Fidelity's Cash Policy: What Investors Need To Know

Fidelity offers a range of options for customers looking to invest their cash. These include savings accounts, money market funds, certificates of deposit (CDs), short-term bonds, bond funds, and deferred fixed annuities. Each option has different features in terms of liquidity, flexibility, insurance, and sensitivity to rate cuts, so customers can choose the one that best suits their needs and financial goals.

Fidelity also provides a Cash Management Account, which is a brokerage account designed for investing, spending, and cash management. It offers competitive rates, spending features such as a free debit card, and no account fees or minimums to open an account.

Additionally, Fidelity allows customers to transfer money to and from their accounts, set up recurring transfers, and manage their funds through various tools and services.

Fidelity's Cash Management Account

The Fidelity Cash Management Account is a brokerage account designed for spending, saving, and cash management. It is not a bank account, but it allows you to spend, save, and invest.

The account has no account fees or minimums to open and offers competitive rates. It also includes spending and money movement features such as a free debit card, check writing, Bill Pay, and more.

• ATM fee reimbursement: The account will automatically reimburse all ATM fees charged by other institutions when using the Fidelity debit card at any ATM displaying the Visa, Plus, or Star logos.
• Digital wallet compatibility: The account is compatible with digital wallets, allowing for convenient and secure transactions.
• Free mobile check deposit and Bill Pay: Via the Fidelity mobile app, users can easily deposit checks and pay bills on the go.
• No annual fee for debit/ATM card: There is no annual fee for the debit/ATM card, and ATM fee reimbursements are included.
• Free online Bill Pay and transfers: The account offers free online Bill Pay and free transfers between Fidelity accounts and bank accounts.
• FDIC insurance eligibility: Cash balances in the Fidelity Cash Management Account can be swept into an FDIC-insured interest-bearing account at one or more program banks, providing FDIC insurance for deposits.
• Choice of cash options: Users can choose between the Fidelity Government Money Market Fund (SPAXX) and the FDIC-Insured Deposit Sweep Program for their cash. The former offers the potential for higher earnings but is subject to market risk, while the latter provides additional protection with FDIC insurance.
• Real-time insights: The account provides real-time spending views and alerts, allowing users to track their spending and make informed decisions.
• Flexible payment options: The account offers flexible ways to pay and get paid, including Bill Pay, a digital wallet-compatible debit card, mobile check deposit, and payment apps integration.
• Automatic transfers and direct deposit: Users can easily set up direct deposit and create automatic transfers to invest their extra cash, making saving a seamless part of their routine.

Cash available to trade

The cash available to trade is the amount available to purchase securities in a cash account without adding money to the account. Executed buy orders will reduce this value (at the time the order is placed), and executed sell orders will increase this value (at the time the order executes).

It is important to pay attention to this balance to avoid good faith violations. A good faith violation occurs when you buy a security and sell it before paying for the initial purchase in full with settled funds. Only cash or the sales proceeds of fully paid-for securities qualify as "settled funds".

If you incur three good faith violations in a 12-month period in a cash account, your brokerage firm will restrict your account. This means you will only be able to buy securities if you have sufficient settled cash in the account prior to placing a trade. This restriction will be effective for 90 calendar days.

The cash available to trade also includes unsettled cash. If you use it, you could be trading with cash that’s not yet settled and you could be subject to a violation.

Committed to Open Orders

The dollar amount allocated to pending orders that have not yet been executed (e.g. buy orders). The amount you have committed to open orders decreases your cash available to trade.

Real-Time, Intraday, and Overnight

Real-time: Balances updated in real-time display values that change with market price fluctuations on the underlying securities in your account. Essentially, it is a complete recalculation based on price fluctuations of positions, trade executions, and money movement into or out of the account.

Intraday: Balances updated intraday reflect trade executions and money movement into and out of the account during the day.

Overnight: Balances updated overnight display values after a nightly update of the account. In some cases, certain balance fields can only be updated overnight due to regulatory restrictions.

Cash available to invest

Fidelity offers a Cash Management Account that allows you to separate your spending activity from your investment activity. This account has no account fees or minimums to open and offers competitive rates. It also reimburses ATM fees globally and is digital wallet compatible.

The Cash Management Account is a brokerage account, not a bank account, and it allows you to spend, save, and invest. You can choose where you hold your uninvested cash: the Fidelity Government Money Market (SPAXX) or the FDIC-Insured Deposit Sweep Program. Deposits swept into the program bank(s) are eligible for FDIC Insurance, subject to FDIC insurance coverage limits.

The cash available to invest can be used to take advantage of opportunities in the market, such as moving money into investments quickly to benefit from market upturns or seizing new opportunities. It can also prevent you from being forced to sell your investments and locking in losses if the market falls. Additionally, cash can play a role in a diversified portfolio, as investing in different asset classes (such as cash, bonds, and equities) can help reduce the effects of volatility.

Cash and money market funds

Money market funds are a low-risk, short-term savings alternative that provides easy access to your cash. They are mutual funds that invest in debt securities, which are characterised by short maturities and minimal credit risk. These securities are issued by government entities or companies that borrow money and repay the principal and interest to investors within a short period of time.

Fidelity offers government, prime, and municipal (or tax-exempt) money market funds.

The Fidelity Government Money Market Fund (SPAXX) is a taxable money market mutual fund that invests in U.S. Government Agency and Treasury debt, and related repurchase agreements. It is intended for investors seeking a high level of current income, consistent with the preservation of capital and liquidity.

The Prime Money Market Mutual Funds are taxable funds investing in corporate and government securities. They are available only to "natural persons" investors who are not corporations or other types of organisations.

The Fidelity Municipal Money Market Fund seeks a high level of interest income exempt from federal income tax, consistent with liquidity and stability of principal. This fund normally invests at least 80% of its assets in municipal securities whose interest is exempt from federal income tax.

Cash in a brokerage account

The core position is used for the following:

• Depositing your initial investment
• Depositing cheques and direct deposits of pay
• Processing electronic funds transfers (EFTs)
• Processing Fidelity ATM and Visa Gold Card transactions
• Processing payments made through the Bill Pay service

You can choose from a few options for your core position, including:

• Fidelity Government Money Market Fund (SPAXX): A taxable money market mutual fund that invests in U.S. Government Agency and Treasury debt, and related repurchase agreements. This option is intended for investors seeking a high level of current income while preserving capital and liquidity.
• Fidelity Treasury Fund (FZFXX): A taxable money market mutual fund that invests in U.S. Treasury securities and related repurchase agreements, intended for investors seeking high current income while preserving capital and liquidity.
• Taxable Interest-Bearing Cash Option (FCASH): A free credit balance payable to you on demand by Fidelity. Fidelity may use this credit balance for its business, and it may pay interest on this balance based on a schedule set by the company.

It's important to note that you can only have one core position, but you can invest in other money market funds. You can change your core position at any time after your account has been established.

Frequently asked questions