A College Student’s Experiences with Charles Schwab

A couple days ago I received an email from another college student asking about my experience with Charles Schwab for investing, money management and credit card usage. I was asked how easy it was to start investing, how active one must be with investing and how likely a student is to be approved for the Schwab Bank Credit Card. Below is my response.

I first became interested in investing last semester through one of my friends who is a business school student. Back in high school I was on speech team and I was used to following the news quite closely. Upon moving to college, I seemed to lose some focus on current events because there was no pressing need. I found investing to be a way to keep me up-to-date on the news and it also has been a fun way for me to better understand our economy.

Investment strategies vary widely. I tend to take a more active role in investing by selling and trading stocks within the period of a day or two. I do this because I have the time and am willing to put forth the effort. Because of this, Schwab has upgraded me to Active Trader status, allowing me access to enhanced trading tools (more specifically, their StreetSmart platform). However, you can take a very basic and long-term approach to investing, and Schwab will not penalize you for simply letting your money mature slowly. You can put your money in one or two companies that you are confident will have consistent growth through the next few years (normally bigger companies like Google or GE) or you could invest your money in some smaller businesses that you think will experience significant growth (for example, the original investors in Starbucks are quite wealthy right now). If you don't really know stocks too well, a mutual fund is a good option. Essentially, mutual funds are a collection of various stocks that have increased stability and less risk. Schwab makes it easy to trade all of these equities and they provide external ratings on their site to help you evaluate stocks. In addition, when I opened my account I was contacted by a trading consultant who was willing to provide me with investment guidance. If you need help, calling Schwab is simple, you will talk to somebody in the United States, and you can get pertinent advice on how to invest.

My strategy tends to be a more difficult one due to the volatility of stocks over a short period of time, but I choose to do it because my goal with this portfolio is to learn, not to make large profits. I don't have much money in the market right now, but I hope to gain the skills to manage my money effectively in college with the ultimate goal that, once I graduate and have a steady income, I will have already learned to invest responsibly.

I don't really know how easy it is to get approved for the Schwab credit card. I believe that I was approved mainly because of assets with Schwab, because of my major and because I am employed. Some students get credit cards that are 'secured'- meaning that the student has to essentially prepay for purchases so that the bank knows that they have money to cover purchases. The advantage of the Schwab credit card may be that they can see your liquid assets (e.g. checking account balance) and know how that you can repay your balance. That being said, the Schwab credit card approval process may not have access to your Schwab account balances because the card is managed by FIA card services. A second point that helped me to get approved was my education- when I applied, they asked for my university and major. Statistics show that education, grades and major can be a good basis for determining credit in those without an established FICO score (see The Human Capital Score). The fact that you are in college should act in your favor. Finally, I have a paying job here at college, so I have a steady income (albeit of a quite small amount). If you have a job and hence have a consistent way to pay our bills, you are more likely to be approved.

My favorite part about the Schwab credit card is that it is a real card. What I mean is that the card is intended for adults and the card has the features you need, not the ostentatious selling points of cards banks try sell on campus. I love the 2% cash back feature- compared to other cards, this is a high percentage and I have received some money back from this feature. For example, I made about $10 from buying books for this semester. It may not seem like much, but that is a couple cups of coffee for free! I do not carry a balance from month to month so the interest rate is not as significant to me, but the rate is slightly below the national average. Note that if you do carry a balance from month to month, the Schwab card may not be the best option for you because the 2% cash back feature will become insignificant compared to the interest rate on your carried balance. Also be aware that, if you want a credit card, you may want to apply before February 22 so that you are not affected by regulations that will come into play from the Credit Card Act of 2009 (for information, see here).

Schwab has been a great company for me to do business with and I have really had no issues with them. My one minor complaint is that they do not provided scanned images of checks in their online interface, so it can be difficult to ensure that the specific checks have been cashed. A way around this is to deposit checks at a local bank that provides scanned images online, and you can simply transfer the money over to your Schwab account once the check clears. The combined brokerage, checking and credit card accounts at Charles Schwab make it easy for young adults to effectively manage their money while providing the tools and guidance to make smart decisions with their money.

Disclosure: The author currently owns stock in Google.