Earn 1.5% on your checking account without the usual hoops (at Fidelity)

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CDub
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Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by CDub » Sun Aug 05, 2018 7:24 am

The Fidelity Cash Management account has served as my primary checking account for 5+ years. It's an excellent product with no fees, minimums, and free-ATM withdrawals. Combining this with the Fidelity 2% cashback visa has been a great option for me.

I recently came across their "Cash Manager" https://www.fidelity.com/cash-managemen ... sh-manager feature. This allows you to connect to a brokerage account to automatically transfer funds from the brokerage to your checking account if you happen to: 1) overdraft your cash management account or 2) drop below a "minimum target balance" in your cash management account

Cash that sits in the Brokerage Account is automatically placed in the “Core Position” – which at Fidelity is a Money Market Account currently yielding 1.56% (SPAXX).

As a result, you can keep a tiny amount of money in your checking account (possibly even $0, though I haven’t tried that) – and leave the rest in your brokerage account earning the money market rate (currently 1.56%).

I am aware of the various high yield checking accounts that exist out there, however, those often come with a lot of hoops to jump through (i.e. spend 12 debit card transactions per month, keep $x invested, etc...). I put all of my spending on credit cards when possible, and do not want to jump through all of those hoops. This setup doesn't have any hoops to jump through once it's setup.

I have now transferred all of the money except for $1000 that was currently in the "Cash Management Account" into the "Brokerage Account". I set the minimum target balance at $1000. If anything is charged to my Cash Management greater than the amount available, it will automatically transfer from my "Brokerage" account allowing the transaction to process without issue.

This allows me to keep all of my checking account dollars earning the money market rate (currently 1.56%) and not worry about keeping enough in the checking account.

I have even changed all of the old direct debits from my checking account to debit directly from the Brokerage Account instead. You can even do "billpay" directly from the Brokerage Account.

This is not a setup I have seen discussed before and just discovered it this week, so I thought it was worth sharing - and also getting a feedback on any drawbacks that aren't yet visible to me.

TLDR: It is possible to yield >1.5% interest on your checking account funds. Connect your Checking Account (Fidelity Cash Management) to a Fidelity Brokerage Account and start using your brokerage account to store your checking account needs. Setup the “Cash Manager” feature. Anything charged to your checking account will be automatically covered by the Brokerage Account. Your checking account dollars then earn the money market rate (currently 1.56% in SPAXX) instead of the paltry checking account rate.

student
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by student » Sun Aug 05, 2018 7:39 am

Good post. I am somewhat cautious with this type of setup. If there is fraud and the checking account get hit, I do not want it to automatically take money from my brokerage account.

zrail
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by zrail » Sun Aug 05, 2018 8:03 am

I set this up last week. The key thing in my mind is that they’ll only liquidate money market funds in the linked brokerage account, so if there is money in there you don’t want available for immediate spending just buy into a bond fund.

CDub
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by CDub » Sun Aug 05, 2018 8:04 am

student wrote:
Sun Aug 05, 2018 7:39 am
Good post. I am somewhat cautious with this type of setup. If there is fraud and the checking account get hit, I do not want it to automatically take money from my brokerage account.
That’s a good point, however, the cash manager does not “sell” anything except money market and cash equivalents. Ie if you have stock or bond positions in your brokerage then they would not be touched.

Spirit Rider
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by Spirit Rider » Sun Aug 05, 2018 8:06 am

You don't have to go to that much trouble. Just buy SPAXX in your Cash Management Account. When you have insufficient funds in your core position. Fidelity will sell enough of whatever money market funds you have in the CMA to cover the debit. I have been doing this since it was originally the MySmartCash account more than a decade ago.
Last edited by Spirit Rider on Sun Aug 05, 2018 8:14 am, edited 1 time in total.

Chip
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by Chip » Sun Aug 05, 2018 8:12 am

I guess I don't even have a "Cash Management Account". SPAXX is my "core account" position at Fidelity. I have checks that Fidelity provides that draw directly from that account & fund. Plus Billpay debits, direct pulls, etc.

CDub
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by CDub » Sun Aug 05, 2018 8:15 am

Spirit Rider wrote:
Sun Aug 05, 2018 8:06 am
You don't have to go to that much trouble. Just buy SPAXX in your Cash Management Account. When you have insufficient funds in your core position. Fidelity will sell enough of whatever money market funds you have in the CMA to cover the debit.
This is a great point and a nice simplification. One drawback that I see is that direct deposits would not go straight into SPAXX, you’d have to buy it. In my scenario your funds are automatically earning the interest.

CDub
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by CDub » Sun Aug 05, 2018 8:16 am

Chip wrote:
Sun Aug 05, 2018 8:12 am
I guess I don't even have a "Cash Management Account". SPAXX is my "core account" position at Fidelity. I have checks that Fidelity provides that draw directly from that account & fund. Plus Billpay debits, direct pulls, etc.
Can you get a debit card on that account? I actually hadn’t even considered that approach.

Chip
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by Chip » Sun Aug 05, 2018 8:22 am

CDub wrote:
Sun Aug 05, 2018 8:16 am
Can you get a debit card on that account? I actually hadn’t even considered that approach.
Yes. I have one.

student
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by student » Sun Aug 05, 2018 8:33 am

CDub wrote:
Sun Aug 05, 2018 8:04 am
student wrote:
Sun Aug 05, 2018 7:39 am
Good post. I am somewhat cautious with this type of setup. If there is fraud and the checking account get hit, I do not want it to automatically take money from my brokerage account.
That’s a good point, however, the cash manager does not “sell” anything except money market and cash equivalents. Ie if you have stock or bond positions in your brokerage then they would not be touched.
I see. So cash manager will stop taking money from the brokerage account if only stock and bond are available. That's good to know. I opened a separate Fidelity cash management account recently because I do not want to use the cash management feature of the brokerage account directly. I was wondering what if there was a compromise and a check was written against the brokerage account. I called Fidelity and asked. The rep told me that no stock or bond will be sold. I called a second time to confirm and was told the opposite.

student
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by student » Sun Aug 05, 2018 8:34 am

Spirit Rider wrote:
Sun Aug 05, 2018 8:06 am
You don't have to go to that much trouble. Just buy SPAXX in your Cash Management Account. When you have insufficient funds in your core position. Fidelity will sell enough of whatever money market funds you have in the CMA to cover the debit. I have been doing this since it was originally the MySmartCash account more than a decade ago.
Interesting. I logged on to my account and SPAXX was not available as a choice for core position in my cash management account.

Spirit Rider
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by Spirit Rider » Sun Aug 05, 2018 8:37 am

CDub wrote:
Sun Aug 05, 2018 8:15 am
Spirit Rider wrote:
Sun Aug 05, 2018 8:06 am
You don't have to go to that much trouble. Just buy SPAXX in your Cash Management Account. When you have insufficient funds in your core position. Fidelity will sell enough of whatever money market funds you have in the CMA to cover the debit.
This is a great point and a nice simplification. One drawback that I see is that direct deposits would not go straight into SPAXX, you’d have to buy it. In my scenario your funds are automatically earning the interest.
Actually, you can get the same result with a CMA.

Direct deposits to a brokerage account behind the scenes still purchase into the money market account for that day's end of day transaction. This is the rule for all mutual funds.

Set deposit alerts on your CMA which you will get by 10:00am. As long as you submit an order by 4:00pm ET, the purchase will into the money market account for that day's end of day transaction.

The net effect is exactly the same. If a bit more involvement is necessary.

CDub
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by CDub » Sun Aug 05, 2018 8:37 am

[quote="Spirit Rider" post_id=4053400 time=<a href="tel:1533474410">1533474410</a> user_id=717]
You don't have to go to that much trouble. Just buy SPAXX in your Cash Management Account. When you have insufficient funds in your core position. Fidelity will sell enough of whatever money market funds you have in the CMA to cover the debit. I have been doing this since it was originally the MySmartCash account more than a decade ago.
[/quote]
student wrote:
Sun Aug 05, 2018 8:34 am
Interesting. I logged on to my account and SPAXX was not available as a choice for core position in my cash management account.
Yes, that was my point in response to his post above. SPAXX cannot be the core position in the cash management account. You could purchase it manually though as he mentioned.

student
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by student » Sun Aug 05, 2018 8:39 am

CDub wrote:
Sun Aug 05, 2018 8:16 am
Chip wrote:
Sun Aug 05, 2018 8:12 am
I guess I don't even have a "Cash Management Account". SPAXX is my "core account" position at Fidelity. I have checks that Fidelity provides that draw directly from that account & fund. Plus Billpay debits, direct pulls, etc.
Can you get a debit card on that account? I actually hadn’t even considered that approach.
I think there maybe danger in using the cash management feature of the brokerage account. You can write checks and have debit card. However, note the following.

1) Debit card from a Cash Management Account will reimburse fees from international ATM but not for debit card from brokerage.

2) (Repeated posting) I was wondering what if there was a compromise and a check was written against the brokerage account. I called Fidelity and asked. The rep told me that no stock or bond will be sold. I called a second time to confirm and was told the opposite.

mpsz
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by mpsz » Sun Aug 05, 2018 8:39 am

For those mentioning fraud concerns, you also need to make sure that margin is disabled on your brokerage account. I believe Cash Manager will first use your available brokerage cash, then sell money market funds, and finally withdraw on margin. So putting your "not available for spending" cash into a bond fund is not sufficient if you have margin enabled.

student
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by student » Sun Aug 05, 2018 8:39 am

CDub wrote:
Sun Aug 05, 2018 8:37 am
Yes, that was my point in response to his post above. SPAXX cannot be the core position in the cash management account. You could purchase it manually though as he mentioned.
ok. I missed the manual part.

Spirit Rider
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by Spirit Rider » Sun Aug 05, 2018 8:40 am

student wrote:
Sun Aug 05, 2018 8:34 am
Spirit Rider wrote:
Sun Aug 05, 2018 8:06 am
You don't have to go to that much trouble. Just buy SPAXX in your Cash Management Account. When you have insufficient funds in your core position. Fidelity will sell enough of whatever money market funds you have in the CMA to cover the debit. I have been doing this since it was originally the MySmartCash account more than a decade ago.
Interesting. I logged on to my account and SPAXX was not available as a choice for core position in my cash management account.
I did't say you change your core account in the CMA which you can not do. You use core funds to purchase SPAXX.

Dandy
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by Dandy » Sun Aug 05, 2018 8:41 am

I have a Vanguard Advantage Account (a cash management account) which for some reason they not only don't advertise but it is hard to find information about it. Originally, I was going to use that as my primary checking account but when money market rates went almost to zero I kept the account but found a better checking account.

The VG Advantage Account has unlimited checking on their Federal Money Market Fund with a compound yield of 1.89%. It comes with an ATM card, Bill Pay etc (which I have never used). I wrote checks on it last year for the first time - no problem. Also move money between this account and my bank with no problems.

It is available to VG Select customers or above. I pay no fee.

My only concern about it is that VG doesn't seem to feature this product and may discontinue it or not enhance it. I would guess that Fidelity would have a state of the art account.

Meanwhile, I'll enjoy the interest which is better than my current checking and savings options. By the way I don't recall any Boglehead posts discussing the VG Advantage Account.

Chip
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by Chip » Sun Aug 05, 2018 8:41 am

student wrote:
Sun Aug 05, 2018 8:39 am
However, note the following.

1) Debit card from a Cash Management Account will reimburse fees from international ATM but not for debit card from brokerage.
This is incorrect. I have been reimbursed for all ATM fees. Though I am Private Client and that may make a difference.

CDub
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by CDub » Sun Aug 05, 2018 8:41 am

student wrote:
Sun Aug 05, 2018 8:33 am

I see. So cash manager will stop taking money from the brokerage account if only stock and bond are available. That's good to know. I opened a separate Fidelity cash management account recently because I do not want to use the cash management feature of the brokerage account directly. I was wondering what if there was a compromise and a check was written against the brokerage account. I called Fidelity and asked. The rep told me that no stock or bond will be sold. I called a second time to confirm and was told the opposite.
It’s listed in their FAQ’s, they will not sell stock or bond.

https://www.fidelity.com/cash-managemen ... nt-account
If I drop below my minimum target balance or use Cash Manager overdraft protection, will any of my stocks, bonds, or mutual funds be sold?
No, Cash Manager overdraft protection is funded by using available funds (available cash, available margin, and non-core Fidelity money market assets) from a hierarchy of Fidelity funding accounts (up to $99,999.99 per day per funding account) that you designate. It will not sell equity or bond positions or non-money market funds, and will not subject you to variations in market conditions.
Last edited by CDub on Sun Aug 05, 2018 8:45 am, edited 2 times in total.

Tdubs
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by Tdubs » Sun Aug 05, 2018 8:42 am

Don't know much about this. Why doesn't Vanguard have something similar?

student
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by student » Sun Aug 05, 2018 8:42 am

Spirit Rider wrote:
Sun Aug 05, 2018 8:40 am
student wrote:
Sun Aug 05, 2018 8:34 am
Spirit Rider wrote:
Sun Aug 05, 2018 8:06 am
You don't have to go to that much trouble. Just buy SPAXX in your Cash Management Account. When you have insufficient funds in your core position. Fidelity will sell enough of whatever money market funds you have in the CMA to cover the debit. I have been doing this since it was originally the MySmartCash account more than a decade ago.
Interesting. I logged on to my account and SPAXX was not available as a choice for core position in my cash management account.
I did't say you change your core account in the CMA which you can not do. You use core funds to purchase SPAXX.
I misinterpreted. Thank you for your note.

student
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by student » Sun Aug 05, 2018 8:44 am

Chip wrote:
Sun Aug 05, 2018 8:41 am
student wrote:
Sun Aug 05, 2018 8:39 am
However, note the following.

1) Debit card from a Cash Management Account will reimburse fees from international ATM but not for debit card from brokerage.
This is incorrect. I have been reimbursed for all ATM fees. Though I am Private Client and that may make a difference.
Being a Private Client could be it. I called Fidelity specifically about this a year ago. Of course, the rep could be wrong.

student
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by student » Sun Aug 05, 2018 8:46 am

CDub wrote:
Sun Aug 05, 2018 8:41 am
student wrote:
Sun Aug 05, 2018 8:33 am

I see. So cash manager will stop taking money from the brokerage account if only stock and bond are available. That's good to know. I opened a separate Fidelity cash management account recently because I do not want to use the cash management feature of the brokerage account directly. I was wondering what if there was a compromise and a check was written against the brokerage account. I called Fidelity and asked. The rep told me that no stock or bond will be sold. I called a second time to confirm and was told the opposite.
It’s listed in their FAQ’s, they will not sell stock or bond.

If I drop below my minimum target balance or use Cash Manager overdraft protection, will any of my stocks, bonds, or mutual funds be sold?
No, Cash Manager overdraft protection is funded by using available funds (available cash, available margin, and non-core Fidelity money market assets) from a hierarchy of Fidelity funding accounts (up to $99,999.99 per day per funding account) that you designate. It will not sell equity or bond positions or non-money market funds, and will not subject you to variations in market conditions.
Thanks. Well, I know one of the reps is wrong. I just don't know which one.

UpperNwGuy
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by UpperNwGuy » Sun Aug 05, 2018 8:46 am

student wrote:
Sun Aug 05, 2018 8:33 am
CDub wrote:
Sun Aug 05, 2018 8:04 am
student wrote:
Sun Aug 05, 2018 7:39 am
Good post. I am somewhat cautious with this type of setup. If there is fraud and the checking account get hit, I do not want it to automatically take money from my brokerage account.
That’s a good point, however, the cash manager does not “sell” anything except money market and cash equivalents. Ie if you have stock or bond positions in your brokerage then they would not be touched.
I see. So cash manager will stop taking money from the brokerage account if only stock and bond are available. That's good to know. I opened a separate Fidelity cash management account recently because I do not want to use the cash management feature of the brokerage account directly. I was wondering what if there was a compromise and a check was written against the brokerage account. I called Fidelity and asked. The rep told me that no stock or bond will be sold. I called a second time to confirm and was told the opposite.
The third call will be the tie-breaker! :)

CDub
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by CDub » Sun Aug 05, 2018 8:49 am

Dandy wrote:
Sun Aug 05, 2018 8:41 am
I have a Vanguard Advantage Account (a cash management account) which for some reason they not only don't advertise but it is hard to find information about it. Originally, I was going to use that as my primary checking account but when money market rates went almost to zero I kept the account but found a better checking account.

The VG Advantage Account has unlimited checking on their Federal Money Market Fund with a compound yield of 1.89%. It comes with an ATM card, Bill Pay etc (which I have never used). I wrote checks on it last year for the first time - no problem. Also move money between this account and my bank with no problems.

It is available to VG Select customers or above. I pay no fee.

My only concern about it is that VG doesn't seem to feature this product and may discontinue it or not enhance it. I would guess that Fidelity would have a state of the art account.

Meanwhile, I'll enjoy the interest which is better than my current checking and savings options. By the way I don't recall any Boglehead posts discussing the VG Advantage Account.
I had not heard about this, thanks for sharing!

I originally signed up for the fidelity account due to unlimited ATM reimbursement at any ATM worldwide. It looks like vanguards advantage account requires PNC bank ATMs.

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indexfundfan
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by indexfundfan » Sun Aug 05, 2018 8:52 am

You can get a little bit more yield using SPRXX instead of SPAXX (1.85% vs. 1.57%). Or even using FZDXX 1.97% ($100k to start, $10k to maintain). All of these options require you to manually purchase the fund in the CMA (but will be automatically liquidated as necessary to meet debits).
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CDub
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by CDub » Sun Aug 05, 2018 8:58 am

indexfundfan wrote:
Sun Aug 05, 2018 8:52 am
You can get a little bit more yield using SPRXX instead of SPAXX (1.85% vs. 1.57%). Or even using FZDXX 1.97% ($100k to start, $10k to maintain). All of these options require you to manually purchase the fund in the CMA (but will be automatically liquidated as necessary to meet debits).

Yep, good point as well. I wish fidelity would offer SPRXX as a core position alternative.

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alpenglow
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by alpenglow » Sun Aug 05, 2018 9:22 am

indexfundfan wrote:
Sun Aug 05, 2018 8:52 am
You can get a little bit more yield using SPRXX instead of SPAXX (1.85% vs. 1.57%). Or even using FZDXX 1.97% ($100k to start, $10k to maintain). All of these options require you to manually purchase the fund in the CMA (but will be automatically liquidated as necessary to meet debits).
Thanks for the suggestion of SPRXX.
Spirit Rider wrote:
Sun Aug 05, 2018 8:40 am
student wrote:
Sun Aug 05, 2018 8:34 am
Spirit Rider wrote:
Sun Aug 05, 2018 8:06 am
You don't have to go to that much trouble. Just buy SPAXX in your Cash Management Account. When you have insufficient funds in your core position. Fidelity will sell enough of whatever money market funds you have in the CMA to cover the debit. I have been doing this since it was originally the MySmartCash account more than a decade ago.
Interesting. I logged on to my account and SPAXX was not available as a choice for core position in my cash management account.
I did't say you change your core account in the CMA which you can not do. You use core funds to purchase SPAXX.
Silly me. I never thought about holding anything in the CMA besides core cash. I'll use core cash earning 0.25 to buy SPRXX instead.

Thanks!

vtMaps
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by vtMaps » Sun Aug 05, 2018 9:33 am

CDub wrote:
Sun Aug 05, 2018 8:41 am
It’s listed in their FAQ’s, they will not sell stock or bond.

https://www.fidelity.com/cash-managemen ... nt-account
If I drop below my minimum target balance or use Cash Manager overdraft protection, will any of my stocks, bonds, or mutual funds be sold?
No, Cash Manager overdraft protection is funded by using available funds (available cash, available margin, and non-core Fidelity money market assets) from a hierarchy of Fidelity funding accounts (up to $99,999.99 per day per funding account) that you designate. It will not sell equity or bond positions or non-money market funds, and will not subject you to variations in market conditions.
There's the catch... they will use available margin. I'm pretty sure they reserve the right to liquidate any of your funds to claw back the margin. Better to buy SPRXX in the CMA account which has no margin.

--vtMaps
The optimist proclaims that we live in the best of all possible worlds; and the pessimist fears this is true. --James Branch Cabell

CDub
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by CDub » Sun Aug 05, 2018 9:55 am

vtMaps wrote:
Sun Aug 05, 2018 9:33 am
[quote=CDub post_id=4053451 time=<a href="tel:1533476509">1533476509</a> user_id=129605]
It’s listed in their FAQ’s, they will not sell stock or bond.

https://www.fidelity.com/cash-managemen ... nt-account
If I drop below my minimum target balance or use Cash Manager overdraft protection, will any of my stocks, bonds, or mutual funds be sold?
No, Cash Manager overdraft protection is funded by using available funds (available cash, available margin, and non-core Fidelity money market assets) from a hierarchy of Fidelity funding accounts (up to $99,999.99 per day per funding account) that you designate. It will not sell equity or bond positions or non-money market funds, and will not subject you to variations in market conditions.
There's the catch... they will use available margin. I'm pretty sure they reserve the right to liquidate any of your funds to claw back the margin. Better to buy SPRXX in the CMA account which has no margin.

--vtMaps
[/quote]

Is that really a catch? Don’t you have to sign up for margin? I don’t think it’s turned on by default. I can’t seem to tell from looking at my account.

marcopolo
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by marcopolo » Sun Aug 05, 2018 10:56 am

vtMaps wrote:
Sun Aug 05, 2018 9:33 am
CDub wrote:
Sun Aug 05, 2018 8:41 am
It’s listed in their FAQ’s, they will not sell stock or bond.

https://www.fidelity.com/cash-managemen ... nt-account
If I drop below my minimum target balance or use Cash Manager overdraft protection, will any of my stocks, bonds, or mutual funds be sold?
No, Cash Manager overdraft protection is funded by using available funds (available cash, available margin, and non-core Fidelity money market assets) from a hierarchy of Fidelity funding accounts (up to $99,999.99 per day per funding account) that you designate. It will not sell equity or bond positions or non-money market funds, and will not subject you to variations in market conditions.
There's the catch... they will use available margin. I'm pretty sure they reserve the right to liquidate any of your funds to claw back the margin. Better to buy SPRXX in the CMA account which has no margin.

--vtMaps
That is my preferred approach. I keep my brokerage account and CMA account separate. I do NOT use Cash Manager to allow CMA to access funds in the Brokerage account (overdraft protection). I have large margin capability in the Brokerage account and don't want any fraudulent transaction in the CMA to be able to access that.

I use FZDXX in the CMA account to hold all my near term expenses, it is yielding close to 2%. Automatically sold to cover any expenses in the CMA account. Replenish as needed. I am in the withdrawal phase of life so don't need to worry about periodic deposits coming in. :(
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by Scotttheking » Sun Aug 05, 2018 11:04 am

Open a second brokerage account. I have 2, one for stocks, one holding my cash supply in money markets. The second is linked to cma for overdrafts.

marcopolo
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by marcopolo » Sun Aug 05, 2018 11:12 am

Scotttheking wrote:
Sun Aug 05, 2018 11:04 am
Open a second brokerage account. I have 2, one for stocks, one holding my cash supply in money markets. The second is linked to cma for overdrafts.
The CMA IS a brokerage account. You can hold the MM fund directly in it. No need for a second Brokerage account. I just found that out recently from another poster here.

viewtopic.php?f=1&t=237712&p=3986884&hilit=CMA#p3986884
Once in a while you get shown the light, in the strangest of places if you look at it right.

CDub
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by CDub » Sun Aug 05, 2018 1:25 pm

marcopolo wrote:
Sun Aug 05, 2018 11:12 am
Scotttheking wrote:
Sun Aug 05, 2018 11:04 am
Open a second brokerage account. I have 2, one for stocks, one holding my cash supply in money markets. The second is linked to cma for overdrafts.
The CMA IS a brokerage account. You can hold the MM fund directly in it. No need for a second Brokerage account. I just found that out recently from another poster here.

viewtopic.php?f=1&t=237712&p=3986884&hilit=CMA#p3986884
Yep, this was discussed further up in this thread as well. The only downside with only using the CMA is you have to manually buy the MM, as you can't set that as the core position. I have direct deposits coming into the brokerage and it's just a bit simpler if I deposit straight into the brokerage account with the MM as the core position.

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Mursili
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by Mursili » Thu Aug 23, 2018 12:12 am

CDub wrote:
Sun Aug 05, 2018 9:55 am
Is that really a catch? Don’t you have to sign up for margin? I don’t think it’s turned on by default. I can’t seem to tell from looking at my account.
I know this is an old thread, but I looked into whether I had margin turned on in our brokerage account. It is straightforward to find. Go to the account, go to "Account Features" (you might have to click "More..." to see it) and then "Brokerage and Trading" and then "Margin." Happily it verified that we do not have margin "turned on" in that account.

I do not see me using margin much in the future and will likely never opt to "turn it on".

This thread has been useful to us in that we got money out of accounts earning next to nothing and are at least getting SPAXX kind of returns now.
When it comes to havoc, no one wreaks like me! - Dr. Heinz Doofenshmirtz

CDub
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by CDub » Thu Aug 23, 2018 6:46 am

Mursili wrote:
Thu Aug 23, 2018 12:12 am
CDub wrote:
Sun Aug 05, 2018 9:55 am
Is that really a catch? Don’t you have to sign up for margin? I don’t think it’s turned on by default. I can’t seem to tell from looking at my account.
I know this is an old thread, but I looked into whether I had margin turned on in our brokerage account. It is straightforward to find. Go to the account, go to "Account Features" (you might have to click "More..." to see it) and then "Brokerage and Trading" and then "Margin." Happily it verified that we do not have margin "turned on" in that account.

I do not see me using margin much in the future and will likely never opt to "turn it on".

This thread has been useful to us in that we got money out of accounts earning next to nothing and are at least getting SPAXX kind of returns now.
Good to know! Glad it has been useful to you.

arf30
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by arf30 » Thu Aug 23, 2018 7:37 am

This two account setup can provide some nice fraud protection over a single account if you only enable debit card and checkwriting on the CMA, especially because Fidelity doesn't let you modify debit card limits like other banks.

It must be convenient though in retirement to hold all investments, money market, FDIC cash in a single CMA account and never worry about the balance.

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Artful Dodger
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by Artful Dodger » Thu Aug 23, 2018 9:44 am

CDub wrote:
Sun Aug 05, 2018 8:58 am
indexfundfan wrote:
Sun Aug 05, 2018 8:52 am
You can get a little bit more yield using SPRXX instead of SPAXX (1.85% vs. 1.57%). Or even using FZDXX 1.97% ($100k to start, $10k to maintain). All of these options require you to manually purchase the fund in the CMA (but will be automatically liquidated as necessary to meet debits).

Yep, good point as well. I wish fidelity would offer SPRXX as a core position alternative.
I was going to make the same point as indexfundfan. I called Fidelity a while back, and they recommended FZDXX. I looked at past performance, and FZDXX returned 1.10% YTD, and 1.46% past year, vs .83% YTD and 1.03% past year for SPAXX. I don't recall having $100K for the initial investment, but was likely close.

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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by willthrill81 » Thu Aug 23, 2018 9:46 am

We just keep our checking account as 'lean' as we prudently can, investing the 'difference' or stowing it in an Ally savings account that currently pays 1.80%. Easy peezy.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by MrBeaver » Thu Aug 23, 2018 10:21 am

Note that there is an important difference between the Fidelity CMA and Vanguard Advantage (mentioned in one reply above) which may be more important to some depending on your location and travel frequency:

Fidelity CMA: https://www.fidelity.com/mymoney/no-atm ... o-gimmicks
All Fidelity ATM withdrawal fees will be waived for your Fidelity® Cash Management Account. In addition, your account will automatically be reimbursed for all ATM fees charged by other institutions while using a Fidelity® Visa® Gold Check Card linked to your account at any ATM displaying the Visa®, Plus®, or Star® logos.
Vanguard Advantage: https://personal.vanguard.com/us/whatwe ... ageaccount
Use your Visa® Gold debit card at any ATM worldwide wherever the Visa or Plus® System logos are displayed. Vanguard never charges a fee for an ATM transaction. However, you may be charged a surcharge by the bank that owns the ATM. All transactions from PNC-affiliated banks are free.
PNC locations appear to be limited to the USA in the east coast and great lakes regions (https://apps.pnc.com/locator/#/search). The Fidelity ATM fee reimbursement is almost universal. Fidelity's fees are also lower for the account unless you're a Vanguard Flagship customer.

I've thought about doing this, but so far haven't as I prefer Vanguard's short-term and ultra-short bond funds to Fidelity's offerings for medium-term 'almost cash' reserves, so for now anyway, I'm still maintaining a separate checking account and manually exchanging between the checking account and cash-like holdings in my Vanguard account.

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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by targetconfusion » Thu Aug 23, 2018 11:10 am

Schwab also does this - a margin feature that covers checking drafts by adding negative cash balance to your brokerage. The interest rate is 8% or something high, but does not much matter because (1) the amount is always small and (2) the time period of the loan is short, usually whatever it takes for me to sell some broad market ETF to cover it. E.g., a $2k loan for 3 days costs $1.31. I actually did not even realize the account had this feature until the first time it happened, but must have enrolled at some past point.

Overall, it allows us to operate with less cash and retain more investment exposure at the cost of a little bit more hassle. Obviously, there is risk that you are forced to sell low, but theoretically at least equal risk that you sell high if you subscribe to "nobody knows nothing."

CDub
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by CDub » Fri Aug 24, 2018 7:00 pm

targetconfusion wrote:
Thu Aug 23, 2018 11:10 am
Schwab also does this - a margin feature that covers checking drafts by adding negative cash balance to your brokerage. The interest rate is 8% or something high, but does not much matter because (1) the amount is always small and (2) the time period of the loan is short, usually whatever it takes for me to sell some broad market ETF to cover it. E.g., a $2k loan for 3 days costs $1.31. I actually did not even realize the account had this feature until the first time it happened, but must have enrolled at some past point.

Overall, it allows us to operate with less cash and retain more investment exposure at the cost of a little bit more hassle. Obviously, there is risk that you are forced to sell low, but theoretically at least equal risk that you sell high if you subscribe to "nobody knows nothing."
The margin feature can be nice in some situations, but what I’m referring to at fidelity is different than just adding margin.

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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by IntangibleAssets » Sun Sep 02, 2018 12:06 pm

Good Afternoon Fellow Bogleheads,

I recently signed up for the Visa 2% CB card and obviously had to open a CMA as part of that.

Being very new to the fidelity site would it be possible for someone to explain the step by step process of buying the funds in the CMA there?

Do I Just go to Trade, select the CMA account ---> Type in the symbol, (ex: SPRXX) ---> Action (buy) ---> Amount: $xxxxx

Then this is automatically in my CMA?

Then if I understand correctly...when I need to pay my CC balance and I pay with the CMA account the SPRXX funds will automatically be sold to pay the balance, is this correct?

Appreciate anyone helping my understanding of this!!!

-IA

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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by edge » Sun Sep 02, 2018 12:19 pm

I've used this account for years, its an excellent product.

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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by arf30 » Sun Sep 02, 2018 12:27 pm

IntangibleAssets wrote:
Sun Sep 02, 2018 12:06 pm
Do I Just go to Trade, select the CMA account ---> Type in the symbol, (ex: SPRXX) ---> Action (buy) ---> Amount: $xxxxx

Then this is automatically in my CMA?

Then if I understand correctly...when I need to pay my CC balance and I pay with the CMA account the SPRXX funds will automatically be sold to pay the balance, is this correct?
Correct, it's a checking and brokerage in one that will auto liquidate money market funds to cover transactions.

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Leif
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by Leif » Sun Sep 02, 2018 3:06 pm

UpperNwGuy wrote:
Sun Aug 05, 2018 8:46 am
The third call will be the tie-breaker! :)
Yes, Private Client gets their ATM fees reimbursed. The amount of fee reversed is limited, maybe $50 or $75/year, but I recall it is more than I expected to need.

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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by DavidRoseMountain » Sun Sep 02, 2018 10:41 pm

I get that you can use the debit card to withdraw cash at the ATM machine.
But can you also use the debit card to deposit cash at the ATM machine with the Fidelity Cash Management account ?
Or with Vanguard's Advantage account ?

IntangibleAssets
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by IntangibleAssets » Sun Sep 02, 2018 11:09 pm

arf30 wrote:
Sun Sep 02, 2018 12:27 pm
IntangibleAssets wrote:
Sun Sep 02, 2018 12:06 pm
Do I Just go to Trade, select the CMA account ---> Type in the symbol, (ex: SPRXX) ---> Action (buy) ---> Amount: $xxxxx

Then this is automatically in my CMA?

Then if I understand correctly...when I need to pay my CC balance and I pay with the CMA account the SPRXX funds will automatically be sold to pay the balance, is this correct?
Correct, it's a checking and brokerage in one that will auto liquidate money market funds to cover transactions.
Thanks! Does anyone have any experience keeping it all straight in terms of cost basis for tax purposes or am I over-thinking it?

For example since I plan to charge almost everything to my card now I anticipate the account will fluctuate as I use/replenish....

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jpsfranks
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by jpsfranks » Sun Sep 02, 2018 11:14 pm

IntangibleAssets wrote:
Sun Sep 02, 2018 11:09 pm
Thanks! Does anyone have any experience keeping it all straight in terms of cost basis for tax purposes or am I over-thinking it?

For example since I plan to charge almost everything to my card now I anticipate the account will fluctuate as I use/replenish....
It's a money market fund so unless something goes horribly wrong it will always be 1.00/share and have no gain or loss.

As for things going horribly wrong, it is worth noting that at the height of the 2008 crisis a couple of money market funds did freeze assets and even lost a few cents/share after lengthy unwinding. This did not happen to any Fidelity funds to my knowledge.

I think this is a fine technique and do it myself in my Fidelity account, but it is worth being cognizant that you are trading away an explicit FDIC guarantee for something without government insurance. IMHO leaving some emergency amount in a separate traditional FDIC insured account would be sensible. Leaving it in the FDIC portion of a Fidelity account is not practical for this purpose because the FDIC funds are always automatically spent first.

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