Don't Use Fidelity's Cash Manager

Fidelity's cash manager is not reliable, and can result in bounced checks or other charges. When checks or other charges get specially processed by hand, the processor cannot see that you have funds available in your brokerage account through the cash manager to pay the charges. That's why Fidelity tells customers (after a problem) that the cash manager is not "guaranteed." Instead of relying on the cash manager, keep sufficient money IN your cash management account to cover your payments and charges. You can do that with money in your core account or in any Fidelity money market fund held in your cash management account. You can keep larger amounts of money in a separate Fidelity brokerage account so that those funds will be isolated from the cash management account. This video explains the facts.

00:00 Introduction
01:25 I was wrong about Fidelity’s Cash Manager
01:57 The hidden danger in Fidelity’s Cash Manager
03:37 Why I recommended using Fidelity’s Treasury Only Money Market Fund (FDLXX) if you pay state taxes
04:40 One of my checks is dishonored
05:10 Fidelity says its Cash Manager works on a best efforts basis and is not guaranteed
06:36 Solving the mystery of my dishonored check, and why you should not rely on Fidelity’s Cash Manager
11.04 The solution to the Cash Manager bug
14:22 The advantage of isolating your brokerage account from your cash management account

Disclaimer: This video explains my experience and opinions, and should not be taken as individual legal or financial advice to you. I know nothing about your personal legal or financial situation and cannot offer individual advice. You should make your own investigation and investment decisions, or consult your own advisors for individual advice.

[hensonm]

Don’t write checks - use Fidelity bill pay to pay the landscaper! Problem solved. Thanks for the video; I’m getting an account!

[jwilder]

Great story and good info to know. Most people would keep a buffer for the unexpected, but I appreciate that you’re pushing the limits. Someone has to test the system!

[IrnBruNYC]

I didn't take business associations or bankruptcy in law school, and I kind of regret that, because I now find both of those subjects very interesting. Anyway, keep producing content on this channel, because what you are doing is great. I found the solution to mystery of the dishonored check to be the most interesting part of the video! BTW, YouTube recommended this video after I watched someone else's video touting the joys of the Fidelity Cash Management Account.

[VeryHydrated]

This video is worth its length in gold, thank you professor.

[abspasadena]

Thanks. I just switched to fidelity and this info will help me organize my accounts! 😊

[shjonblake]

Normally I don't Leave Comments on YouTube, but Calling someone a primate Because.They're using a Flawed system... is in a word..wrong..
We are all entitled to our thoughts and opinions .. But you seem to be an intelligent person.So I know you can express yourself in a better manner than that.. That being said interesting.
Thanks for the info.. Much appreciated

[Todd-tp]

Wow, you really went into the weeds to find out the details of how it works. Thanks for putting out this nuanced information out about checks! I learned something new today

[phaedruscj]

Or you could just keep money in your checking account sufficient to pay your bills

[brendaharris]

Thank you Prof. for the brilliant insight! You were right to question them on the location of this information in the disclosure information. As I read the comments, it's amazing how accepting many comments were on Fidelity's lack of transparency, but saw you as someone trying to scam the system. I have both accounts and will be on my guard and not use the Cash Manager!

[grokman]

I had difficulty with how fast a deposit takes to clear and become available funds! This made me shy of using the CMA as a checking account. Sorry it's been a while and I don't remember the details ( I think it was an ACH transfer from my bank). Thanks for this great hard won lesson! And so well explained.

[jamesherrett]

Every bank is going to dishonor a check where the signature or memo entry writes over part of the MICR line. This is not a specific issue with Fidelity.

[RPJ-nqtf]

“So” there really was not a problem with the Fidelity cash manager? The main problem is your wife’s penmanship. Knowing that now, i’ll make for sure to make my signature tight.

[josephswanson]

This is great information. Thank You. Question.
If I set the core position to SPAXX in the cash account is that the same as leaving it set to CASH? Is there any delay in transfering funds to a credit union or a delay when a debit card is used or a check processed if the core position is set to SPAXX money market?

[hankgr]

I had to wait to 14:20 before my sphincter relaxed. All I could thin about was how a washed check could really wipe you out. Very good info non the less.

[Rdominca]

The real lesson seems to be to avoid using physical checks since the banking/financial industry now considers paper checks a nuisance and their security less important.

[AnonVideos]

A legitimate rant is that they hold your money for the first 30 days without telling you.

Funds can only be used to buy securities and not withdrawn, used for checks, or transferred out. They won’t even close the account until the 30 days has elapsed!

I threw a bunch of money into the account and then needed a new roof. I had to get money from other places as this was not available. Not everyone has this luxury!

[Matt]

Great video professor- thanks for this!

[TimMueller-vi]

Thank you very much for this info. One question: If I buy shares of FDLXX in my cash mgmt account, is it possible to not allow those shares to be liquidated in order to cover a debit from the core account, thereby protecting those assets against fraud? You've explained how to do this by buying those shares in my brokerage account, but in my case that is less preferable. Thanks again.

[kevinlease]

Thank you for sharing your experience, it didn’t come across as a rant to me, it was helpful

[danielhurst]

Fidelity's Cash Management Account is fine.
What is not fine, is giving advice to people to write checks against an account with a zero balance and hope overdraft takes from your other accounts. That is just plain bad advice.