Yesterday Schwab reported third-quarter earnings. During the three months ending Sep. 30, the e-broker made 70 cents a share up from 64 cents a year earlier while revenue increased $132 million to $2.71 billion.
Guess where the money was made?
“For Schwab, net interest revenue made up 60% of overall revenue during the September quarter,” reports the WSJ.
Do you know what net interest revenue is? It’s when Schwab lends your cash out, keeping the profit for itself.
“Schwab and other e-brokers make a significant portion of their profits by sweeping cash daily from customers’ brokerage accounts into the firms’ banking arms,” explains the WSJ.
If you have an account with Schwab and you have money in cash then consider moving it to Fidelity. With Fidelity you’ll earn a lot more by investing that money in a money market rather than letting Schwab use your cash for their own profit.
Originally posted on Your Survival Guy.