Fidelity does not offer a traditional savings account, but it does offer cash management accounts that function similarly
Fidelity is a brokerage and investment firm, not a bank. It does not issue savings accounts in the way a bank like Chase or Bank of America does. However, Fidelity offers cash management accounts — products that hold your money in cash and pay interest — which serve the same purpose as a savings account for most people.
The main cash management product is the Fidelity Government Money Market Fund, which invests your cash in short-term U.S. government securities. There is also the Fidelity Treasury Money Market Fund. Both pay interest rates that change based on market conditions. You can deposit money, withdraw it, and move it to other Fidelity accounts without penalty.
If you have a Fidelity brokerage account, you can also hold cash in a sweep account, which automatically moves uninvested money into a money market fund or bank partner account. The sweep destination depends on your account type and Fidelity's current partnerships.
Key Takeaways
- Fidelity's cash management options include money market funds that pay interest, but these are not FDIC-insured bank savings accounts.
- Money market funds invest your cash in government securities or other short-term debt, so the interest rate and principal value can fluctuate.
- You can deposit and withdraw from Fidelity cash accounts without fees or lock-in periods, similar to a traditional savings account.
- If you need FDIC insurance protection up to $250,000, you can link a Fidelity brokerage account to a partner bank through a sweep program.
How Fidelity money market funds differ from bank savings accounts
A bank savings account is FDIC-insured, meaning the federal government guarantees your money up to $250,000 if the bank fails. Fidelity money market funds are not FDIC-insured. Instead, they are SEC-regulated investment funds. Your principal can go up or down slightly based on the value of the securities in the fund, though money market funds are designed to keep a stable $1 per share value.
Interest rates on Fidelity money market funds change daily based on what the fund earns. You do not lock in a rate. A bank savings account typically offers a fixed rate for a set term, or an adjustable rate that changes on a schedule set by the bank.
Fidelity money market funds have no monthly fees and no minimum balance requirement to open one. You can move money in and out at any time without penalty. Some bank savings accounts charge monthly maintenance fees or require a minimum deposit.
Fidelity sweep accounts and FDIC protection
If you open a Fidelity brokerage account and do not invest all your cash, Fidelity automatically moves uninvested money into a sweep account. The sweep destination depends on your account type. For most individual brokerage accounts, cash sweeps into a Fidelity money market fund by default.
Fidelity also has partnerships with banks that allow cash to sweep into FDIC-insured deposit accounts at those partner banks. This option provides FDIC insurance protection. The partner banks and terms change over time, so you should check Fidelity's current sweep options when you open an account or contact Fidelity directly to see what is available.
You can choose your sweep destination in your account settings. If you want FDIC insurance, you can select a bank sweep option instead of the money market fund sweep. The interest rate on a bank sweep may be lower than the money market fund rate, depending on current market conditions and the partner bank's terms.
Opening and using a Fidelity cash account
To open a Fidelity brokerage account with a cash management option, you visit Fidelity's website or call their customer service line. You provide your name, address, Social Security number, employment information, and funding source. The process typically takes 10 to 15 minutes online.
Once your account is open, you can deposit money by linking a bank account, transferring funds electronically, or mailing a check. Deposits from a linked bank account usually arrive within one to three business days. You can then move that money into a money market fund or leave it in the sweep account.
Withdrawals work the same way. You can transfer money back to your linked bank account, request a check, or move it to another Fidelity account. Most transfers take one to three business days to reach your bank.
Interest rates and how they are calculated
Fidelity money market funds pay a distribution yield, which is the annualized rate of interest the fund has earned recently. This rate changes daily and is not may provide. The yield depends on what short-term securities the fund holds and what interest rates those securities pay.
You earn interest on the money you hold in the fund. Interest is usually paid monthly or quarterly, depending on the specific fund. The interest is automatically reinvested into the fund unless you choose to withdraw it.
You can see the current yield on Fidelity's website or in your account. The yield is listed as a percentage. For example, if the yield is 4.50%, and you hold $10,000 in the fund for one year, you would earn approximately $450 in interest (before any fees or tax). The actual amount depends on when you deposit the money, how long you hold it, and whether the yield changes during that time.
Tax treatment of Fidelity cash accounts
Interest you earn in a Fidelity money market fund is taxable income. Fidelity sends you a Form 1099-INT at the end of the year showing how much interest you earned. You report this on your federal tax return.
If you hold the money market fund in a tax-advantaged account like a Roth IRA or traditional IRA, the interest is not taxed in that year. It grows tax-deferred (or tax-free in a Roth). If you hold it in a regular taxable brokerage account, you pay income tax on the interest each year.
State and local taxes on money market interest vary by location. Some states do not tax interest income, while others do. Check your state's tax rules or speak with a tax professional about how interest from a Fidelity money market fund affects your taxes.
Frequently Asked Questions
Is my money safe in a Fidelity money market fund?
Money market funds are regulated by the SEC and are generally considered low-risk, but they are not FDIC-insured. Your principal can fluctuate slightly, though money market funds aim to maintain a $1 per share value. If you want FDIC insurance, you can choose a bank sweep option instead, which moves your cash into an FDIC-insured account at a partner bank.
Can I write checks from a Fidelity money market fund?
No. Money market funds do not come with a checkbook. However, some Fidelity cash management accounts offer a debit card or allow you to transfer money to a linked bank account and write checks from there. Check with Fidelity about what payment options come with your specific account.
What is the minimum deposit to open a Fidelity cash account?
Fidelity does not require a minimum deposit to open a brokerage account or money market fund. You can open an account with $0 and deposit money later. Some specific funds or account types may have minimums, so check the details when you open your account.
Can I move money between my Fidelity money market fund and a brokerage investment account?
Yes. You can transfer money between your Fidelity accounts at any time without fees. If you want to invest in stocks or mutual funds, you move money from your money market fund to your brokerage cash balance, then place a trade. Money from a sale goes back into your cash balance and can sweep into the money market fund automatically.
How does a Fidelity money market fund compare to a high-yield savings account at a bank?
Both pay interest on cash you deposit. High-yield savings accounts are FDIC-insured and offer a fixed rate for a set period. Fidelity money market funds are not FDIC-insured but may offer a competitive rate that changes daily. The choice depends on whether you prioritize FDIC insurance or potentially higher returns. Compare current rates at both before deciding.