If you keep uninvested cash in a Schwab One brokerage account, the federal insurance sticker on it is about to change. Starting September 8, Schwab moves that cash out of its FDIC-insured Bank Sweep and into a feature called Schwab One Interest, which is covered by SIPC instead. The conversion runs through December 7.
Here’s the number nobody put in the headline. That cash pays 0.01% APY. It paid 0.01% before the change too.
Schwab emailed the notice on August 8. The company later told RIABiz the email went only to Schwab One brokerage customers who use Schwab Bank Investor Checking, not to its whole client base. So plenty of people with idle cash at Schwab got nothing in their inbox and still have a cash feature worth looking at.
The email itself is a masterpiece of calm. “We’ll take care of any necessary steps,” it reads. “There’s nothing you need to do as part of this change, and no fee will be charged.” True on the fee. The rest deserves a second read.
What actually changes
Bank Sweep parks your free credit balance as deposits at partner banks. FDIC insurance covers deposits at $250,000 per depositor, per bank, per ownership category, and because Schwab spread the money across more than one bank, a large balance could pick up more than one $250,000 layer. Park $500,000 and it could sit as $250,000 at Bank A and $250,000 at Bank B, fully covered.
Schwab One Interest is not a deposit. Schwab’s own language: it “is not a bank account, is not a money market fund, and is not FDIC-insured.” It is a direct obligation of the broker, eligible for up to $250,000 in SIPC protection on cash claims. No multi-bank stacking. Schwab adds the line that matters: “Unlike the FDIC, SIPC does not provide blanket coverage.”
Ben Cruikshank of Flourish Financial put it to RIABiz without decoration: “SIPC is unquestionably a lower level of protection than FDIC. FDIC is the gold standard.”
The verdict
If you hold under $250,000 in sweep cash, the insurance swap is close to a non-event. Schwab is not teetering, and SIPC is real coverage for the thing it covers.
The 0.01% is the actual injury, and it has been sitting there the whole time.
The FDIC put the national average savings rate at 0.38% in July. Competitive online savings accounts are paying around 4%. On $20,000, 0.01% earns you about $2 a year. At 4% it earns about $800. Same money, same federal insurance limit, roughly ten minutes of paperwork between them.
That is not a rounding error. That is a car payment.
Do this
If your balance is above $250,000 and you want the multi-bank FDIC layers back, call Schwab and ask to keep Bank Sweep on your Schwab One account. The change happens by default, so not calling is a decision.
For everyone else, ignore the insurance letter and fix the yield. Move anything you are not about to trade with into a high-yield savings account, keep enough in the brokerage to settle trades, and stop treating the sweep as savings. It was never designed to pay you. It was designed to pay the broker. Run your number through our savings calculator, then see where rates actually sit on the savings hub and the best savings accounts page.
Sweep cash is where money goes to sit still. Yours has been sitting still for years.
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