Fidelity Cash Sweep Account Options and Rates
Several options are available for uninvested cash in a Fidelity brokerage account. The broker provides an FDIC sweep program with its Cash Management
Account. This is a hybrid brokerage-bank account. Securities can be traded in it, but it is designed primarily for cash management purposes. It comes
with free checks and a Visa debit card. All deposits that aren’t used to purchase securities are swept into FDIC-insured banks that Fidelity has
partnered with. Each Cash Management Account can have up to 5 program banks, which creates a maximum insurance limit of $1,250,000, much higher than
the government’s normal $250,000 cap.
Interest is paid on funds swept to program banks. As of January 2020, the APY is 0.14% for balances above $100,000. Accounts smaller than that earn just
0.07%. Besides the Cash Management Account, the FDIC sweep program can be used for an IRA and a 529 college savings plan.
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Fidelity Money Market Fund Rates
In a regular brokerage account, a money market mutual fund serves as the core position. Fidelity offers two funds that can be used for this purpose.
The first is the Fidelity Government Money Market Fund (SPAXX). It is currently yielding 0.59%. The other is the Fidelity Treasury Fund (FZFXX). It is
earning 60 basis points right now. These funds can be used in either a retirement or non-retirement account. Other money market funds, including
Fidelity Government Cash Reserves (FDRXX) can be used as an IRA’s core account.
Other Fidelity Cash Sweep Options
The third and final option for uninvested cash is to simply leave funds sitting in a brokerage account, where the money will be insured by SIPC. The
insurance limit here is $250,000. This amount is taken from SIPC’s total $500,000 limit for cash and securities per account. So if you elected to
leave $200,000 in a trading account, you would only be eligible for $300,000 of insurance for securities.
Compared to other brokerage firms, Fidelity’s cash management features are some of the best in the industry. Not all brokers offer three core account
options, for example. Fidelity’s major rival, Schwab, only offers FDIC insurance. E*Trade offers an FDIC sweep program as well, but it only yields
0.01%. Merrill Edge provides money market funds as core positions like Fidelity. But Merrill’s funds pay only 0.34% and 0.47%, lower than Fidelity’s
products. WellsTrade provides $1,000,000 of FDIC insurance, lower than Fidelity’s amount. Ally Invest offers the highest in the industry rate
of 2.20% APY on its online savings account that could easily be linked to its brokerage account.
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Fidelity Cash Management
Besides offering three types of core positions, Fidelity also provides a lot of useful cash management features. For example, the broker offers free
bill pay and a convenient overdraft protection feature. The broker’s mobile apps have check deposit. And a suite of Fidelity credit cards can deposit
up to 2% of purchases into a brokerage account.
ATM fees incurred while using Fidelity’s Visa debit card are reimbursed for Cash Management Account holders. A regular brokerage account is not
eligible for reimbursement, and it is also charged $1 per ATM withdrawal, after five per month.
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