not consumed by open limit orders but rather buy a executed trade that hasn't settled (your CD) is different from my situation?

What message did you get when you tried to place the MM trade?

Has the cash actually been removed from the positions page with the CD not yet added? That is, has your total account value has been reduced by the amount of the CD while you wait for the CD to settle?
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Old 05-17-2023, 11:23 AM   #12
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Originally Posted by Gotadimple View Post
The issue with Schwab, as one poster, noticed is that you can't try and time the deposit from a maturing coupon or CD to cover a new purchase. If you don't have the funds in the bank at settlement date, the purchase is cancelled.

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Even in a margin account?
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Old 05-17-2023, 11:50 AM   #13
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I'm also a Schwab customer.

You may have a misunderstanding of what is happening. Or maybe not. I've been experimenting since I got the email from Schwab describing the change and don't fully understand the intricacies yet.

When you say "they take the money from my cash account as soon as the new order is place," do you mean that the cash actually is gone from the positions page or do you mean that it doesn't show as available to trade on the trading page or both?

My belief, based on a telcon with them and what I'm observing in in my own accounts, is that they've removed the cash on your trading page from showing as being available to trade status because you have an open order pending which consumes it. But, if you look on the positions page, your cash is still there in your account earning interest. They're just trying to make it clear that if you place an additional order and your open orders execute without you taking steps to cover, you'll either create a margin loan or a trading violation depending on the type of account you have.

I just entered an order to purchase MM shares after close today based on the cash showing on my positions page even though the "available to trade" on the trading page showed zero. It showed zero because the speculative open limit orders I have more than consume the cash in my account if executed.

I am wondering if your situation where your cash is not consumed by open limit orders but rather buy a executed trade that hasn't settled (your CD) is different from my situation?

What message did you get when you tried to place the MM trade?

Has the cash actually been removed from the positions page with the CD not yet added? That is, has your total account value has been reduced by the amount of the CD while you wait for the CD to settle?
The $105,000.00 came out as soon as I placed the order and the c.d. appeared on my positions page..It's is there now even though it will not settle until next week..
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Old 05-17-2023, 12:49 PM   #14
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This is clearly an issue when trying to purchase a CD on the same day something matures.

Typically when something matures I immediately put it in the MM and then play the Schwab CD purchase game the next day. That way you purchase the CD and only sell the MM the day before settlement.

But in your case you couldn't purchase the MM until after the market closes.

I wonder if you put in an order to purchase the MM that day would they have removed the funds for the MM. Then you could purchase the CD but wouldn't have funds available because you have an open order for the MM
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Old 05-17-2023, 06:51 PM   #15
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Originally Posted by lawman View Post
I had a $104,000.00 treasury mature today. The money went into my cash account. I placed an order for a $105,000.C.D. ( I had another $1000.00 already in my cash account). The C.D. does not settle until 5/24/2023..In the past I could buy a MM with the $105,000.00 as long as I sold it before the new purchase settled. Now they take the money from my cash account as soon as the new order is placed so therefore I cannot buy a MM even if I wanted. I know it's not a lot of money and I probably would not have bothered anyway but the the fact that now Schwab gets the benefit of my $105,000.00 for a week leaves me somewhat unhappy..Am I just being nit picky?
No, you don't understand how things work at Schwab. You can still buy $105k of SWVXX, but you may have to call to do it. After you do that, you settlement account will have a $105k negative balance. On or before 5/23, you'll need to sell $105k of SWVXX so there are sufficient funds in your settlement account when the CD that you bought closes.

I've done this many, many times... but not in the last couple weeks.
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Old 05-17-2023, 07:48 PM   #16
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No, you don't understand how things work at Schwab. You can still buy $105k of SWVXX, but you may have to call to do it. After you do that, you settlement account will have a $105k negative balance. On or before 5/23, you'll need to sell $105k of SWVXX so there are sufficient funds in your settlement account when the CD that you bought closes.

I've done this many, many times... but not in the last couple weeks.
When I opened an account at Schwab recently, I asked the rep if I could keep the money in SWVXX and wait until the day before the stock or treasury settles to sell SWVXX. He said emphatically "do not do this" but it sounds like people on this forum are able to do this without any issues. Is that correct?
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Old 05-17-2023, 08:14 PM   #17
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When I opened an account at Schwab recently, I asked the rep if I could keep the money in SWVXX and wait until the day before the stock or treasury settles to sell SWVXX. He said emphatically "do not do this" but it sounds like people on this forum are able to do this without any issues. Is that correct?
They told me the same thing..And in addition to that they sent me a notice explaining that cash accounts would be debited upon orders being placed.
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Old 05-18-2023, 04:34 PM   #18
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^^^ Well, if you two are right then a lot of money will be leaving Schwab for Fidelity because I'm not giving them the float... the bid/ask spreads should be enough.

BTW, I last did this about a week ago. DW's Roth had a negative cash balance from May 4 when I bought 2 new issue CDs until May 9.when I sold some SWVXX to cover the settlement of the new issue CDs on May 10. My broker is fully aware that I do this because of the pathetic yield on the settlement account... 0.45% last time I looked.
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Old 05-18-2023, 06:09 PM   #19
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I move my VG and EJ accounts to Schwab. For sure have noticed somethings I dont like. Having to move money ALL the time is one of them. I will keep buying my Tbills at Fido but i did buy a CD in my IRA at Schwab. I was also suppose to get a BONUS for the transfer but I have not got it YET. Maybe you have to Keep the fiunds at Schwab for a certain time period before getting the BONUS?
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Old 05-18-2023, 07:50 PM   #20
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I move my VG and EJ accounts to Schwab. For sure have noticed somethings I dont like. Having to move money ALL the time is one of them. I will keep buying my Tbills at Fido but i did buy a CD in my IRA at Schwab. I was also suppose to get a BONUS for the transfer but I have not got it YET. Maybe you have to Keep the fiunds at Schwab for a certain time period before getting the BONUS?
It was a hassle to get the bonus. I went into the local office to ask about a signup bonus and was told I could just bring in a check and/or transfer some funds. I thought that was kind of odd because in the past with other brokerages I got an email stating how much I would get and how much time I had to get the funds over to Schwab so I decided to call Schwab Customer Service. They sent an email with the bonus amounts based on assets transferred and date (45 day after enrolling) that the funds had to be at Schwab. I deposited a check (rollover old 401k) and transferred enough cash from Fidelity to qualify for the bonus. After 45 days passed, no bonus. I called Customer Service and was told the check deposit wasn't encoded correctly and therefore didn't count towards the bonus. They said they would contact the person that checked the wrong box on the computer screen and have him change it so the check deposit would count towards the bonus. Waited another week and still no bonus. Made another phone call to Customer Service and they finally figured it out and the bonus showed up yesterday. Apparently the date of the check registered as the date the check mark on the computer system was changed and not when the check was actually deposited.
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