Almost everything wrong with consumer banking in america is contained, or stems from the ability to refer to cheque as a neccessary and normal thing in modern day finance.
I tore up my last cheque book ten years ago, I have had to resort to Western Union three times now (once a year) to send money to Her Majesties Customs and Excise for my UK pension topup, its the only thing I still do that way, and if the UK stopped using a closed-loop domestic clearing house and opened up SWIFT I'd do this via the IBAN immediately.
Cheques are cool. They're also horrendously stone age and the "yes but..." are the collected history of insanity that is american banking.
Jimmy Stewart, holding the fort at the friendly credit union on christmas day...
The former is what you're describing. The latter is where the bank takes the funds from you then itself guarantees the piece of paper. Much more like an arbitrarily denominated bit of cash often used in large transactions in the States when (1) a seller doesn't trust the buyer too much or (2) the seller wants the funds to clear more quickly.
Also, regular checks are great. There's something about having to physically take time to spend money via a goofy little ritual that makes it easier to save the stuff.
If there is so much distrust between buyer and seller,why hasnt western financial civilization in europe tanked by now?
I get cashier cheques aren't personal cheques but the underlying logic of why they exist is because of legacy reasons which are inefficient and reinforce bad behaviours.
There's apparently still some utility in them in parts of Europe. When I challenged it (I had to pay 80 EUR for the check!) I was told that a bank transfer could be reversed or canceled, and that Cashier's checks prevent that from happening.
I don't see this situation changing until the banks get together with the central bank and create a unified escrow system to replace Cashier's checks.
As of now, they don't see the benefits of changing to a new system outweighing the costs.
Then again, we also have an app (Swish) similar to venmo allowing you to instantly for free send money to a phone number.
They’re free to and from Fidelity accounts. I’d guess the same for Schwab accounts.
Wire transfers can happen almost immediately but typically cost $20-40 for one, or sometimes both, parties involved.
Wire transfers [1]. (For most business accounts, wire transfers are also free.)
I never had a cheque book, but I have a faint memory of my parents using cheques back in the 1970s :-)
Which is a complete rip-off. You could easily get 2% interest on that $100k you're leaving with them by just leaving it with a better bank. For that to be worth it, you'd need to get at least $2k cash back on that credit card. At 5.25% (which is only for that 1 category you chose!) you'd need to burn through $38k/year... i.e., you gotta $100 a day on that card.
Except even if you somehow were planning to spend $100/day on that one lucky category, your cash back would be an order of magnitude lower, because they'd only give you that cash back on the first $2,500 in purchase, i.e. you could only earn $131 at most. So you're losing out on at least $2,000 to earn at most $131. Terrific deal!
The optimal method is to invest the $100k in VTI or even a money market fund. You don’t have to leave it as cash.
Also, you should have a stash of cash you can find at home in case of power outage or network loss and you can’t get money from the bank. And guns and canned food and clean water.
https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone... is fascinating if you enjoy this kind of stuff.
Of course, interest rates are currently so low that it's basically a moot point. And I hardly ever have let any idle cash sit around without sweeping it into a short-term bond fund, or something better than the money market default.
Other people in this thread report that Schwab pays interest on checking account balances. Schwab's website clearly states that their checking account accrues interest. There's a footnote link there, but the fine print simply says that the rate can change over time.
https://www.schwab.com/public/schwab/banking_lending/checkin...
Of course, just as I don't understand people using a traditional bank these days, I likewise don't understand letting a large cash balance sit in checking account. The best interest rate you're going to see these day is probably sub-1%.
So why leave excess money sitting around in a checking account, when sweeping it into even a short-term U.S. bond fund would provide 2x-10x the return with no additional risk? (i.e. if U.S. Treasuries default, then money market accounts are probably screwed too anyway)
Realistically it's better to move as much as possible to a dedicated savings/investment/brokerage account instead, and if you're doing that then why not just write checks against a single combined account?
I haven’t received a physical paycheck from an employer since 2004.
I haven’t written a physical check since probably 2007. But as noted, cashier’s checks are a completely different product.
I’ve had mobile deposit from my US bank since 2010.
And various banks have offered ATM fee reimbursement (capped at a certain amount) since 2010.
Maybe the issue isn’t that US banks are so behind, but rather the age/year of when folks entered the US banking system and were first exposed to these things themselves versus what they were taught in a classroom.
Your friendly broker really wants your cash, because at this point keeping most of the interest is their best source of income.
This all seems very like "why don't you just use the cloud instead of an old fashioned server?"
[1]https://accountopening.fidelity.com/ftgw/aong/aongapp/fdicBa...
Honestly, I just don't understand why people bother with traditional banks at this point. Pretty much all of the major brokers offer cash management accounts that are equivalent of online banking. Pretty much all with standard:
- No fees
- No minimum balance
- Free checkwriting (usually free physical checks for that matter!)
- ATM fee reimbursement (at least anywhere in the U.S., if not internationally too)
- Free debit cards
- Direct deposit
- Deposit paper checks by taking a picture with a phone app, etc etc etc.
The only possible downside that I can think of is that I'd have to deal with a little extra hassle if I wanted a cashier's check. But even then, it would simply take an extra day or two. And it's not like I'm closing on a new home purchase all that frequently.
Nevertheless, people that I talk to get weird and SCARED when I talk about it. Even my wife keeps a separate checking account at a physical bank, because she just likes knowing that a brick-and-mortar building is there. I don't get it myself, but human nature can be odd when it comes to money.