Schwab Cut Your Sweep Rate 89% While Being Sued

I found it on a Tuesday night. Not because someone told me to look. Because I was bored and scrolling through my Schwab account looking for something else.

Cash sweep. 0.01% APY.

I stared at it. Then I pulled up a calculator. I had about a hundred grand sitting in that sweep. A hundred thousand dollars earning me ten bucks a year. Not ten bucks a month. Ten bucks a year.

That same hundred grand in Fidelity's default money market fund would have paid around $3,270. Same cash. Same country. Same interest rate world. The difference is $3,260 a year. Gone. Not stolen at gunpoint. Just kept.

Here is the part that made my stomach turn. Schwab was paying 0.45% on that sweep as recently as last summer. Then they cut it 89% in five months. Two cuts in December alone. Down to 0.05%. Then it kept falling to where it sits now. A penny on a hundred dollars.

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As soon as July, a new buzzword will almost certainly become front-page news.

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Hundreds of trillions…

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They did this while being sued for paying too little on sweep accounts. Not before the lawsuits. During. They looked at the class action complaints stacking up on the docket and cut the rate anyway. That tells you something about how afraid they are of you.

And why wouldn't they be calm. They're sitting on $453.7 billion in client sweep cash. Four hundred fifty-three billion. They take that cash. They lend it out or buy bonds at 4% or 5%. They pay you a fraction of a fraction.

The spread between what they earn and what they pay you made up half their total revenue in 2023. Nine point four billion dollars. Half the company runs on the cash you forgot to move.

Iran is hitting America where it hurts:

In our AI infrastructure.

Iranian drones just struck Amazon's data centers…

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Forbes says: "The next AI arms race is about fortifying data centers."

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Elon Musk.

He's just gained approval for it from the FCC…

It could unleash $12.8 trillion in new wealth…

And one little-known Musk supplier could see the biggest upside.

There's no time to waste here.

Click here for the full story.

Now here is what I wish I had known sooner. Schwab used to let you set a money market fund as your automatic sweep. Your idle cash would roll into something like SWVXX and earn a real yield without you lifting a finger. They killed that option for most accounts. If you want your cash in a money market fund now, you have to move it yourself. Every time. They are betting you won't. They are right about most people.

This is not their first time. In 2022, Schwab paid $187 million to settle with the SEC over their robo-advisor doing the same thing. Sweeping client cash into a low-yield bank account. Pocketing the spread. Saying nothing. A hundred eighty-seven million sounds like a lot until you measure it against nine billion a year. That fine was the cost of a parking spot.

The newest lawsuit names a group of Californians aged 65 and older. The complaint calls it elder financial abuse. These are retirees with cash in retirement accounts. People who trusted the name on the building. People like us.

I am not telling you to sue anyone. I am not telling you to leave Schwab. I don't know your situation and I am still sorting out my own. But I pulled up my account on a Tuesday and found a number that made me feel like a fool. You can pull up yours tonight. Look for the line that says "cash sweep." Look at the rate. Do the math on what that same cash would earn in a money market fund paying 3% or better.

That is not advice. That is just what a friend would say.

Don't just take our word for it. Explore our latest video research and see the data in action. We’ve compiled the most critical insights tailored specifically to your goals.

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