Transcription
Right now, your bank is making money off of you and is not in some sneaky hidden way. It's right out there in the open.
On $10,000 sitting in a Chase savings account, you make $1 a year. Meanwhile, Chase turns around and lends your money out at around 9%. On that same $10,000, they pocket $900.
Now, I recently came across an account that flips that completely. It's free to open, zero monthly fees, and no minimum balance required. And right now, it is paying 3.26% on your cash automatically every single day without you having to do anything. It is called the Fidelity Cash Management Account. I started to dig into it and the more I looked, the more I realized that this thing makes your bank look embarrassing.
So, in this video, I'm going to break down exactly what this account is, how the interest rates work, what features your bank probably doesn't have, and what you need to know about before you move your money over. So, let's get into it.
The Fidelity Cash Management Account is not a traditional bank account. It's technically a brokerage account, but it functions exactly like a checking account in every way that it matters to you. You get a debit card. You get to write checks. You can set up direct deposit. You have a routing number and an account number, online bill pay, and mobile check deposit. All the normal banking features, and it's all completely free.
The difference is where your money actually sits while it's in the account. At a regular bank, your cash just sits there earning almost nothing while the bank puts it to work for themselves. With the Fidelity CMA, the moment that your money hits your account, it automatically gets moved into something called Spax. This is Fidelity's government money market fund, and this fund is currently paying at 3.26% as of filming of this video.
For context, the national average for regular savings account right now is roughly around 0.4%. The big banks like Chase, Bank of America, and Wells Fargo are paying even less than that on most accounts. That means that this account is paying roughly eight times the national average. This is for the same money with the same level of access. And again, you don't have to set anything up. The moment that your money lends, it starts earning.
Here's also one thing that most people get wrong about this account before they ever open it, and it has nothing to do with the rate. So, let me break this down simply. Spax is not FDIC insured. And that is probably the first thing that people flag when they hear about this account. But here's what it actually holds. US Treasury bills, short-term government securities, pretty much the same instruments that the federal government uses to fund itself. So, these are not stocks and they do not go up and down with the market. They mature on a fixed schedule and pay out quartly. They are backed by the full taxing and borrowing power of the United States government. So in the entire history of US government money market funds, not one has ever lost principle. And that's important to note to eliminate risk.
On top of that, your account carries SIPC protection. SIPC stands for Securities Investor Protection Corporation. Think of it as a brokerage world's version of FDIC Insurance. If Fidelity as a firm ever fails, SIPC steps in and protects your account up to $500,000 with up to $250,000 of that specifically in cash. It is a federal insurance policy that most people have never heard of, but it has been protecting brokerage accounts since 1970.
Now, if FDIC insurance is a hard requirement for you, Fidelity built that option in too. It is called the FDIC insured deposit sweep program. With this option, Fidelity automatically splits your cash across multiple partner banks, so you have up to $4 million that is fully FDIC insured. The trade-off is the rate. That option is currently paying at 1.84%. Still better than most big banks, but a lot lower than Spax.
Now, my personal pick is Spax because of the higher rate, the government-backed holdings, and the track record that pretty much makes it the right call for most people. But the choice is yours, and both options are right there inside of your account. So, whenever you sign up, you'll get to choose which option that works best for you. And if you change your mind down the road, you can always switch it. The choice stays in your hands.
There's also a tax advantage to Spax that most people don't realize because Spax holds US government securities. A portion of the interest that it pays you may be exempt from state income tax. So not federal, but just state. Now, if you live in a high tax state like California, New York, or New Jersey, that adds up. A regular high yield savings account does not give you that.
And the rate is honestly not even the most impressive part of this account. So, let me walk you through the features because some of these generally surprise me.
Number one is unlimited ATM fee reimbursements worldwide, not no network specific ATMs that you have to hunt down on an app. So, if you like to party in Vegas, those $25 fees are wiped. So, any ATM that charges you a fee, Fidelity pays it back. Most banks either charge you their own fee on top of the ATM's fee or they only reimburse you within their own network. Fidelity just covers it, no questions asked.
Number two is no foreign transaction fees. So, if you travel internationally, this is a big deal. Most debit cards charge you 1 to 3% every time that you swipe in another country. Fidelity charges zero. So, just pay in the local currency, and you keep every dollar.
Number three is that there is zero fees across the board. There are no monthly maintenance fees, no minimum balance fees, no fees to open, no check writing fee, no bill pay, free online transfers, and free wire transfers up to $1 million per business day online. So pretty much the cost to own this account is literally $0.
Number four is your interest compounds automatically. You get paid on the first of every month. That interest gets added to your balance and your new higher balance starts earning interest immediately. You never have to touch anything.
Number five is same day a transfers. You can push up to $100,000 out in a single business day and you can pull up to $250,000 in. You can do this all online with no phone call required.
Now compare that to your current bank. There's usually monthly fees, limited ATM network, foreign transaction charges, slow transfers, and just less interest on your money.
Now, most people set this account up and still leave money on the table without realizing it. Here's what most people miss about this account. It replaces both your checking account and your savings account at the same time. So, think about how most people manage their money right now. They have a checking account at Chase or Bank of America where the paycheck lands, and then they have a separate savings account somewhere else where they try to set money aside.
With the Fidelity CMA, your entire balance earns interest whether you are about to spend it or not. You can write checks or swipe your debit card. Fidelity automatically pulls from your Spax balance to cover you. So, you never really have to manually move money around.
This also makes it one of the best places that you can keep your emergency fund. Your emergency fund needs to do three things. It needs to be liquid so you can access it fast. It needs to be safe. And it needs to be earning real interest while you wait. Most people just have their emergency fund parked in a basic savings account earning almost nothing. that money is losing to inflation every month. The Fidelity CMA checks all of those boxes. You get same day access, government-backed holdings, and an interest rate that's working for you in the background.
So, if you were to put that into numbers, if you have $20,000 sitting in an emergency fund at Chase earning 0.01%, you make $2 a year. That same $20,000 in a Fidelity CMA earns you over $650 a year. Your emergency fund is supposed to protect you. That's the whole purpose of an emergency fund. is supposed to protect you and also be working for you while it waits.
And on top of all that, you can set up automatic reoccurring transfers and investments directly from this account. If you want to invest a set amount, like into an index fund every single month, you can automate that from your CMA. Now, if you want to move a fixed amount to another account on payday, you can also schedule that, too. So, this can become the center of your entire financial system, not just a place to park cash.
And if you already have other accounts at Fidelity, like a brokerage account or an IRA, adding a CMA makes everything even cleaner. Your spending account, your savings, and all of your investments are all in one place, so you can move money between them instantly with no transfer delays and no fees. A lot of people I know, they're juggling between three to four different apps just to manage your own money. This just makes it more streamlined.
There's also one detail about this account that most people only find out after they already move their money over. Because what I want to give you is the full picture so you can make the right call for your situation.
First is that you cannot deposit physical cash in this account. If you regularly receive cash or money orders, you will still need a traditional bank account to deposit those first, then transfer over. The direct cash deposit option does not exist here.
Second is that Fidelity does not support Zelle. If you send and receive money through Zelle regularly that would not work directly with this account. Venmo and Cash App are alternatives, but Zelle specifically is not available.
Third is Plaid integration is manual. A lot of apps and services that link to your bank account use a platform called Plaid. Fidelity does not connect automatically through Plaid the way big banks typically do. You can still link it, but you would have to do it with your routing and account number instead of an instant login method, which can take a couple extra minutes, but it does work.
Fourth is that new accounts may have a short hold period on large deposits. When you first open the deposit and transfer a large summon, Fidelity may hold it for a few business days while the account history is established. This is standard for new accounts and it does resolve over time.
For most people, I believe that none of these are really deal breakers. So, for my recommendation, it is to open up the Fidelity CMA and move a bulk of your savings and emergency fund over and just keep a basic no fee checking account at a local bank for cash deposits if you need one. You get a high rate on your money, plus you have a backup in case if you need it.
So, that is the Fidelity Cash Management Account. It is free to open, zero fees, a great interest rate on autopilot, and your checking and savings account combined into one place.
But, here's something that I did not tell you at the start of this video. The Fidelity CMA is one of the best places to store cash right now, but it is not the only one. And depending on how much you have and what your goals are, there might be even better places to park your money. I put together an entire video breaking down the seven best high yield savings accounts that you can open right now, which ones are actually worth it, and which ones that you should stay away from. If you want to make sure that every dollar that you have is working as hard as possible, click on this video right here. I see over there.