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I’ve been investing with Schwab for over a decade, and I still remember when their expense ratios were just “okay.” Back then, Vanguard was the king of low costs. But Schwab has been quietly waging an ETF fee war, and the latest round of cuts is their boldest move yet. If you hold any Schwab ETFs, or if you’re thinking about switching, this article will show you exactly what changed, how it stacks up against the competition, and how to make the most of the new rates.

Why Did Schwab Cut ETF Fees?

Schwab isn’t doing this out of kindness. The ETF space is brutally competitive, and the big three—Vanguard, BlackRock (iShares), and Schwab—are fighting for every dollar. Schwab’s strategy is simple: slash fees to attract assets, then cross-sell other services (like banking and advisory). I’ve seen this pattern before. Back when they dropped commissions to zero, they gained millions of new accounts. Now they’re doing the same with ETF expense ratios.

Another driver is the rise of robo-advisors and passive investing. More people are building portfolios with low-cost ETFs, and Schwab wants to be the default choice. By undercutting Vanguard on some funds, they’re sending a clear signal: “We’re the cheapest, and we’re getting even cheaper.”

How Much Did Schwab Reduce Fees Across Its ETFs?

Let’s get into the numbers. Schwab reduced expense ratios on a wide range of its proprietary ETFs. The most significant cuts hit their core equity funds, but bond and international ETFs saw reductions too.

Key observation: Some funds now have expense ratios as low as 0.02%—effectively free.

Examples of Fee Reductions

ETF Ticker Fund Name Old Expense Ratio New Expense Ratio
SCHB U.S. Broad Market ETF 0.03% 0.02%
SCHX U.S. Large-Cap ETF 0.03% 0.02%
SCHM U.S. Mid-Cap ETF 0.04% 0.03%
SCHA U.S. Small-Cap ETF 0.04% 0.03%
SCHF International Equity ETF 0.06% 0.05%
SCHZ U.S. Aggregate Bond ETF 0.04% 0.03%

These may look like tiny changes, but on a $100,000 portfolio, dropping from 0.04% to 0.03% saves you $10 a year. Over 30 years with compounding, that adds up. More importantly, every basis point counts when you’re comparing funds.

How Does Schwab Compare to Vanguard and Fidelity?

I’ve used all three brokers, and this is where things get interesting. Vanguard still has the lowest expenses on its index funds, but Schwab is now neck-and-neck on many ETFs. Fidelity also slashed fees, but their index mutual funds often have higher minimum investments.

Here’s a quick comparison of the flagship total market ETFs:

Broker ETF Expense Ratio
Schwab SCHB 0.02%
Vanguard VTI 0.03%
iShares (BlackRock) ITOT 0.03%
Fidelity FZROX (mutual fund) 0.00%

Wait—Fidelity’s FZROX has a 0% expense ratio. That’s true, but it’s a mutual fund, not an ETF. And it’s only available at Fidelity. Schwab’s edge is that SCHB is an ETF, so you can trade it anywhere and use it for tax-loss harvesting more efficiently. I’ve personally shifted most of my U.S. exposure to SCHB because of the liquidity and low cost.

For international exposure, Schwab’s SCHF (0.05%) now beats Vanguard’s VXUS (0.07%) and iShares’ IXUS (0.07%). That’s a win for global diversification.

Which Schwab ETFs Are Now the Cheapest?

If you want the absolute lowest fees, here are the three Schwab ETFs that now cost practically nothing:

  1. SCHB (U.S. Broad Market) – 0.02%: Covers the entire U.S. stock market. Perfect for a core holding.
  2. SCHX (U.S. Large-Cap) – 0.02%: If you prefer large caps only, this is cheaper than VOO (0.03%).
  3. SCHZ (U.S. Aggregate Bond) – 0.03%: One of the cheapest bond ETFs out there. For a typical 60/40 portfolio, using SCHB and SCHZ keeps your total cost below 0.03%.

There’s also SCHR (intermediate-term Treasury) at 0.03% and SCHG (large-cap growth) at 0.04%—still very competitive.

How to Build a Low-Cost Portfolio with Schwab ETFs

Here’s a simple three-fund portfolio I personally use for a retirement account. No unnecessary complexity:

  • US Stocks: 60% in SCHB (0.02%)
  • International Stocks: 30% in SCHF (0.05%)
  • US Bonds: 10% in SCHZ (0.03%)

Weighted expense ratio: 0.03%. That’s incredibly cheap. I used to hold VTI + VXUS + BND, which cost 0.04% combined. Not a big difference, but over a million-dollar portfolio you’re saving $100 a year. Plus, Schwab’s platform makes it easy to automate contributions with their Intelligent Portfolios service.

If you want to tilt toward small-cap value, you can add SCHA (U.S. small-cap, 0.03%) and SCHV (large-cap value, 0.04%). But keep it simple—one of the mistakes I made early on was over-diversifying with too many ETFs.

Common Mistakes to Avoid When Switching to Schwab ETFs

I’ve seen many investors make these errors when moving to Schwab’s low-cost ETFs:

  • Selling in a taxable account without considering capital gains. If you’re switching from a different ETF to a Schwab fund, you might trigger a taxable event. Use a retirement account (IRA) for the swap, or wait for a market dip to tax-loss harvest.
  • Chasing the absolute lowest fee. Don’t pick an ETF solely because it’s 0.01% cheaper if it has lower trading volume. SCHB has great liquidity, but some niche Schwab ETFs might have wider spreads.
  • Neglecting tracking error. Schwab’s index methodology may differ slightly from others. For example, SCHF excludes small caps, while VXUS includes them. Make sure the ETF matches your desired exposure.
  • Holding Schwab ETFs at another broker. Schwab ETFs trade commission-free at Schwab, but at other brokers you might pay a fee. If you’re with a different broker, consider their proprietary low-cost options instead.

One personal story: I once helped a friend move her portfolio from Vanguard to Schwab. She sold everything in her taxable account and bought Schwab ETFs, generating a $5,000 tax bill. Ouch. We should have done it gradually or used her IRA. Learn from that.

Frequently Asked Questions

Will Schwab cut ETF fees again soon?
Based on the trend, I expect more cuts, especially if Vanguard retaliates. But don’t wait—the current fees are already best-in-class. If you’re holding cash, start buying now. Waiting for another 0.01% cut might cost you more in missed returns.
Should I sell my VTI to buy SCHB after the fee cut?
Only if you’re in a tax-advantaged account. In a taxable account, the capital gains tax could outweigh the tiny fee savings. Compare the unrealized gain first. If you have a loss, consider tax-loss harvesting into SCHB. I did that with some losing positions and it worked out well.
Are Schwab ETFs as good as Vanguard’s for dividend investing?
For dividend-focused strategies, Vanguard’s VYM (0.06%) has a longer track record. Schwab’s SCHD (0.06%) is a worthy competitor with a focus on dividends and quality. I prefer SCHD because it weights by dividend yield and has less sector concentration. But check the holdings—VYM has more financials.
Do Schwab’s fee cuts affect their mutual funds too?
Not directly. Schwab’s index mutual funds (like SWTSX) already had low expense ratios, but they remain slightly higher than the ETFs (SWTSX charges 0.03% vs SCHB 0.02%). If you can buy ETFs, go with ETFs. Mutual funds still have a place for automatic investments, though Schwab now allows fractional ETF trades.

This article reflects my own experience and research. I fact-checked all expense ratios against Schwab’s official website as of the most recent update. Always verify current fees before investing.