Fidelity Cash Management Account

garlen | Feb 16, 2019 | 3 posts since 2017

Is anybody using a Fidelity Investments' Cash Management Account along with a brokerage account to replace their checking account?

--> The CMA behaves like a bank checking account (ATM access, no fees, checks, online bill pay, remote check deposits, FDIC insurance, modest interest rate ~0.37%)

https://www.fidelity.com/cash-management/fidelity-cash-management-account/overview

https://accountopening.fidelity.com/ftgw/aong/aongapp/interestRates

--> If I use Cash Manager, it looks like I can link it to a brokerage account where I can use cash to buy a money market fund (yielding ~2%)... and then Cash Manager will take care of selling the money market to take care of cash needs (like overdraft) ... and I'd then leave the majority of the "checking" funds in the money market in the brokerage account

https://www.fidelity.com/cash-management/fidelity-cash-management-account/cash-manager

I currently use Ally checking, but this seems like a way to get better returns on my checking account balances without having to jump through hoops for a reward checking account.

Questions:

* does this seem reasonable (anybody else doing this)?

* am I missing any down-side other than SIPC insurance rather than FDIC insurance?

* it doesn't seem like I'd be hit with any fees with this scheme

* and experience with Fidelity's bill pay system?

Thank you!

2

Answers

RJM | Feb 17, 2019 | 499 posts since 2011

I have the CMA. I have been with Fidelity for over 10 years as my brokerage. I mostly use it for moving large amounts to & from via ACH or with checks.

I have NOT used it like a checking account or billpay because I like to keep my funds separated.

Here are my issues: Setting up links to external accounts is a problem most of the time. While one bank or CU was very easy, the rest require forwarding a copy of your statement at the external firm. And even after doing that, it's incredibly slow. It takes 5-10 days for a human to review it for the link to be available to use.(And if you want it sooner, too bad) And at least one of my external accounts I was unable to download it and forward it to fidelity for some unknown reason and I had to actually print it out and snail mail it. That took almost 3 weeks. They do not offer the 2 small deposits thing that everywhere else does.

I have never written a check that did not require more work from me. They either call or email me telling me to call to confirm. While I have active trader reps that will bend over backwards, it's still a step I should not have to take. Recently, I told them I wanted that to stop .They sent me a link to the signature card page where I guess they want me to fill out a new one and snail mail it in. I asked where my old one was and they could not answer me. (We are at an impasse as I am not sending another signature card in) I don't have a scanner so its snail mail only for me.

They recently came out with free ACH transfers and I did one to Ally back a few months ago when they were having the payback promo. It works just like the ACH transfers in that you enter the wire transfer info and make a new link. Since I already had Ally linked long ago there was no waiting. The only problem is some firms charge to receive wire transfers, but not Ally.

As mentioned above, one of my external links was very easy, it was "enter your username & password" and BOOM, the link was established. (That may have been Penfed??)
I remember being hopeful that all links would be so easy but no such luck.
Fidelity says that only large banks & CUs are set for that. Cannot recall on Ally because its been linked for a long time.
I have not paid the first bill via billpay so I am unaware how it works.

As far as Ally, they have an overdraft feature that is pretty cool that I have used 8-10 times already.

Rather than keeping money in my Ally checking at their pitiful rate, I have it set to Automatically pull the funds from one Ally savings account. In $100 increments and each counts toward the limit of 6.
That is Ally's overdraft protection.

I have most of my bills to automatically pull from either All American where I have a 2.50% checking or Ally. Im sure you could set up Fidelitys CMA to do that too. (Without worry of going over 6 per month)
Finally, the downside of SPRXX is you have to manually buy it. I get dividends & interest payments frequently so I have to buy SPRXX everytime.

3

steved | Feb 23, 2019 | 24 posts since 2014

I am investigating doing the exact same thing. My motivation is that Ally checking pays almost no interest and I am getting sick of worrying about the 5/month limit on Ally Savings transfers.

Fidelity's CMA is basically a bank account (paying little interest) that will automatically transfer cash from your brokerage money market if needed. However, if you deposit cash into the CMA, you need to manually transfer it back to the money market--a big pain.

A better alternative is to just open a second Fidelity brokerage account (with no CMA option) to use as your checking account. You still get checks/ATM with rebates, but the money always sits in the brokerage account's core fund which currently yields over 2%.

One big downside I have discovered is their hold times. If you initiate an inbound ACH transfer from Fidelity, it doesn't make the deposit available for use for 4 days AFTER the ACH has cleared. (For example, if you initiate an ACH on Monday, it will generally be received on Tuesday but Fidelity will not let you withdraw it until the following Monday.) I have not yet tested availability of funds where the ACH transfer is initiated at the other bank.

2

RJM | Feb 23, 2019 | 499 posts since 2011

Its funny you mention that, I have 3 ally savings accounts but never considered a 2nd brokerage account for the CMA.

By the way, ally allows 6 transactions, not 5.

I have never had any holds on my account, probably because the value of my account far exceeds any transfer amount.

Fidelity's brokerage regular checking account, which I think is SPAXX pays less than SPRXX which is what I usually buy. (Not federally insured but I trust fidelity more than the government.

Fidelity responded by secure message that my signature has changed from 2007. I had not realized I had been there that long.

I just called a rep who said a lot of people have 2nd CMAs so their larger brokerage account is not connected to their smaller bill paying account. I did forget to ask if they have any automatic overdraft from the other account or not.

Do you know about that?

Thanks for the heads up.

1

RJM | Feb 23, 2019 | 499 posts since 2011

Just found my own answer.... this is exactly what I need I think.
--------------------------------
You can set up self-funded overdraft protection for your Fidelity Cash Management Account by designating a separate Fidelity account to transfer money from in the event of an overdraft.

1

steved | Feb 23, 2019 | 24 posts since 2014

I'm pretty sure it doesn't have anything to do with account value. They told me it's their SOP. Funds are available for trading as a soon as they clear, but not for withdrawal until 4 days later.

Do you use SPRXX as your core position or do you have to purchase it manually? I only see SPAXX and FZFXX available as for core funds. One pays 2.04% and the other 2.03%. SPRXX is much better at 2.27%.

I don't want my accounts connected at all so I didn't look. If there's a transaction that would exceed the balance of my cash account, I want Fidelity to bounce it--not pull from my investment account.

1

RJM | Feb 23, 2019 | 499 posts since 2011

Mine is set for the SPAXX I think, except for the IRA it was FDRXX i think?

I have to buy the SPRXX manually.

1

steved | Feb 27, 2019 | 24 posts since 2014

Quick follow up: If the ACH transfer is initiated at the sending bank, the funds appear to become available for withdrawal the same day they are received.

5

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