Does Fidelity's auto-liquidation of non-core money market funds ever fail?

[cwenger]

I have a taxable brokerage account at Fidelity where I hold my cash in FZDXX because it earns more than my high-yield savings account. I can't use it as my core position unfortunately but whenever I get some money in I just put in a buy order for more FZDXX. I also use my brokerage account as a checking account to pay credit cards. Based on the advice of a Fidelity rep here ("It is best practice to sell non-core money markets in advance of expected purchases."), I generally sell enough FZDXX first, but I'd like to stop doing this. However, I'm scared of the possibility of an ACH withdrawal being rejected due to insufficient funds in my core account, making the credit card payment fail. Has anybody had any issues with Fidelity's auto-liquidation failing with a non-core money market fund?

[rv26]

Is this a regular brokerage account or Cash management account? I know with a Cash Management Account you can take advantage of the Cash Manager (https://www.fidelity.com/cash-managemen ... sh-manager)

[whodidntante]

I've had disgustingly large automatic liquidations with great success. I'll test a 100k liquidation in May as part of a gambit.

[123]

I tidy up our Fidelity accounts by moving money into FZDXX all the time. Fidelity sweeps it out to automatically cover any purchases, ACH, or checks. Been working great this way for over 5 years without any problems. Key point to remember is to always carry a balance in FZDXX so you don't have to go through the $100K doorway again.

I wish Schwab could be as nice and accommodating. At Schwab if you use any "purchased" MMF you have to sell it to have funds available for settlement of transactions.

[nalor511]

The only auto transfer I had fail, involved an ACH debit of a CMA that should have overdrafted pull from my brokerage margin, and that was just one too many steps, the ACH was kicked back as NSF. Fidelity couldn't tell me why. I've had the same setup work in the past. I've never had a liquidation of FZDXX or SPRXX fail.

[Zosima]

The only auto transfer I had fail, involved an ACH debit of a CMA that should have overdrafted pull from my brokerage margin, and that was just one too many steps, the ACH was kicked back as NSF. Fidelity couldn't tell me why. I've had the same setup work in the past. I've never had a liquidation of FZDXX or SPRXX fail.

+1. I also have a CMA with overdraft pull from brokerage and I once had a quarterly tax payment where Fidelity failed to pull the funds from the brokerage account. Fidelity apologized but failed to provide an explanation of why that happened.

Now, I keep FZDXX in both my CMA and brokerage account and always ensure that there is sufficient funds in my CMA (via FZDXX) to cover upcoming bills and payments. Fidelity has never failed to pull from FZDXX to cover expenses or investments from either my CMA or brokerage account.

[JoMoney]

It hasn't happened that I'm aware of, but there are explicit warnings when you buy a non-government money market fund about the potential risk of liquidity issues and control gates (which is why non-government money market funds aren't allowed to be a 'settlement fund')
I've used FDRXX as an additional fund in a CMA account, and as the "Core" account in a brokerage account with debit/ATM card and bill pay enabled. The only auto-liquidation issue I've had was in the CMA account I bought FDRXX with the entire bank sweep balance and had a ACH bill pay withdrawal fail that happened the same day - sometimes it takes a day for a new money market fund purchase to become "available" for withdrawal. If I had a larger balance at the time it wouldn't have been a problem, and if I had kept an eye on the "available" balance (and remembered the upcoming withdrawal was happening that day) it wouldn't have been a problem. The only consequence of the failed ACH withdrawal was I got an email saying it had failed and I resubmitted it.

[gpburdell]

I've been using non core Fido money markets as cash for many years now and try to keep nothing in the core option. I've had no issues with the auto liquidation for transfers (incl external to other banks), atm debits, ach/billpay and buying stocks or t-bills.

In a PC browser, if you go to your account then click on the 'Balance' tab, you'll see that money you have in Fido money markets are included in "cash available to trade" and "cash (core)".

[cwenger]

Is this a regular brokerage account or Cash management account? I know with a Cash Management Account you can take advantage of the Cash Manager (https://www.fidelity.com/cash-managemen ... sh-manager)

This is a brokerage account, not a cash management account. I like the simplicity of a single account so I don't want to use a CMA also.

[user9532]

In the current debt celing scenario is there any potential downside in holding a somewhat large balance in FZDXX?

[Gadget]

I had an issue one time in the past many years. It was for a purchase of stocks at Vanguard (before I completely switched to Fidelity) that was for over 100k. There was not enough in the CMA, but there was more than enough in the overdraft protection account for the CMA. The ACH stock purchase from Vanguard failed. When I called Fidelity, they apologized and had me call Vanguard to process it again. It worked the 2nd time.

They said someone accidentally failed it for insufficient funds and forgot to look at overdraft protection accounts. They implied that for purchases of this amount, which must have been $100k because it was something like $150k, they were reviewed manually by a real person. I remember he implied it was all computers when less than $100k. No idea if that was for me specifically, or a standard policy. But it does line up with their wire transfer limits that are for $100k max unless you call a real person.

[ma21n2]

I'm thinking of opening a Fidelity CMA account and keeping all my cash in FDLXX (my interest checking account pays almost nothing). I'll then use it to pay credit card bills and what not. Is there any downside to opening a CMA account instead of Brokerage account? I think CMA comes with ATM fee rebate whereas Brokerage account doesn't unless you meet some asset requirement.

[cwenger]

I'm thinking of opening a Fidelity CMA account and keeping all my cash in FDLXX (my interest checking account pays almost nothing). I'll then use it to pay credit card bills and what not. Is there any downside to opening a CMA account instead of Brokerage account? I think CMA comes with ATM fee rebate whereas Brokerage account doesn't unless you meet some asset requirement.

The main difference I've observed (I got a CMA solely for a bonus) is that with a CMA the default sweep option is cash only, while for a brokerage it can be some money market funds. But if you're planning to use FDLXX you'll have to manage that manually anyway. More details on the wiki here.

[ma21n2]

Great, thank you!

[Charles Joseph]

I've had disgustingly large automatic liquidations with great success. I'll test a 100k liquidation in May as part of a gambit.

My $10.05 liquidation from Taco Bell cleared today without a hitch.

Seriously, I've never had a problem. I buy FDLXX in my CMA and all transactions go smoothly.

[MikeG62]

I have a taxable brokerage account at Fidelity where I hold my cash in FZDXX because it earns more than my high-yield savings account. I can't use it as my core position unfortunately but whenever I get some money in I just put in a buy order for more FZDXX. I also use my brokerage account as a checking account to pay credit cards. Based on the advice of a Fidelity rep here ("It is best practice to sell non-core money markets in advance of expected purchases."), I generally sell enough FZDXX first, but I'd like to stop doing this. However, I'm scared of the possibility of an ACH withdrawal being rejected due to insufficient funds in my core account, making the credit card payment fail. Has anybody had any issues with Fidelity's auto-liquidation failing with a non-core money market fund?

Nope, not one time and I've been using FZDXX to hold my excess cash for a very long time now. Sweeps happen when they need to without fail.

[ma21n2]

I opened a Fidelity CMA account, and I linked it on Ally.com. Ally made two small deposits to Fidelity CMA, which I confirmed. But later in the day I got an email from Fidelity titled "Direct Debit Failure Notification":

An attempt to apply a direct debit to your account in the amount of $0.xx by ALLY BANK was unsuccessful because the account does not have sufficient funds to cover the debit.

Because this transaction was returned, it will not appear in your transaction history on Fidelity.com. You should contact ALLY BANK to determine the best next steps.

Does Fidelity not make ACH deposits available for ACH debit the same day? Or does Fidelity process ACH debits first and then ACH credits? (in which case, the ACH debit would have failed because my account had a $0 balance before receiving the two small deposits)

[JoMoney]

I opened a Fidelity CMA account, and I linked it on Ally.com. Ally made two small deposits to Fidelity CMA, which I confirmed. But later in the day I got an email from Fidelity titled "Direct Debit Failure Notification":

An attempt to apply a direct debit to your account in the amount of $0.xx by ALLY BANK was unsuccessful because the account does not have sufficient funds to cover the debit.

Because this transaction was returned, it will not appear in your transaction history on Fidelity.com. You should contact ALLY BANK to determine the best next steps.

Does Fidelity not make ACH deposits available for ACH debit the same day? Or does Fidelity process ACH debits first and then ACH credits? (in which case, the ACH debit would have failed because my account had a $0 balance before receiving the two small deposits)

Fidelity direct deposits are available the same day (usually earlier than expected delivery date)... the issue is the ordering how your request came in. My guess was Ally sent the debit before the deposit to keep someone from somehow spending their 20 cents and locking it up before they can claw it back.

[ma21n2]

Thank you. Glad to hear Fidelity makes ACH deposits available the same day.

The two small deposits from Ally showed up early in the morning, so I'd think Ally sent both ACH credit and debit instructions together in the same batch. With my Citibank checking account, ACH credits for the day usually have a timestamp of around 5am, followed by ACH debits with a timestamp of around 6am. So for the batch of ACH instructions they received overnight, Citi seems to be processing ACH credits first and then ACH debits. Maybe Fidelity doesn't do that?

[JoMoney]

I can't say for certain how Fidelity's system processes same-day ACH direct deposits/direct debits, but looking at my CMA's account history on the few instances I have where there was a direct deposit and a direct debit on the same day, the "direct debit" is listed as occurring later or after the deposit.

That said, I also know that the ordering of how these things show up can be different once they're "processed", on the day-of and sometimes for a few days after the transaction it just shows the transaction and says "processing", the date and order sometimes show up differently once the transaction(s) have fully posted to the account.

[ma21n2]

Thank you so much for checking.

[jmw]

Anyone knows what happens if a failure involves billpay. Does the billpay just cancel or is the payment at the other end gets returned unpaid?

[BoglesBeagle]

Anyone knows what happens if a failure involves billpay. Does the billpay just cancel or is the payment at the other end gets returned unpaid?

Late response, but if the bill pay was sent as a check, it can bounce. I once had this happen with a rent check due to confusion on my end and slow clearing by the landlord, which was mildly embarrassing. (This is the flip side of the fact that the money doesn’t leave until the paper bill pay check is presented. Presumably this can’t happen at banks that tie up the funds as soon as they send the check.)

I don’t know what happens if Fidelity/CheckFree pays the biller electronically. It seems like in this case it’s more like a push that could just cancel before taking flight? But no direct experience.