Fidelity CMA + MMF vs. online credit union

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squidfather
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Fidelity CMA + MMF vs. online credit union

Post by squidfather » Wed May 16, 2018 8:20 am

My current banking situation is a bit of a mess and I'm looking to simplify things. Wanted to see if others have taken a similar approach and how it is working out.

Currently we have checking accounts at BofA (wife single, and a joint) and Alliant Credit Union (my single), with savings at Alliant. We had been using the joint BofA account for auto-debit of rent and daycare bills, and the Alliant savings to hold liquid funds for a home purchase, which we are completing in the next month. Most of our other expenses go on credit cards (to maximize rewards) and then we each pay our cards out of our individual checking accounts.

I currently have some of my retirement accounts at Fidelity (also at Vanguard and TIAA), along with 529s and a cash management. The CMA mostly sits empty unless we are going overseas, then I drop some cash in there for no-fee foreign ATM use. In an effort to simplify things, I was considering making the CMA a joint account and we'd just run all our checking needs through there, including direct deposit of all paychecks, billpay for the mortgage, etc.

My plan would be to open a brokerage at fidelity to hold emergency funds in a muni money market fund and set this as the overdraft backup for the CMA (although I can't remember the last time I had an overdraft). Rates on Alliant savings (1.5%) and MMF yield are close enough that I don't care about the difference. We don't have a taxable retirement account, but when we do I would just open a separate brokerage not linked to the CMA so those funds wouldn't be at risk from debit card loss, fraud, etc. Could do something simliar for other intermediate term savings needs that I don't want to link to the CMA.

As I see it, the pros are: Consolidate retirement, 529s, checking, e-fund at Fidelity, reducing financial institutions by 2. Will also be opening a solo 401k for the first time this year and could hold that there as well. Cons are the strangeness with Fidelity using sweep banks rather than being an actual bank, and lack of some in-branch services (although I never deposit cash, and have many local Fidelity branches if I need to deposit a large check).

Has anyone done something similar with CMA + multiple brokerage accounts? Any gotchas I might be missing?

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Re: Fidelity CMA + MMF vs. online credit union

Post by livesoft » Wed May 16, 2018 8:22 am

So you are opening yet another set of accounts? Doesn't sound like simplification to me.

Simplification would be to put everything at Bank of America and use the Merrill Edge investment thing.
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Re: Fidelity CMA + MMF vs. online credit union

Post by indexfundfan » Wed May 16, 2018 8:27 am

I think OP is planning to close Alliant. OP already has account at Fidelity.

I used the Fidelity CMA/brokerage combo for daily checking when it first came out many years ago. My recollection is that the CMA can overdraft automatically from the brokerage side with no fees. So I believe you can put the money in a muni MMF (or any other MMF) on the brokerage side and it gets redeemed automatically when needed to pay for a debit on the CMA side.
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squidfather
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Re: Fidelity CMA + MMF vs. online credit union

Post by squidfather » Wed May 16, 2018 8:30 am

indexfundfan wrote:
Wed May 16, 2018 8:27 am
I think OP is planning to close Alliant. OP already has account at Fidelity.
Correct, I already have fidelity and I'm tied there through work retirement accounts and Massachusetts 529s. The plan would be to close the BofA and Alliant accounts.

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Re: Fidelity CMA + MMF vs. online credit union

Post by indexfundfan » Wed May 16, 2018 8:32 am

squidfather wrote:
Wed May 16, 2018 8:30 am
indexfundfan wrote:
Wed May 16, 2018 8:27 am
I think OP is planning to close Alliant. OP already has account at Fidelity.
Correct, I already have fidelity and I'm tied there through work retirement accounts and Massachusetts 529s. The plan would be to close the BofA and Alliant accounts.
Closing Alliant is fine. But sometimes having a brick and mortar bank account is useful. Do you have a local Fidelity office?
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squidfather
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Re: Fidelity CMA + MMF vs. online credit union

Post by squidfather » Wed May 16, 2018 8:39 am

indexfundfan wrote:
Wed May 16, 2018 8:27 am

Closing Alliant is fine. But sometimes having a brick and mortar bank account is useful. Do you have a local Fidelity office?
I'm in Boston, so there are many local Fidelity offices, including closer to work than BofA, and just down the road from the new place. I know they don't have as many services as a typical branch, and that has given me some pause. But, in the last several years, I've only been in a BofA branch 3 times. Once for a notary, which I now have access to through work; once to get a cashier's check, which they charged me a ridiculous fee for; and once recently to deposit a 5-figure check, which was beyond the mobile banking $2500 deposit limit. And when presented with the check, BofA asked if we'd like to sit down to discuss how to best manage our finances. No thanks.

So if I'm ok not having a physical bank, any other concerns I should be aware of?

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Re: Fidelity CMA + MMF vs. online credit union

Post by marcopolo » Wed May 16, 2018 8:47 am

indexfundfan wrote:
Wed May 16, 2018 8:32 am
Closing Alliant is fine. But sometimes having a brick and mortar bank account is useful. Do you have a local Fidelity office?
I have used Fidelity CMA as my main account for a few years. Kept an old Wells Fargo (free) checking account open just for the access to brick and mortar store front. But, i found i was never using it. Closed it about a year ago, and have not had a single instance where i would have needed it.

What are the scenarios in which this would be needed? The only thing i can think of that i can't do is to deposit cash, but i can't recall the last time i had a need to do that.
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Re: Fidelity CMA + MMF vs. online credit union

Post by indexfundfan » Wed May 16, 2018 8:50 am

squidfather wrote:
Wed May 16, 2018 8:39 am
I'm in Boston, so there are many local Fidelity offices, including closer to work than BofA, and just down the road from the new place. I know they don't have as many services as a typical branch, and that has given me some pause. But, in the last several years, I've only been in a BofA branch 3 times. Once for a notary, which I now have access to through work; once to get a cashier's check, which they charged me a ridiculous fee for; and once recently to deposit a 5-figure check, which was beyond the mobile banking $2500 deposit limit. And when presented with the check, BofA asked if we'd like to sit down to discuss how to best manage our finances. No thanks.

So if I'm ok not having a physical bank, any other concerns I should be aware of?
I assume you plan to use the automatic free overdraft feature? Have you clarified with Fidelity if your understanding of how it works is correct?

I can't think of any other gotchas. The CMA account is pretty nice, with free checks, billpay, ATM usage. The only thing is the low APY, but this can be fixed with the automatic free overdraft.
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Re: Fidelity CMA + MMF vs. online credit union

Post by arf30 » Wed May 16, 2018 10:52 am

I'm doing this, there are three options. I've tested these approaches:

1. Fidelity CMA with cash position and MM fund (SPAXX or SPRXX). When the cash position is depleted, Fidelity automatically liquidates shares from the MM funds to cover transactions. It's a simple "all in one" checking + emergency savings.

2. Fidelity CMA + Fidelity Brokerage. Your money sits in the brokerage account which has a MM fund core position, the CMA account stays empty. Turn on "self funded overdraft protection" in Cash Management settings. When a debit occurs on the CMA account, Fidelity automatically draws from the brokerage account to cover the transaction. A little more complicated, but all of your money is earning interest.

3. Fidelity Brokerage. The brokerage has a routing number and a MM fund as a core position, just use it as a checking account. Downsides are it doesn't refund ATM fees and aggregators like Mint and Personal Capital won't properly categorize the transactions because they classify everything as a brokerage transaction.
Last edited by arf30 on Wed May 16, 2018 3:06 pm, edited 2 times in total.

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Re: Fidelity CMA + MMF vs. online credit union

Post by indexfundfan » Wed May 16, 2018 12:02 pm

arf30 wrote:
Wed May 16, 2018 10:52 am
I'm doing this, there are two options. I've tested both of these approaches:

1. Fidelity CMA with cash position and MM fund (SPAXX or SPRXX). When the cash position is depleted, Fidelity automatically liquidates shares from the MM funds to cover transactions. It's a simple "all in one" checking + emergency savings.

2. Fidelity CMA + Fidelity Brokerage. Your money sits in the brokerage account which has a MM fund core position, the CMA account stays empty. Turn on "self funded overdraft protection" in Cash Management settings. When a debit occurs on the CMA account, Fidelity automatically draws from the brokerage account to cover the transaction. A little more complicated, but all of your money is earning interest.
Option 1 looks interesting. SPRXX is yielding 1.7%.

Do you need to maintain a cash position at all? Would this account behave similarly to a 1.7% checking account?

I think the only difference with a true checking account is that you need to manually buy SPRXX. Liquidation of SPRXX to cover debits appears to be automatic.
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squidfather
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Re: Fidelity CMA + MMF vs. online credit union

Post by squidfather » Wed May 16, 2018 12:14 pm

arf30 wrote:
Wed May 16, 2018 10:52 am
I'm doing this, there are two options. I've tested both of these approaches:

1. Fidelity CMA with cash position and MM fund (SPAXX or SPRXX). When the cash position is depleted, Fidelity automatically liquidates shares from the MM funds to cover transactions. It's a simple "all in one" checking + emergency savings.

2. Fidelity CMA + Fidelity Brokerage. Your money sits in the brokerage account which has a MM fund core position, the CMA account stays empty. Turn on "self funded overdraft protection" in Cash Management settings. When a debit occurs on the CMA account, Fidelity automatically draws from the brokerage account to cover the transaction. A little more complicated, but all of your money is earning interest.
Thank you, that is very helpful. I'll probably go with option 2, as I tend to keep very little cash, and most savings are automated into retirement accounts. I'll probably just manually move any extra savings over the brokerage after paying bills each month. Given no fees for the brokerage, I like the mental distinction of having 2 accounts.

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Re: Fidelity CMA + MMF vs. online credit union

Post by arf30 » Wed May 16, 2018 12:51 pm

indexfundfan wrote:
Wed May 16, 2018 12:02 pm
Option 1 looks interesting. SPRXX is yielding 1.7%.

Do you need to maintain a cash position at all? Would this account behave similarly to a 1.7% checking account?

I think the only difference with a true checking account is that you need to manually buy SPRXX. Liquidation of SPRXX to cover debits appears to be automatic.
You don't need to hold any cash with either option, but you do have to manually buy into the MM fund with option 1, and if you don't the cash position tends to pile up in my experience.

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Re: Fidelity CMA + MMF vs. online credit union

Post by eg1 » Wed May 16, 2018 1:02 pm

arf30 wrote:
Wed May 16, 2018 12:51 pm
indexfundfan wrote:
Wed May 16, 2018 12:02 pm
Option 1 looks interesting. SPRXX is yielding 1.7%.

Do you need to maintain a cash position at all? Would this account behave similarly to a 1.7% checking account?

I think the only difference with a true checking account is that you need to manually buy SPRXX. Liquidation of SPRXX to cover debits appears to be automatic.
You don't need to hold any cash with either option, but you do have to manually buy into the MM fund with option 1, and if you don't the cash position tends to pile up in my experience.
Does option 2 get really cumbersome during tax time to figure out all the cost basis with all the buys and sells?

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Re: Fidelity CMA + MMF vs. online credit union

Post by arf30 » Wed May 16, 2018 1:14 pm

eg1 wrote:
Wed May 16, 2018 1:02 pm
Does option 2 get really cumbersome during tax time to figure out all the cost basis with all the buys and sells?
They'll send a consolidated 1099 like Vanguard does so you only report one number, but if you're concerned you can minimize it by using the "maintain minimum balance" option in the cash manager - it will just top off the CMA every once in a while when balance falls below the threshold you set.

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Re: Fidelity CMA + MMF vs. online credit union

Post by indexfundfan » Thu May 17, 2018 11:28 am

arf30, how long is the hold when you submit an ACH pull using the Fidelity website?
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Re: Fidelity CMA + MMF vs. online credit union

Post by arf30 » Thu May 17, 2018 12:10 pm

1-2 days, but I've read conflicting reports on this forum, I think it might vary by the source bank.

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Re: Fidelity CMA + MMF vs. online credit union

Post by Cash » Sat May 19, 2018 8:05 am

We also used to have accounts at BOA, Alliant, and Fidelity, and consolidated all at Fidelity. I think it's a nice, one-stop setup. We also have a checking account at TD Bank in case we need a physical branch for anything (once in the past two years). I also write all checks from that account, where I keep only a small amount of money, and not the Fidelity account to avoid the issue I had at Alliant.

I keep cash in FTEXX (muni money market) in the CMA to avoid taxable interest income.

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Re: Fidelity CMA + MMF vs. online credit union

Post by arf30 » Sat May 19, 2018 10:42 am

Cash wrote:
Sat May 19, 2018 8:05 am
We also used to have accounts at BOA, Alliant, and Fidelity, and consolidated all at Fidelity. I think it's a nice, one-stop setup. We also have a checking account at TD Bank in case we need a physical branch for anything (once in the past two years). I also write all checks from that account, where I keep only a small amount of money, and not the Fidelity account to avoid the issue I had at Alliant.

I keep cash in FTEXX (muni money market) in the CMA to avoid taxable interest income.
You can have multiple CMAs in the same Fidelity account - lots of people spin up a second CMA solely for ATM/debit/checkwriting and keep a small amount of money in it (using the cash manager). It does seem crazy that banks don't ask you to log in and approve/deny new ACH requests.

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Re: Fidelity CMA + MMF vs. online credit union

Post by whodidntante » Sat May 19, 2018 11:13 am

arf30 wrote:
Thu May 17, 2018 12:10 pm
1-2 days, but I've read conflicting reports on this forum, I think it might vary by the source bank.
3-4 business days for me. I pull from multiple banks. Maybe I make Fidelity nervous? :P

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Re: Fidelity CMA + MMF vs. online credit union

Post by whodidntante » Sat May 19, 2018 11:16 am

arf30 wrote:
Wed May 16, 2018 1:14 pm
eg1 wrote:
Wed May 16, 2018 1:02 pm
Does option 2 get really cumbersome during tax time to figure out all the cost basis with all the buys and sells?
They'll send a consolidated 1099 like Vanguard does so you only report one number, but if you're concerned you can minimize it by using the "maintain minimum balance" option in the cash manager - it will just top off the CMA every once in a while when balance falls below the threshold you set.
For a money market fund? The buys and sells won't matter. Fluctuations in MMF NAV are de minimis.

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Re: Fidelity CMA + MMF vs. online credit union

Post by arf30 » Sat May 19, 2018 11:17 am

whodidntante wrote:
Sat May 19, 2018 11:16 am
For a money market fund? The buys and sells won't matter. Fluctuations in MMF NAV are de minimis.
Good point.

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Re: Fidelity CMA + MMF vs. online credit union

Post by Cash » Sun May 20, 2018 6:24 am

arf30 wrote:
Sat May 19, 2018 10:42 am
Cash wrote:
Sat May 19, 2018 8:05 am
We also used to have accounts at BOA, Alliant, and Fidelity, and consolidated all at Fidelity. I think it's a nice, one-stop setup. We also have a checking account at TD Bank in case we need a physical branch for anything (once in the past two years). I also write all checks from that account, where I keep only a small amount of money, and not the Fidelity account to avoid the issue I had at Alliant.

I keep cash in FTEXX (muni money market) in the CMA to avoid taxable interest income.
You can have multiple CMAs in the same Fidelity account - lots of people spin up a second CMA solely for ATM/debit/checkwriting and keep a small amount of money in it (using the cash manager). It does seem crazy that banks don't ask you to log in and approve/deny new ACH requests.
Yeah I suppose that's another solution, though I would not set up that account to use cash manager (if anyone were to gain access, they could still withdraw up to whatever is available in the backup account).

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Re: Fidelity CMA + MMF vs. online credit union

Post by arf30 » Sun May 20, 2018 7:47 am

Cash wrote:
Sun May 20, 2018 6:24 am
arf30 wrote:
Sat May 19, 2018 10:42 am

You can have multiple CMAs in the same Fidelity account - lots of people spin up a second CMA solely for ATM/debit/checkwriting and keep a small amount of money in it (using the cash manager). It does seem crazy that banks don't ask you to log in and approve/deny new ACH requests.
Yeah I suppose that's another solution, though I would not set up that account to use cash manager (if anyone were to gain access, they could still withdraw up to whatever is available in the backup account).
The cash manager has two modes, for this account you would disable the overdraft protection and set it to top off the account at $500 (or whatever limit). It's an overnight process that runs once a day, so there's no risk of it draining your backup account. At most they drain $500, you notice the fraud because cash manager sends you an alert that it's moving money, disable the cash manager and notify Fidelity.

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Re: Fidelity CMA + MMF vs. online credit union

Post by crg11 » Thu Jun 14, 2018 9:01 am

Just wanted to say, thank you for this thread and the excellent tidbits in it. Because my new employer has a 401k with Fidelity, I have been working on moving my Vanguard 401k, IRAs, etc to Fidelity and consolidating when possible. This thread made me realize I could also move for my emergency fund and has at least made me entertain the idea of moving my checking over.

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Re: Fidelity CMA + MMF vs. online credit union

Post by indexfundfan » Thu Jun 14, 2018 9:05 am

indexfundfan wrote:
Thu May 17, 2018 11:28 am
arf30, how long is the hold when you submit an ACH pull using the Fidelity website?
Answer my own question: if you submit your ACH pull on day T, the money is credited on T+1 and available on T+5.
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