Use Vanguard MM Prime for cash rather than local bank?

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goshenBogle
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Use Vanguard MM Prime for cash rather than local bank?

Post by goshenBogle » Tue Aug 13, 2019 5:44 pm

We have too much money in our bank's checking accounts that pay little or no interest. We are thinking of minimizing the amounts in these accounts and instead using Vanguard MM Prime to hold cash that we do not need on a day-to-day basis since MM Prime pays 2% or more. The only problem we foresee is that if we need cash from the MM Prime, the transfer to our local bank checking account could take up to 3 days.

What do folks think of this strategy?
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Silk McCue
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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by Silk McCue » Tue Aug 13, 2019 5:46 pm

It’s what we do.

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by drawpoker » Tue Aug 13, 2019 5:47 pm

Doesn't VG offer check writing feature on the MM account?

My VG GinnieMae account does, and, in the event of some awful emergency, I would write a check on the VG account, present it at my local bank where I have an account, and get the needed cash in a hurry.

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by jebmke » Tue Aug 13, 2019 5:49 pm

goshenBogle wrote:
Tue Aug 13, 2019 5:44 pm
We have too much money in our bank's checking accounts that pay little or no interest. We are thinking of minimizing the amounts in these accounts and instead using Vanguard MM Prime to hold cash that we do not need on a day-to-day basis since MM Prime pays 2% or more. The only problem we foresee is that if we need cash from the MM Prime, the transfer to our local bank checking account could take up to 3 days.

What do folks think of this strategy?
Check on this. It depends on the bank. When I initiate a transfer from VG it hits my bank account the next business day. There have been threads on this -- especially with respect to Ally and long ACH times.

I keep very little money in the bank. Most of our expenses are either direct debits or charged to credit cards. By the last week of the month, I know what the CC balances are. I've arrange for all the DDs to hit in the first week so it is pretty easy to fund a months worth of expenses with one transfer.
When you discover that you are riding a dead horse, the best strategy is to dismount.

11cents
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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by 11cents » Tue Aug 13, 2019 5:52 pm

I do this as well, using automatic investments from my checking account into Prime MM. You can write checks on Prime accounts for amounts $200 or greater.

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by White Coat Investor » Tue Aug 13, 2019 6:04 pm

goshenBogle wrote:
Tue Aug 13, 2019 5:44 pm
We have too much money in our bank's checking accounts that pay little or no interest. We are thinking of minimizing the amounts in these accounts and instead using Vanguard MM Prime to hold cash that we do not need on a day-to-day basis since MM Prime pays 2% or more. The only problem we foresee is that if we need cash from the MM Prime, the transfer to our local bank checking account could take up to 3 days.

What do folks think of this strategy?
Been doing it for years.
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lukestuckenhymer
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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by lukestuckenhymer » Tue Aug 13, 2019 6:13 pm

Vanguard prime money market has the highest yield I can find at a place that I trust putting my money. I might be able to find teaser rates 20 bps higher at some random online bank (Wealthfront, Robinhood, Redneck bank, et al), but I would never trust putting my money there in a million years.

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by Trader Joe » Tue Aug 13, 2019 6:13 pm

goshenBogle wrote:
Tue Aug 13, 2019 5:44 pm
We have too much money in our bank's checking accounts that pay little or no interest. We are thinking of minimizing the amounts in these accounts and instead using Vanguard MM Prime to hold cash that we do not need on a day-to-day basis since MM Prime pays 2% or more. The only problem we foresee is that if we need cash from the MM Prime, the transfer to our local bank checking account could take up to 3 days.

What do folks think of this strategy?
I do this now and it has worked out great.

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by Cheez-It Guy » Tue Aug 13, 2019 6:14 pm

11cents wrote:
Tue Aug 13, 2019 5:52 pm
I do this as well, using automatic investments from my checking account into Prime MM. You can write checks on Prime accounts for amounts $200 or greater.
The requested minimum is $250, not $200.

Also, I do this. However, lately it appears that Federal MM has a better after tax yield than Prime MM, so I use that instead.
Last edited by Cheez-It Guy on Tue Aug 13, 2019 6:17 pm, edited 1 time in total.

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by betablocker » Tue Aug 13, 2019 6:16 pm

I’ve found vanguard to be a nightmare to deal with as a bank. Great funds. Terrible customer service. I switched to Fidelity. A bit less on the MM but worth it for all the hassles of VG.

j0nnyg1984
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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by j0nnyg1984 » Tue Aug 13, 2019 6:23 pm

What are the tickers for the MM funds y’all are using at vanguard? I’m trying to clean up my moms accounts; dumping capital one would be beneficial

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by Cheez-It Guy » Tue Aug 13, 2019 6:28 pm

Prime = VMMXX
Federal = VMFXX

Federal is the settlement fund for brokerage accounts, which links to external bank accounts for bidirectional ACH transfers.

I think some folks may use others for special tax situations.

Silk McCue
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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by Silk McCue » Tue Aug 13, 2019 6:30 pm

j0nnyg1984 wrote:
Tue Aug 13, 2019 6:23 pm
What are the tickers for the MM funds y’all are using at vanguard? I’m trying to clean up my moms accounts; dumping capital one would be beneficial
I Googled Vanguard Prime Money Market. Here it is.

https://investor.vanguard.com/mutual-fu ... file/VMMXX

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by UpperNwGuy » Tue Aug 13, 2019 6:32 pm

Silk McCue wrote:
Tue Aug 13, 2019 5:46 pm
It’s what we do.

Cheers
Me too!

lostdog
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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by lostdog » Tue Aug 13, 2019 6:42 pm

We do this with the Federal Money Market sweep account. The yield is very close to Prime MM.

The ACH transfer may be a day early compared to waiting for the Prime money market sell to settle.
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ScooterBob
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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by ScooterBob » Tue Aug 13, 2019 7:00 pm

I also use the Prime MM instead of local banks- I HATE banks... Don't be put off by all the negative views some people give Vanguard's customer service. I have had nothing but GREAT experiences every time I have had to call. NEVER once did I have a bad experience. Some folks may possibly come across a customer rep that is having a bad day but I think many just can never be satisfied.... Some just love to complain...

Bob

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Kevin M
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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by Kevin M » Tue Aug 13, 2019 8:28 pm

I was using primarily Vanguard Treasury MM (VUSXX) in taxable until recently, as it had a taxable-equivalent yield (TEY) for me of greater than 2.5%. I have a couple of bank accounts that yield more than 2.5%, so VUSXX is less attractive now at a compound TEY for me of 2.40%, but it's still pretty good. Prime MM compound TEY is 2.20%, which still is better than Ally Bank savings APY of 1.90%.

I just sold most of my VUSXX to put into a 17-month CD at Andrews FCU at 2.95% APY. They also have an 8-month at 2.87% APY. I'm already a member, so it was easy. Also, I have a lot of bonds and CDs maturing soon, so no need for much cash.

I use Prime MM in Vanguard IRAs. I recently initiated an IRA position in Vanguard ultra-short-term bond fund (VUSFX) when the yield was about 2.55%; the SEC yield now is down to 2.44%--still 24 basis points higher than Prime MM with a duration of less than one year (but with some credit risk).

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by HomeStretch » Tue Aug 13, 2019 8:42 pm

I do the same using VUSXX Treasury MMF with a small amount in VMFXX, the settlement fund.

You can move funds electronically to your linked bank more quickly than ACH by wiring funds from Vanguard ($10 fee, free for Flagship). You can do this online yourself. If you keep some funds in the settlement fund VMFXX, the wire (if initiated early enough) will process same day although you may not see it credited by your bank until the next morning. Any other MMF takes one day to sell/settle so the wire will be processed one day after you initiate it.

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by spencer99 » Tue Aug 13, 2019 9:18 pm

goshenBogle wrote:
Tue Aug 13, 2019 5:44 pm
We have too much money in our bank's checking accounts that pay little or no interest. We are thinking of minimizing the amounts in these accounts and instead using Vanguard MM Prime to hold cash that we do not need on a day-to-day basis since MM Prime pays 2% or more. The only problem we foresee is that if we need cash from the MM Prime, the transfer to our local bank checking account could take up to 3 days.

What do folks think of this strategy?
I do this, but with Federal MM.

Have you considered opening a HELOC with your local bank as an option for immediate emergency funds?

S

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by j0nnyg1984 » Tue Aug 13, 2019 9:22 pm

Cheez-It Guy wrote:
Tue Aug 13, 2019 6:28 pm
Prime = VMMXX
Federal = VMFXX

Federal is the settlement fund for brokerage accounts, which links to external bank accounts for bidirectional ACH transfers.

I think some folks may use others for special tax situations.
Kevin M wrote:
Tue Aug 13, 2019 8:28 pm
I was using primarily Vanguard Treasury MM (VUSXX) in taxable until recently, as it had a taxable-equivalent yield (TEY) for me of greater than 2.5%. I have a couple of bank accounts that yield more than 2.5%, so VUSXX is less attractive now at a compound TEY for me of 2.40%, but it's still pretty good. Prime MM compound TEY is 2.20%, which still is better than Ally Bank savings APY of 1.90%.
Thanks peeps. I’ll investigate these three funds :sharebeer

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by tc101 » Tue Aug 13, 2019 9:24 pm

I also keep my cash in Vanguard Prime MMF.

There is no emergency I can think of that would require me get cash in less than 3 days. I could use a credit card, or just tell someone I would have the cash in 3 days. I could use a check from the MMF. Can anyone think of any real need to get cash immediately?
Last edited by tc101 on Tue Aug 13, 2019 9:26 pm, edited 1 time in total.
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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by yangtui » Tue Aug 13, 2019 9:24 pm

I have my emergency fund/debt sinking fund in prime mm.

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by dardeninvestor » Tue Aug 13, 2019 9:29 pm

Amex Savings is quite simple. Transfers to and from Schwab instantly.

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J G Bankerton
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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by J G Bankerton » Tue Aug 13, 2019 9:39 pm

Cheez-It Guy wrote:
Tue Aug 13, 2019 6:14 pm
Also, I do this. However, lately it appears that Federal MM has a better after tax yield than Prime MM, so I use that instead.
Is the tax savings in state taxes? I have both the prime mm and the federal settlement fund. I keep most of my venture capital in the prime because of the higher interest.

OP I keep monthly expenses in a bank the rest in the prime MM.

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by Ferdinand2014 » Tue Aug 13, 2019 9:46 pm

goshenBogle wrote:
Tue Aug 13, 2019 5:44 pm
We have too much money in our bank's checking accounts that pay little or no interest. We are thinking of minimizing the amounts in these accounts and instead using Vanguard MM Prime to hold cash that we do not need on a day-to-day basis since MM Prime pays 2% or more. The only problem we foresee is that if we need cash from the MM Prime, the transfer to our local bank checking account could take up to 3 days.

What do folks think of this strategy?
I keep all of my cash in FDLXX (Fidelity Treasury Only Money Market Fund) and 4 week treasury bills at Fidelity. It is my emergency money, reserve money for large expenses and entire fixed income allocation. I keep enough cash in local bank for monthly budget and no more. Transfers from Fidelity to my local bank take 1-2 business days. I prefer to not use checks or debit cards with my brokerage accounts although Fidelity makes it easy to do so.
Last edited by Ferdinand2014 on Tue Aug 13, 2019 9:50 pm, edited 1 time in total.
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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by j0nnyg1984 » Tue Aug 13, 2019 9:50 pm

I thought this would be easier to compare, but either I’m missing something, or the vanguard site doesn’t provide ALL of the information.

How do I find the specifics regarding the taxability of each of these funds? I’ve seen blogs and other calculators showing that based on a persons tax status, state, etc., one MM may be better than another, but this is hard to determine on the vanguard page.

For reference, we will be single, should be in the 12% bracket next year (though we are planning on doing tIRA > rIRA conversions), WA state so no state income tax...

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by J G Bankerton » Wed Aug 14, 2019 5:25 am

j0nnyg1984 wrote:
Tue Aug 13, 2019 9:50 pm

How do I find the specifics regarding the taxability of each of these funds?
The interest paid by U.S. Treasury bonds is exempt from income taxation at the state and local level, but is fully taxable on your federal income tax return.

I assume it is the same for federal MM funds. If you don't pay any state or local tax go with the MM with the highest yield.

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by classicindexer » Wed Aug 14, 2019 7:07 am

Yes, DW and I just started this earlier this year. We bank with Chase so we opened a joint You Invest brokerage account and keep most of our savings in the Vanguard Prime money market VMMXX. I try to keep a buffer in checking so that I don't have to sell VMMXX often. If I have to sell VMMXX I can typically get the money in my Chase Checking in one business day as long as I sell shares before 4 PM.

The reason for You Invest at Chase was to maintain the $15K minimum for free checking accounts + benefits like cashier checks, safe deposit box, etc. Otherwise we would have opened a joint Vanguard taxable brokerage account since we have multiple IRA accounts at Vanguard.

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by Kevin M » Wed Aug 14, 2019 12:25 pm

j0nnyg1984 wrote:
Tue Aug 13, 2019 9:50 pm
I thought this would be easier to compare, but either I’m missing something, or the vanguard site doesn’t provide ALL of the information.

How do I find the specifics regarding the taxability of each of these funds? I’ve seen blogs and other calculators showing that based on a persons tax status, state, etc., one MM may be better than another, but this is hard to determine on the vanguard page.

For reference, we will be single, should be in the 12% bracket next year (though we are planning on doing tIRA > rIRA conversions), WA state so no state income tax...
Only the state income tax exemption applies to the MM funds being discussed here: Prime, Treasury, Federal. The state tax exemption depends on the percent of income from US government obligations (USGO), and for some states, the percent of holdings in USGO (e.g., must be at least 50% for CA, NY and CT for any state tax exemption).

For 2018, Treasury MM was 100% USGO income, Fed MM was 77.79%, and Prime MM was 28.23%.

As a CA resident, I dont' get any state tax exemption for Prime MM, so the yield is the taxable-equivalent yield (TEY) for me.

For planning purposes, I assume 77.8% of Fed MM income exempt from state income taxes, but we won't really know until Vanguard publishes its USGO document in 2020.

I assume Treasury MM will continue to be 100% USGO income.

I derive equations for TEY in this post: viewtopic.php?f=10&t=248539.

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by mariezzz » Wed Aug 14, 2019 12:55 pm

I use VMMXX for most cash. Keep a few hundred at most in checking except when mortgage & credit card bill are coming due.

Each individual needs to decide how likely it is that they're going to need cash essentially immediately... and how much is likely needed.
I believe with VMMXX it can take 2-3 'open stock market days' to receive in checking account but I believe you can pay for a wire transfer and get the money a little more quickly. Worst case scenario: I discover at 4:01 pm ET Fri that I need more cash than is in my checking account. Sell Tues (in this scenario, Mon was a holiday), money is in checking account Thu. So roughly 5.5 calendar days is about the longest period.

I can't imagine ever needing much cash virtually immediately - virtually everything I'm likely to need can be covered with a credit card.

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by anon_investor » Wed Aug 14, 2019 1:13 pm

You can put money you do not need for a week plus in Vanguard MM accounts (personally I like the VMFXX sweep fund), then just make sure to transfer over what you need a week ahead of time. Alternatively, you can have an online high yield savings account+checkin (e.g. Ally Bank, Capital One 360, etc.) where you can get some decent interest in the high yield savings, and instantly transfer to the checking and pay bills immediately.

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Kemosabi
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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by Kemosabi » Thu Aug 15, 2019 1:36 pm

It would be great if there was no minimum for check writing for VG MM accounts. The need for a bank would be eliminated

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by Kevin M » Thu Aug 15, 2019 1:53 pm

Kemosabi wrote:
Thu Aug 15, 2019 1:36 pm
It would be great if there was no minimum for check writing for VG MM accounts. The need for a bank would be eliminated
Vanguard used to offer a Vanguard Advantage Account (VAA) that enabled bank-like functionality, but unfortunately, they discontinued it on 7/31/2019.

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by Phineas J. Whoopee » Thu Aug 15, 2019 6:19 pm

To what extent do you think you might need, being generous, access to genuine, honest to goodness checking account cash within three days?

I'd keep that much, generously estimated, at your bank, probably in a savings account you can go online and transfer to checking with immediate effect, and keep the rest elsewhere. A retail money market mutual fund is a perfectly rational choice.

I don't know what expenses you might face on short notice, but three days often is well within what any reputable person you're doing business with will accept as reasonable.

PJW

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by classicindexer » Thu Aug 15, 2019 6:29 pm

I agree. About two months ago I switched to trying to keep about $10K in checking to cash flow about two months of expenses and the once a year large bills like property taxes and auto/home insurance that we pay annually.

At the end of each month if there’s more than $10K in checking the rest gets transferred into our taxable brokerage to buy Vanguard prime money market fund VMMXX. This way I am not having to sell VMMXX if needed to pay for an emergency or one of those large annual bills. We also have credit cards and a HSA debit card so they could help float any unexpected emergency expenses. I figure after a few more months I’ll re-evaluate if $10K is too much and reduce it if necessary.

I switched to YNAB for budgeting two months ago when I switched to trying this method and learned that I don’t necessarily need to keep my budget in sync with checking and brokerage money market mutual fund balances. Before I was transferring money to the money market a few times a month.

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by J G Bankerton » Thu Aug 15, 2019 6:50 pm

I have check writing for my settlement fund and my prime MM is an alternative redemption fund. No need to move money if there isn't enough in the settlement fund to cover a check. Wells Fargo handles the checks for Vanguard so It is virtually just like a bank.

Some bond funds can also be an alternative redemption fund.

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by FrugalInvestor » Thu Aug 15, 2019 6:53 pm

White Coat Investor wrote:
Tue Aug 13, 2019 6:04 pm
goshenBogle wrote:
Tue Aug 13, 2019 5:44 pm
We have too much money in our bank's checking accounts that pay little or no interest. We are thinking of minimizing the amounts in these accounts and instead using Vanguard MM Prime to hold cash that we do not need on a day-to-day basis since MM Prime pays 2% or more. The only problem we foresee is that if we need cash from the MM Prime, the transfer to our local bank checking account could take up to 3 days.

What do folks think of this strategy?
Been doing it for years.
We have as well.

We are now retired so make one transfer each month from our MM account to our bank checking account. We then pay the credit card bill and the bills that cannot go on our credit card using the the bank's bill pay system. Works very well for us.
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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by lostdog » Fri Aug 16, 2019 7:25 am

Yesterday at 10:00am I initiated a transfer from my Vanguard Federal Money Market sweep account to my credit union checking account. It just showed up this morning. It took less than 24 hours.
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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by J G Bankerton » Fri Aug 16, 2019 9:11 am

lostdog wrote:
Fri Aug 16, 2019 7:25 am
Yesterday at 10:00am I initiated a transfer from my Vanguard Federal Money Market sweep account to my credit union checking account. It just showed up this morning. It took less than 24 hours.
Was it ACH or wire transfer. Vanguard puts a withdrawal hold on ACH in transfers. My bank clears direct deposits from the government and Verizon the day they are received.

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by lostdog » Fri Aug 16, 2019 9:12 am

J G Bankerton wrote:
Fri Aug 16, 2019 9:11 am
lostdog wrote:
Fri Aug 16, 2019 7:25 am
Yesterday at 10:00am I initiated a transfer from my Vanguard Federal Money Market sweep account to my credit union checking account. It just showed up this morning. It took less than 24 hours.
Was it ACH or wire transfer. Vanguard puts a withdrawal hold on ACH in transfers. My bank clears direct deposits from the government and Verizon the day they are received.
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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by classicindexer » Fri Aug 16, 2019 9:14 am

I think that ACH transfers run 3 times a day so if you initiate one early morning or early afternoon you may receive it next business day. I’ve seen this happen with PayPal, Venmo or Apple Pay Cash if I initiate a transfer before noon or so EST.

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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by lostdog » Fri Aug 16, 2019 9:17 am

classicindexer wrote:
Fri Aug 16, 2019 9:14 am
I think that ACH transfers run 3 times a day so if you initiate one early morning or early afternoon you may receive it next business day. I’ve seen this happen with PayPal, Venmo or Apple Pay Cash if I initiate a transfer before noon or so EST.
Basically before market close I think.
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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by Artsdoctor » Fri Aug 16, 2019 9:24 am

goshenBogle wrote:
Tue Aug 13, 2019 5:44 pm
We have too much money in our bank's checking accounts that pay little or no interest. We are thinking of minimizing the amounts in these accounts and instead using Vanguard MM Prime to hold cash that we do not need on a day-to-day basis since MM Prime pays 2% or more. The only problem we foresee is that if we need cash from the MM Prime, the transfer to our local bank checking account could take up to 3 days.

What do folks think of this strategy?
Think about how much money (and interest) you're talking about here. No need to specify to us, but is this a concept, or is it a lot of money? It's one thing to be talking about $5,000-$10,000 in "cash" and another to be talking about $100,000 in cash. Don't get caught up in agonizing over a few bucks here and there.

How often is it going to be a hardship waiting 2-3 days for money to arrive from Vanguard to your bank? If you always have $1,000 in your bank, for example, you'll have access to your ATM or whatever small change you'll need while waiting on the Vanguard transfer. The "opportunity cost" will be insignificant. If you set up your Vanguard account correctly, you'll be able to "push" money from Vanguard to your local bank and you should have it the next day.

Northern Flicker
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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by Northern Flicker » Fri Aug 16, 2019 1:51 pm

If the gross yields (I.e. yields before ER is subtracted in order to calculate SEC yield) of Vanguard money market funds accurately reflect risk, then the Prime money fund will have a lower risk-adjusted return than the Federal MMF or Treasury MMF due to the higher expense ratio, which is higher for a typical individual investor due to the high minimum for admiral shares of Prime.

MotoTrojan
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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by MotoTrojan » Fri Aug 16, 2019 2:00 pm

Fidelity CMA with a brokerage linked via Cash Manager has been life changing. My savings and checking are now merged, earning good yield, and I can use any ATM on the planet for free.

The linked brokerage allows deposits (paycheck included) to be automatically invested in SPAXX rather than the core CMA FIDC fund. My CMA only ever has a balance >$0 if I get an ATM fee refund, then my next purchase wipes that out.

classicindexer
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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by classicindexer » Fri Aug 16, 2019 2:35 pm

MotoTrojan wrote:
Fri Aug 16, 2019 2:00 pm
Fidelity CMA with a brokerage linked via Cash Manager has been life changing. My savings and checking are now merged, earning good yield, and I can use any ATM on the planet for free.

The linked brokerage allows deposits (paycheck included) to be automatically invested in SPAXX rather than the core CMA FIDC fund. My CMA only ever has a balance >$0 if I get an ATM fee refund, then my next purchase wipes that out.
That sounds great although the SPAXX ER at 0.42% is high vs. Vanguard VMFXX at 0.11%. :( Looks like the Fidelity money market fund ERs start at 0.38%.

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Kevin M
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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by Kevin M » Fri Aug 16, 2019 3:43 pm

classicindexer wrote:
Fri Aug 16, 2019 2:35 pm
MotoTrojan wrote:
Fri Aug 16, 2019 2:00 pm
Fidelity CMA with a brokerage linked via Cash Manager has been life changing. My savings and checking are now merged, earning good yield, and I can use any ATM on the planet for free.

The linked brokerage allows deposits (paycheck included) to be automatically invested in SPAXX rather than the core CMA FIDC fund. My CMA only ever has a balance >$0 if I get an ATM fee refund, then my next purchase wipes that out.
That sounds great although the SPAXX ER at 0.42% is high vs. Vanguard VMFXX at 0.11%. :( Looks like the Fidelity money market fund ERs start at 0.38%.
It's true that Vanguard MM funds have higher yields than the corresponding Fidelity MM funds. The problem is that Vanguard no longer offers bank-like functionality since the discontinuation of the Vanguard Advantage Accounts in July. Fidelity provides a way to get a decent yield in what functions like a checking account, currently bout 2%, or a little more or less, depending on the fund and your state income tax rate if using SPAXX or FDLXX.

You can still keep larger amounts in a higher-yielding Vanguard MM fund, and then periodically transfer over to Fidelity to pay bills or whatever you use a checking account for.

Kevin
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edge
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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by edge » Fri Aug 16, 2019 3:50 pm

True, the yield difference on the basic MMs is in VGs favor. But because VG no longer has bank functionality it makes it highly inconvenient to use their MMFs as a bank account. Fidelity's is both convenient and high yielding. And if you use the premium class the yield difference is narrow/non-existent. Currently showing Fidelity Money Market Premium Class as 2.20% and Vanguard Prime Money Market at 2.16%. Please note that the as-of dates are different so this is not fully apples-to-apples. Irrespective of this, they are pretty close.
Kevin M wrote:
Fri Aug 16, 2019 3:43 pm
classicindexer wrote:
Fri Aug 16, 2019 2:35 pm
MotoTrojan wrote:
Fri Aug 16, 2019 2:00 pm
Fidelity CMA with a brokerage linked via Cash Manager has been life changing. My savings and checking are now merged, earning good yield, and I can use any ATM on the planet for free.

The linked brokerage allows deposits (paycheck included) to be automatically invested in SPAXX rather than the core CMA FIDC fund. My CMA only ever has a balance >$0 if I get an ATM fee refund, then my next purchase wipes that out.
That sounds great although the SPAXX ER at 0.42% is high vs. Vanguard VMFXX at 0.11%. :( Looks like the Fidelity money market fund ERs start at 0.38%.
It's true that Vanguard MM funds have higher yields than the corresponding Fidelity MM funds. The problem is that Vanguard no longer offers bank-like functionality since the discontinuation of the Vanguard Advantage Accounts in July. Fidelity provides a way to get a decent yield in what functions like a checking account, currently bout 2%, or a little more or less, depending on the fund and your state income tax rate if using SPAXX or FDLXX.

You can still keep larger amounts in a higher-yielding Vanguard MM fund, and then periodically transfer over to Fidelity to pay bills or whatever you use a checking account for.

Kevin

MotoTrojan
Posts: 5552
Joined: Wed Feb 01, 2017 8:39 pm

Re: Use Vanguard MM Prime for cash rather than local bank?

Post by MotoTrojan » Fri Aug 16, 2019 3:50 pm

classicindexer wrote:
Fri Aug 16, 2019 2:35 pm
MotoTrojan wrote:
Fri Aug 16, 2019 2:00 pm
Fidelity CMA with a brokerage linked via Cash Manager has been life changing. My savings and checking are now merged, earning good yield, and I can use any ATM on the planet for free.

The linked brokerage allows deposits (paycheck included) to be automatically invested in SPAXX rather than the core CMA FIDC fund. My CMA only ever has a balance >$0 if I get an ATM fee refund, then my next purchase wipes that out.
That sounds great although the SPAXX ER at 0.42% is high vs. Vanguard VMFXX at 0.11%. :( Looks like the Fidelity money market fund ERs start at 0.38%.
True but the SEC yield is currently only 0.17% off so the delta isn't as bad as the ER would suggest. I also will often manually move from SPAXX to SPRXX which is only 0.05% lower than VMFXX currently, and the setup will automatically use SPAXX before SPRXX so my bulk savings remains and I don't have to do the manual transactions often. While the ER is lower, I don't hold substantial cash holdings so my checking account float makes up a large enough portion that having it constantly earning the full yield is an overall boost in income, rather than checking earning 0.01% at Wells Fargo.

If you do hold substantial cash I believe there are some money market funds at Fidelity with lower ERs and high minimum deposits as well, but I am quite happy with the current arrangement.

FireHorse
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Re: Use Vanguard MM Prime for cash rather than local bank?

Post by FireHorse » Fri Aug 16, 2019 3:59 pm

Thanks for the thread.
This is confirmed what I wanted to do
Cheers

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