3 Ways to Use Fidelity as a Bank Account (2024)

[Updated on April 3, 2024. Fidelity announced in the March account statement and confirmed in their support channel on Reddit that a money market fund will be available as the default option in the Cash Management Account on or around June 15, 2024.]

Fidelity Investments is best known as an administrator for workplace retirement plans and an online broker for retail investors. In addition to 401k/403b accounts, Traditional and Roth IRAs, HSAs, and taxable brokerage accounts, Fidelity also offers accounts that can be used for the same purpose as a checking account and a savings account.

Because Fidelity is interested in having a full relationship with its customers for both banking and investing and its primary focus is on the investing part, it’s in a good position to offer better rates and features than other banks in the banking part.

This is not a sponsored post. Fidelity isn’t paying me to promote it. I’m only writing as a satisfied customer of over 20 years. Here are three ways to use a Fidelity account to manage day-to-day spending and savings.

1. CMA as Checking

Fidelity Cash Management Account (CMA) is a separate account type from Fidelity’s regular taxable brokerage account officially called “The Fidelity Account.” You have to choose the account type when you open the account. A Cash Management Account can’t be changed to a regular taxable brokerage account after you open the account. Nor can an existing regular taxable brokerage account be changed to a CMA.

Included Features

The Cash Management Account is specifically designed to meet banking needs. It has pretty much everything people need for a checking account and nearly everything is free.

– FDIC-insured balance (2.72% APY as of April 3, 2024) or money market (coming soon around June 15, 2024).

– No minimum balance. No maintenance fee. Does not require direct deposit.

– Provides a routing number and an account number for direct deposits and direct debits.

– Accepts check deposits by mobile app or in person at a Fidelity branch.

– Free checkbook. No minimum amount for writing a check.

– Free Visa debit card for purchase, ATM withdrawal, and teller cash advance. It does not require using the debit card a minimum number of times per month.

– No fee to use any ATM worldwide. Reimburses the ATM fee charged by the machine.

– Free Bill Pay service with eBill.

– Free same-day ACH. Push $100,000 per business day out of Fidelity and pull $250,000 per business day into Fidelity by online self-service. Call customer service to transfer a higher amount.

– Free wire transfers. Same $100,000 per business day by online self-service. Call customer service to transfer a higher amount.

The 2.7% interest rate on the FDIC-insured balance is lower than the rate on many high-yield savings accounts but it’s a lot higher than the rate on most online checking accounts. For example, although Ally Bank pays 4.25% on its savings account as I’m writing this, its checking account pays only 0.1%. Most high-yield savings accounts don’t have all the checking features such as check writing, debit card, and Bill Pay.

You’ll have the option to use a money market fund as the default (“core”) on or around June 15, 2024. The yield on the money market fund is above 5% as I’m writing this. You get checking account features while earning a higher yield than the rate on many savings accounts.

Routing Number and Account Number

You see the routing number and the account number for direct deposits and direct debits when you click on the routing number link below the account name.

Choose “checking” as the account type if you’re asked to select one.

If your bank uses Plaid to add a Fidelity account as a linked bank account, search for a non-existent bank and then click on “Link with account numbers.” It will make Plaid use a micro-deposit to verify your Fidelity account.

You come back to verify the link after you receive the micro-deposit in your Fidelity account.

Limitations

Fidelity Cash Management Account has some limitations that aren’t a deal-breaker to me.

– Does not accept deposits of physical cash.

– Does not support Zelle in the account (but you can link the debit card in the Zelle mobile app).

– Does not link instantly through Plaid (must go through micro-deposits).

– Does not offer sub-accounts for tracking different goals.

– Does not provide cashier’s checks.

– Recurring ACH pushes out of Fidelity only support monthly and annual frequencies. Recurring ACH pulls into Fidelity only support weekly, biweekly, and monthly frequencies.

– 1% transaction fee on debit card purchases in foreign countries. This fee doesn’t apply to international ATM withdrawals.

– ACH pulls and check deposits are held for up to five business days. The money still earns interest. It’s just not available for withdrawal while it’s on hold. You won’t be subject to the hold if you know the right way to transfer money.

I’ve used a Fidelity CMA for at least 15 years. It’s my primary checking account. I use my otherwise dormant Bank of America checking account on those rare occasions when I need to deposit physical cash, get a cashier’s check, or set up recurring transfers on an odd schedule. I don’t use a debit card for purchases (no rewards) or track my savings by separate goals.

The hold time on ACH pulls and check deposits will shrink over time for established accounts on smaller amounts. My ACH pulls and check deposits are usually available for withdrawal in two business days. I do an ACH push from the other side when I need it to be available immediately.

When you use a Fidelity CMA as your checking account, you can link it to an existing high-yield savings account as you normally do with a checking account. You earn much higher interest in the Fidelity CMA than in a typical checking account.

2. CMA as Checking/Savings Combo

Instead of linking to an external savings account, you can put the money in a money market fund in the Cash Management Account and keep both checking and savings in the same account.

Money Market Fund as Default

The default option in the CMA is only the FDIC-insured bank balance as of now. Fidelity will add a money market fund as a default option around June 15, 2024. When this becomes available and you switch the core option to the money market fund, money in the CMA will earn a much higher yield.

Buy Money Market Fund

You can manually buy a money market fund before a money market fund becomes available as a default option on or around June 15, 2024.

Although the CMA is designed for banking needs, it’s still a brokerage account. With some exceptions (no margin or options), you can buy in the CMA pretty much everything available in a regular brokerage account. That includes stocks, bonds, brokered CDs, mutual funds, and ETFs. A Fidelity money market fund pays about 5% annualized yield as of April 3, 2024, which is higher than the rate paid by many high-yield savings accounts.

A money market fund isn’t FDIC-insured but when you buy a government or Treasury money market fund, the underlying investments in the money market fund are backed by the government. See No FDIC Insurance – Why a Brokerage Account Is Safe.

The CMA becomes a checking/savings combo when you buy a money market fund in it. The core balance in the CMA serves as the checking part and the money market fund serves as the savings part. Fidelity will automatically sell from the money market fund when your core balance in the CMA is insufficient to cover a debit. This is like having free automatic overdraft transfers from savings to checking.

Because Fidelity will automatically sell from the money market fund to cover debits, if you’re so inclined, you can be aggressive in keeping the core balance in the CMA close to zero while keeping the bulk of your account in the money market fund earning a higher yield. Or you can set a maximum target balance alert with the Cash Manager to buy more shares of the money market fund when you have excess cash in the “checking” part.

The manual buys and target balance alerts won’t be necessary after June 15, 2024 when you switch the core to the money market fund.

Cash Manager Not Needed

You may have seen some convoluted setups using the Cash Manager feature in the Fidelity CMA. It’s unnecessary and undesirable.

The only thing remotely useful in the Cash Manager is the maximum balance alerts. An alert only tells you that your CMA core balance exceeded the maximum target balance. It doesn’t automatically buy a money market fund in the CMA for you. You still have to buy it manually.

You don’t need an alert for the CMA core balance dropping below a minimum balance when you have enough savings in the money market fund held in the CMA. Selling from the money market fund held within the CMA to cover debits works out of the box. It happens automatically anyway even if you don’t set up anything in the Cash Manager.

The Cash Manager has a “self-funded overdraft protection” feature to link the CMA to another Fidelity account or an external bank account. This is unnecessary and undesirable when you want the CMA to stand by itself. You don’t want unauthorized debits to affect your other accounts.

Add Treasury Bills or Brokered CDs

If you’d like to take it one step further, you can also buy Treasury Bills or brokered CDs in the CMA when you have money that you know you won’t need for some time. The CMA then becomes a checking/savings/CD combo. The money automatically goes into the “checking” part when the Treasury Bill or brokered CD matures. For example, the amount set aside for the next property tax bill can go into a Treasury Bill or a brokered CD. See and How to Buy CDs in a Fidelity Brokerage Account.

Please note if you enable the “auto roll” feature when you buy new-issue Treasury Bills or brokered CDs in the CMA, the amount for the next roll reduces your “available to withdraw” number for a few days during the roll. A debit may fail if you don’t have enough available to withdraw. It’s not a problem if you don’t use auto roll or if you keep a substantially higher amount in a money market fund than the amount for the next roll.

I use a Fidelity Cash Management Account as a checking/savings/CD combo this way. I buy into the Fidelity Government Money Market Fund (FZCXX) when I have a large core balance. I also buy Treasury Bills with money I know I won’t need for some time. Fidelity automatically sells from the money market fund as needed to cover direct debits and outgoing transfers.

My setup works well but I’m moving to a different setup below to eliminate the manual steps to buy a money market fund.

3. Separate Regular Brokerage Account

A regular Fidelity taxable brokerage account (“The Fidelity Account”) also provides a routing number and an account number for direct deposits and direct debits, free checks, debit cards, and Bill Pay. It includes everything in the CMA except ATM fee reimbursem*nt but it uses a money market fund that pays a higher yield as the core position as opposed to the FDIC-insured balance as in the CMA.

It won’t be necessary to use a separate regular brokerage account when the CMA gets the option to use a money market fund as the core balance on or around June 15, 2024.

Premium Services or Private Client Group

The ATM fee reimbursem*nt is also included when you have Premium Services or Private Client Group status, which generally requires having $250k or more with Fidelity outside workplace retirement plans. It doesn’t matter whether you have an assigned advisor.

You see your service level at the top right when you log in to Fidelity’s website. It’s also printed at the top left of your PDF account statement. Contact customer service if you have more than $250k with Fidelity outside workplace retirement plans but you’re not given a premium service level.

Someone said they didn’t get the ATM fee reimbursem*nt automatically when they used the debit card for the first time even though they had Premium Services or Private Client Group status. They had to call customer service and have the card specifically coded for ATM fee reimbursem*nt.

That wasn’t my experience. I had the ATM fee automatically reimbursed when I used the debit card from the brokerage account. I didn’t have to do anything differently. It may have to do with which happened first — having a debit card from the brokerage account and then qualifying for Premium Services or Private Client Group or having Premium Services or Private Client Group status first and then getting a debit card from the brokerage account. It was the latter for me and it was automatic.

Even if you don’t get ATM fee reimbursem*nt, the higher yield on the core balance may very well cover the ATM fees several times over. Suppose your core position has an average balance of $3,000 during the year (the “checking” part in the CMA), a 2% higher yield pays $60 more in interest. That’s plenty to pay for ATM fees unless you frequently take ATM withdrawals. My account records show that I used an ATM only twice last year.

The same missing features and limitations of the CMA also apply to the regular taxable brokerage account — no physical cash deposits, no cashier’s check, 1% foreign transaction fee on debit card purchases (which doesn’t apply to international ATM withdrawals), and hold on ACH pulls and check deposits for up to five business days (but no hold on receiving ACH pushes).

Set and Forget

Using a regular brokerage account for spending and savings becomes truly set-and-forget. You don’t have to manually buy a money market fund. All deposits automatically go into a money market fund that pays about a 5% yield as of April 3, 2024. All debits come out of this money market fund. It’s like using a savings account as a checking account.

You can still buy Treasury Bills or brokered CDs to set aside money for specific bills in the future. The same caveat on “auto roll” and “available to withdraw” as mentioned above also applies.

Name Your Accounts

Although you can keep the money for spending and short-term reserves in the same regular taxable brokerage account that also holds your long-term investments, most people probably prefer to keep them separate. You can have two (or more) regular taxable brokerage accounts for different purposes. You just give them different names so that you know which is which.

To change the display name of an account, click on the setup icon near the top left and then click on “Account display preferences.”

Check the box next to the account you’d like to name and then click on the “Rename” link on the top. Change the name to “Spending Account” or something to that effect.

You can also move an account to a different group to help you organize. There’s a built-in “Spend & Save Accounts” group but I put my account in the “Investment Accounts” group so that it shows up on the top.

***

The biggest draw of using a Fidelity brokerage account for spending and short-term reserves is the checking features. You effectively use a savings account as a checking account and earn a good yield from the first dollar. Everything is seamlessly together.

A Vanguard money market fund and some less well-known high-yield savings accounts pay more but they don’t offer checking features. When you pair it with a checking account that pays close to zero, the blended yield on all your cash goes down. For example, if you have $5,000 in a checking account that pays 0.1% and you have $50,000 in a Vanguard money market fund that pays 5.2%, your blended yield on $55,000 is 4.74%. You might as well put the whole $55,000 in a Fidelity brokerage account earning 4.9% and eliminate the need to watch your checking account balance and transfer back and forth between two accounts.

If you’re going to open a new Fidelity account, check Fidelity’s current special offers page first (not an affiliate link). You might as well get a small bonus when you meet the terms of the special offer.

Transitioning a checking account takes some time and effort. Banks know it. That’s why they pay you close to zero in checking accounts. They bet that you think it takes too much work to switch. Don’t fall for it. It’s easier than you think when you take your time to make the move.