Fidelity’s brokerage account as checking account

I had been using Presidential bank as my main checking account for several years since 2002. Recently, I reviewed the situation and decided to make a switch. Presidential bank has a good checking product but I found it lacking in the following:

  1. While the APY is moderately competitive (currently 4.5%), even better alternatives are available.
  2. The above APY is limited to the first $25k only. The APY beyond $25k drops significantly to 2.75%. This makes the consolidation of liquid reserves troublesome.
  3. Direct deposit is required to earn the 4.5% APY interest rate.

I looked and compared offerings from several online banks and even brick & mortar banks in my area. In the end, I decided to move my main checking needs to Fidelity brokerage. The following are the reasons:

  1. Balances earn top yields using Fido’s money market fund (MMF). I use FSPXX, a California AMT tax-free MMF. For me, this fund spots a higher yield than even Vanguard’s MMF after taking AMT into consideration. (Note: Non-core MMFs might have minimum balance ($2000) fees but this can be easily avoided by enrolling into an auto-investment, typically $100 every 3 months or something like that).
  2. Free and extremely fast (next business day) ACH transfers to linked bank accounts. Many banks and even Vanguard have much slower ACH processing times. In addition, there doesn’t appear to have a limit to the number of ACH links that I can set up.
  3. Money can be transferred using ACH from external accounts. For example, from the Vanguard website, I can pull money out from the Fidelity account into Vanguard. Note that you typically cannot do this with MMFs. For example, you cannot pull money out from Vanguard’s Prime MMF from an external institution. (Note: There is an offering from Vanguard that let’s you do this for free but you need to have at least a million dollars with Vanguard to get it).
  4. Unlimited check writing with no check minimum amount limitation. Most mutual fund’s MMFs have check writing minimums, for example this is $250 for Vanguard MMFs.
  5. Free Billpay through the CheckFree system (one of the better billpay systems).
  6. No direct deposit requirement.
  7. Check card provided (moot point, since I do not intend to use it).

There are a few negatives that I can think of. These are

  1. Lack of ability to deposit paper checks easily; for that I use a savings account (APY 5%) at a local credit union.
  2. Need to manually buy into FSPXX. Otherwise, any money deposited goes into FCFXX which has a lower yield. This is usually not a problem since whenever I submit an ACH-in, I would submit a purchase request for FSPXX at the same time. Note: sale of FSPXX to cover debits (e.g. ACH withdrawals, checks, billpays, etc) are automatic.

Bonus : At the time of this post, Fidelity is still offerring a $100 sign-up bonus for new households with a $10,000 deposit. Link HERE.

Related internet resource : FWF’s Fidelity MMF discussion.


  1. TFB

    Thanks for the detailed info. Do you know if Fidelity enforces the minimums (minima?) on those AMT Free MM funds like FSPXX? $25k initial and 10k ongoing are very high hurdles.

  2. indexfundfan (Post author)

    TFB, I think the minimums are enforced. I got in with the specified minimum but you can pull out the excess the very next day. Since this is a MMF, there is no capital gain tax consequence or trading limitation if you should do this.

    Using FSPXX is kind of like a “semi-sweep” MMF since it will be automatically redeemed to meet debits but you need to manually buy it when you deposit cash.

    Additional notes:

    1. There is a small balance (less than $2000) fee of $12 a year, checked on the second Friday of November for FSPXX. (But there is no fee for the core account).

    2. You will be given 30 days to meet the minimum balance if you should drop below.

    3. Minimum subsequent purchase for FSPXX is $1000.

    4. Some on FWF reported that Fidelity is improving on its banking features, possibly with ATM rebates. We’ll see how it goes.

  3. DJ


    Do you feel comfortable with SIPC? Is it worth it to give up FDIC for a little yields?

  4. indexfundfan (Post author)

    Note that the new Fidelity “mySmartCash” brokerage account offers unlimited ATM rebates in addition to the above features.

  5. Pingback: indexfundfan @ indextown » Blog Archive » Taxable MMF now a better deal than muni MMF

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