Brokerage Checking Accounts (2024)

While checking accounts are convenient in many ways, you usually have to transfer funds to a separate account if you want to invest that money. For investors who trade often, making these transfers can be tedious and time consuming.

A brokerage checking account combines checking features with the accessibility of a brokerage account—meaning you can pay bills and buy investments all from one place. While this type of account won’t appeal to everyone, it has its advantages.

What Is a Brokerage Checking Account?

Brokerage checking accounts are similar to regular checking accounts except they make it easier to purchase investment securities since you don’t need to first transfer the funds from an external account. While some brokerages let you invest money with a regular checking account, others require you to set up a brokerage checking account.

With a brokerage checking account, you can buy investments either directly through your account or through a linked investment account. Different brokerage checking accounts may have slightly different features. Most offer low fees, ATM reimbursem*nts and debit cards. Some even offer free checks.

A brokerage checking account makes investing faster and more accessible for those who trade often or want to consolidate their checking and investment accounts while having easy access to the stock market. Instead of making a transfer from your checking to your brokerage account to fund an investment—sometimes waiting multiple days for the transfer to arrive—a brokerage checking account allows you to invest at any time.

Brokerage checking accounts are flexible—you can buy, sell or trade securities whenever you want without penalty. But like a brokerage investment account, there are no tax advantages with a brokerage checking account.

Brokerage Checking Account vs Cash Management Account

Some brokerages use the term “cash account” or “cash management account” instead of “brokerage checking account.” These names all refer to the same type of account, but cash accounts and cash management accounts usually offer competitive interest rates, allowing account holders to save, spend and invest from a single account. The best cash management accounts offer high APYs and more than $2 million in FDIC insurance.

How Does a Brokerage Checking Account Work?

A brokerage checking account combines the features of a brokerage account and a checking account. Like the best checking accounts, a brokerage checking account provides checks, a debit card and ATM access. Depending on the brokerage, you may also qualify for ATM fee reimbursem*nts or interest on your balance. Some brokerages may even waive foreign transaction fees if you travel internationally. These features make it easy to use a brokerage checking account for everyday use.

Brokerage checking accounts share similarities with regular brokerage accounts too. You can invest directly from your account—or in some cases, a linked investment account. Either way, you don’t have to wait for an incoming transfer from a separate account before making an investment.

Unlike a regular checking account that you can open at a bank, brokerage checking accounts can only be opened through a brokerage, not a bank or credit union. Often, there are minimal fees to open and maintain a brokerage checking account, especially if you choose one of the best online brokers.

Brokerages hold your uninvested funds in one or more FDIC-insured banks, meaning anything you haven’t invested is insured—just like at a regular bank. You may even be able to get additional FDIC coverage if your brokerage holds uninvested funds in multiple banks.

Pros and Cons of Brokerage Accounts With Checking

While brokerage accounts with checking features provide the flexibility some investors crave, this type of account isn’t right for everyone. Here are some pros and cons to consider before opening a brokerage checking account.

Pros

• Usually no minimum opening balance requirement
• Usually no monthly maintenance fees
• Allows account holders to invest immediately without waiting for a transfer to settle
• Keeps investments and spending cash in one account
• Some accounts provide additional FDIC insurance by partnering with multiple banks

Cons

• Often offer lower interest rates than high-yield savings and other deposit accounts
• Online brokerages don’t offer in-person service
• Brokerages don’t offer all the same services as regular banks
• Some brokerages require you to link to a separate investment account, which may have its own fees

Alternatives to Brokerage Checking Accounts

If a brokerage checking account isn’t the best option for you, there are plenty of alternatives. Some people prefer to keep their investments and checking account separate while stashing savings in a dedicated interest-bearing account. If you’re someone who likes to keep cash in separate accounts, you may prefer one of the following alternatives:

• Money market account: A money market account blends features of both checking and savings accounts. Usually, money market accounts earn more interest than traditional savings accounts, but they also come with check-writing abilities and a debit card. MMAs aren’t meant for everyday transactions, but they do offer a good deal of flexibility.
• Certificate of deposit: A certificate of deposit (CD) is a type of deposit account that usually earns more interest than a regular savings account, but you must agree to leave your money untouched in the CD for a set period of time. Before buying a CD, you can shop around for the highest interest rate and a term that works for you. Typically, terms range from six months to five years or more.
• High-yield savings account: A high-yield savings account is a type of savings account that earns more interest—often a lot more—than a traditional savings account. Usually, online banks are able to offer high-yield savings accounts because they have lower overhead costs. The downside is that you can’t walk into an online bank if you have questions about your account.

Bottom Line

A brokerage checking account blends the convenient features of a checking account with the ability to buy, sell or trade investments without delay. While this flexibility appeals to some, a brokerage checking account would not be a good fit for those who prefer to keep investments, savings and cash in separate accounts.

Frequently Asked Questions (FAQs)