Are TD Ameritrade, Charles Schwab, and Fidelity FDIC/SIPC Insured?

Is Fidelity, Charles Schwab, TD Ameritrade FDIC protected? Are their brokerage and IRA investing accounts have SIPC insurance coverage?

Are Charles Schwab, Fidelity, and TD Ameritrade FDIC and SIPC Insured?

Banks and brokerage houses in the United States are regulated by different laws and government agencies. Accordingly, they also have different insurance schemes. Banks are eligible for FDIC insurance, although they are not required to have it. Securities firms can sign up for SIPC protection, although this insurance is also not obligatory. Before opening a deposit or brokerage account, be sure to verify what insurance, if any, the company carries.

Is Charles Schwab FDIC Insured and SIPC Protected?

TheĀ Charles Schwab Corporation is a large financial company that has both banking and investing divisions. The firm operates Schwab Bank, which is FDIC insured. Deposits with the bank are protected up to $250,000, which is the government's maximum limit. This amount can be increased using certain account ownership strategies. Many services that are available at a traditional bank will also be found at Schwab. Checks, a Visa debit card, and bill pay are all available. In fact, Schwab even refunds ATM fees that are incurred by users of its debit card, which most traditional banks don't do.

A brokerage account at Schwab is not held with the banking division. Instead, it is technically under the umbrella of a different company, although it carries the Schwab name. The account is protected by the SIPC up to $500,000. Half of this amount can be used for cash balances.

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Is Fidelity FDIC Insured and SIPC Protected?

Unlike Schwab, Fidelity does not operate its own bank. However, it does provide cash sweep services. This means that the broker moves cash balances in a brokerage account to FDIC-insured banks that Fidelity has partnered with. Some of the banks Fidelity uses include HSBC, Wells Fargo, and Citibank. Because Fidelity uses multiple banks for a single account, it is possible to actually increase the FDIC's usual protection. Fidelity customers can use up to five program banks, which means they can cover up to $1,250,000 worth of cash deposits. This system would be ideal for investors who want FDIC insurance, but have more than $250,000 to protect.

Fidelity is a member of the SIPC, and so brokerage accounts with the company are insured up to half a million dollars. This protection includes $250,000 of protection for cash that is not moved to one of the broker's FDIC-insured program banks. Clients can choose either the FDIC sweep program, or keep their cash balances in a money market mutual fund, where the SIPC will be the insurer.

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Is TD Ameritrade FDIC Insured and SIPC Protected?

TD Ameritrade's options are similar to Fidelity's. TD Ameritrade does not operate a bank, although its clients can elect to have their cash balances swept to a program bank. In this case, it is the broker's affiliate TD Bank. This bank is fully FDIC insured.

Instead of electing the cash sweep vehicle, investors can also leave their cash balances with the broker. TD Ameritrade brokerage accounts are protected by the SIPC for both securities and cash deposits.

Learn more about TD Ameritrade »

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