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

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

Post by IntangibleAssets » Mon Sep 03, 2018 12:15 am

jpsfranks wrote:
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.
Thank you!

I'm trying to learn as much as I can about this stuff :) ...Don't Money Market Funds pay dividends, those would need to be accounted for on a 1099 correct?

I appreciate the note regarding some separate FDIC portions.

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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 » Mon Sep 03, 2018 12:32 am

IntangibleAssets wrote:
Mon Sep 03, 2018 12:15 am
I'm trying to learn as much as I can about this stuff :) ...Don't Money Market Funds pay dividends, those would need to be accounted for on a 1099 correct?

I appreciate the note regarding some separate FDIC portions.
Money market fund dividends will be reported in the 1099-DIV portion of your Fidelity tax statement. Interest from the FDIC portion will appear in the 1099-INT section. Other than the fact that they are reported separately ordinary dividends and interest income are taxed the same (i.e as income).

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

Post by gostars » Mon Sep 03, 2018 12:36 am

IntangibleAssets wrote:
Mon Sep 03, 2018 12:15 am
I'm trying to learn as much as I can about this stuff :) ...Don't Money Market Funds pay dividends, those would need to be accounted for on a 1099 correct?
Yes, you'll pay tax on the dividends, no different from any other savings or checking account interest.


Unrelated question, but since I'm posting: for those who hold entirely in SPRXX or FZDXX instead of SPAXX, are you worried about possibly having your primary account unavailable if redemptions are temporarily suspended due to a run on the fund? I don't mind having an EF in Vanguard Prime MM since I can use cash and cards to survive a temporary hold, but I pay my rent and credit card bills out of checking, and if that suddenly isn't available because the fund is temporarily closed, that has major ramifications, like high fees, negative marks on my credit, etc..

lilyn20
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by lilyn20 » Mon Sep 03, 2018 7:48 am

Don't the high ERs for these accounts (.42%) make them less attractive than a regular account at Ally or Capital One 360? Or is this just seen as the cost of keeping your accounts in one place?

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

Post by arf30 » Mon Sep 03, 2018 8:23 am

lilyn20 wrote:
Mon Sep 03, 2018 7:48 am
Don't the high ERs for these accounts (.42%) make them less attractive than a regular account at Ally or Capital One 360? Or is this just seen as the cost of keeping your accounts in one place?
Don't look at the expense ratio, look at the 7 day SEC yield.

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

Post by RootSki » Mon Sep 03, 2018 8:34 am

arf30 wrote:
Mon Sep 03, 2018 8:23 am
lilyn20 wrote:
Mon Sep 03, 2018 7:48 am
Don't the high ERs for these accounts (.42%) make them less attractive than a regular account at Ally or Capital One 360? Or is this just seen as the cost of keeping your accounts in one place?
Don't look at the expense ratio, look at the 7 day SEC yield.
Doesn’t Fidelity waive the ER on core positions?

lilyn20
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by lilyn20 » Mon Sep 03, 2018 8:57 am

arf30 wrote:
Mon Sep 03, 2018 8:23 am
lilyn20 wrote:
Mon Sep 03, 2018 7:48 am
Don't the high ERs for these accounts (.42%) make them less attractive than a regular account at Ally or Capital One 360? Or is this just seen as the cost of keeping your accounts in one place?
Don't look at the expense ratio, look at the 7 day SEC yield.
Why isn't the ER relevant? I'm considering the manual purchase in my CMA because I do use margin on my brokerage. I just assumed you'd have to pay the fees like any other fund.

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

Post by whodidntante » Mon Sep 03, 2018 9:02 am

RootSki wrote:
Mon Sep 03, 2018 8:34 am
arf30 wrote:
Mon Sep 03, 2018 8:23 am
lilyn20 wrote:
Mon Sep 03, 2018 7:48 am
Don't the high ERs for these accounts (.42%) make them less attractive than a regular account at Ally or Capital One 360? Or is this just seen as the cost of keeping your accounts in one place?
Don't look at the expense ratio, look at the 7 day SEC yield.
Doesn’t Fidelity waive the ER on core positions?
No. They used to waive minimums but they got rid of those so it doesn't matter.

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

Post by arf30 » Mon Sep 03, 2018 9:16 am

lilyn20 wrote:
Mon Sep 03, 2018 8:57 am
arf30 wrote:
Mon Sep 03, 2018 8:23 am
lilyn20 wrote:
Mon Sep 03, 2018 7:48 am
Don't the high ERs for these accounts (.42%) make them less attractive than a regular account at Ally or Capital One 360? Or is this just seen as the cost of keeping your accounts in one place?
Don't look at the expense ratio, look at the 7 day SEC yield.
Why isn't the ER relevant? I'm considering the manual purchase in my CMA because I do use margin on my brokerage. I just assumed you'd have to pay the fees like any other fund.
It's not a useful metric in this case, the SEC or 7 day yield is what should be used when comparing to other high yield savings accounts or other MM funds to determine the return you'll receive.

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jazman12
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by jazman12 » Mon Sep 03, 2018 9:25 am

Don't forget about the expense ratio of .3 for SPXX
Act soon... time is running out

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

Post by gostars » Tue Sep 04, 2018 3:35 am

A traditional bond mutual fund delivers returns in 2 different ways, both in the yield it provides and in the changing value of the underlying assets, as reflected in the NAV (share price). Each day that the NAV is calculated, the fraction of the ER belonging to that day is factored in and decreases the NAV ever so slightly. Since the NAV of a money market fund is always (barring catastrophe) $1, the only return it provides is the interest, and the expenses are taken from them. What you actually receive is the published yield. So, for a published 7 day/SEC yield of 1.85% and 0.3% ER, that means the fund actually made 2.15%, kept 0.3% for expenses, then returned 1.85% to investors. If the ER was 0.4% and the fund still made the same amount, that means the yield would have been 1.75% instead. So, ER is not something that needs to be directly monitored, because it is already reflected in the yield. Ally and Capital One just give you the interest rate without telling you how much they kept for themselves.

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

Post by IntangibleAssets » Wed Sep 12, 2018 11:22 am

Hi All,

Thanks for your help again, really appreciated! I just want to make sure I'm understanding it all correctly.

hypothetical Ex:

My CMA has $100 in the MM fund earning 2% ---> I pay my CC bill from this account $50 ------> then decide to replenish from bank account to the CMA and MM and add an additional $250 (account now $300) ----------> and so on and so forth.

Questions: Does the initial $100 establish any type of cost basis, or if I understood the posts here there is no cost basis reporting with MM funds only dividends earned reporting, essentially the money market mutual fund functions as the rough equivalent as a high yield savings account (without the FDIC) and the only thing we report come tax time would be the 1099-DIV?

Or put another way....what do I need to keep track of for tax purposes?

Apologies if these seem like basic questions, I'm a little new to this process of a money market mutual fund as opposed to a HYSavings account.

Many Thanks
-IA

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

Post by RootSki » Wed Sep 12, 2018 12:29 pm

A nice tool for comparing Fidelity Money Market 7-Day SEC can be found here.

https://fundresearch.fidelity.com/mutua ... ing-yields

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

Post by vtMaps » Wed Sep 12, 2018 1:06 pm

IntangibleAssets wrote:
Wed Sep 12, 2018 11:22 am
essentially the money market mutual fund functions as the rough equivalent as a high yield savings account (without the FDIC) and the only thing we report come tax time would be the 1099-DIV?
Yes. --vtMaps
The optimist proclaims that we live in the best of all possible worlds; and the pessimist fears this is true. --James Branch Cabell

mervinj7
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by mervinj7 » Wed Sep 12, 2018 1:22 pm

IntangibleAssets wrote:
Wed Sep 12, 2018 11:22 am
Hi All,
Thanks for your help again, really appreciated! I just want to make sure I'm understanding it all correctly.
There's some more info on the Fidelity CMA in an earlier post (see below). When I saw that a few months ago, I moved my CORE funds into SPRXX. The current yield is 1.84%, which is a little lower than my Capital One 360 Money Market account at 1.85% but with the CMA I get ATM refunds everywhere. Cash withdrawals automatically liquidate the MM fund.However, cash deposits go back into the CORE fund, so you'll have to repurchase more shares of the MM fund once in while if you have regular deposits.

viewtopic.php?t=237712#p4016408

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

Post by Arby » Tue Nov 20, 2018 1:50 pm

Spirit Rider wrote:
Sun Aug 05, 2018 8:06 am
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.
Or you can buy FDRXX as an alternative to SPAXX.

These are two extremely similar money market funds but FDRXX has a lower expense ratio.

Maybe I am missing something but I can't seem to find any meaningful difference between the two other than the expense ratio which could be the reason for FDRXX's slightly better yield.

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

Post by hafjell » Fri Jan 11, 2019 2:40 pm

Arby wrote:
Tue Nov 20, 2018 1:50 pm
Spirit Rider wrote:
Sun Aug 05, 2018 8:06 am
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.
Or you can buy FDRXX as an alternative to SPAXX.

These are two extremely similar money market funds but FDRXX has a lower expense ratio.

Maybe I am missing something but I can't seem to find any meaningful difference between the two other than the expense ratio which could be the reason for FDRXX's slightly better yield.
Why wouldn't you choose SPRXX?

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

Post by mptfan » Wed Jan 23, 2019 10:50 pm

mpsz wrote:
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.
According to Fidelity, margin is not available in the CMA account.

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

Post by johnsmithsf » Sat Jan 26, 2019 2:59 pm

CDub wrote:
Sun Aug 05, 2018 7:24 am

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.
If you do this combination, and keep all the money in the brokerage account in a money market fund like SPAXX, and your Cash Management accounts does overdraft on this brokerage account SPAXX for every small withdrawal/bill pay etc, will you be able to bypass the 6 MONTHLY transaction limit that real savings accounts / money market funds have? I decided against Ally savings because of this potential issue.

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

Post by vtMaps » Sat Jan 26, 2019 3:12 pm

johnsmithsf wrote:
Sat Jan 26, 2019 2:59 pm
If you do this combination, and keep all the money in the brokerage account in a money market fund like SPAXX, and your Cash Management accounts does overdraft on this brokerage account SPAXX for every small withdrawal/bill pay etc, will you be able to bypass the 6 MONTHLY transaction limit that real savings accounts / money market funds have? I decided against Ally savings because of this potential issue.
There is no monthly transaction limit on a brokerage money market fund. There is a transaction limit on a bank money market account.

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

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

Post by dcart » Tue Jan 29, 2019 11:10 pm

I established CMA and I'm setting up the Cash Manager. I'm wondering if there is any downside to selecting the Self-funded Overdraft protection (I have margin option disabled)? It seems that's the most optimal set up for maximizing interest earned but is there any downside when compared to the other option of setting Minimum and Maximum Target Balances? Thank you.

Jill546
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Re: Earn 1.5% on your checking account without the usual hoops (at Fidelity)

Post by Jill546 » Sat Feb 09, 2019 1:45 pm

Good Afternoon,

I have a Schwab Checking Account. Can the same be accomplished week Schwab?

Thanks.

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

Post by drk » Sat Feb 09, 2019 2:52 pm

Jill546 wrote:
Sat Feb 09, 2019 1:45 pm
Good Afternoon,

I have a Schwab Checking Account. Can the same be accomplished week Schwab?

Thanks.
Sadly, no. You have to manually move money into and out of Schwab’s money market mutual funds.

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