Fidelity's Cash Management Account offers a no-cost alternative to expensive big-bank checking accounts.
It has no monthly fee, no minimum balance requirement and no pesky gotchas like requiring a monthly direct deposit.
The account is Internet-based, so it’s not the right option if you want a brick-and-mortar bank. But you’ll get free mobile banking with mobile check deposit and reimbursement for all ATM fees worldwide.
Checks are free. There’s no monthly debit card fee. Online bill pay is free.
When was the last time you heard the word "free" so many times in conjunction with a checking account?
Fidelity's Cash Management Account (www.fidelity.com) actually isn't a traditional checking account. However, it functions so similarly to a checking account that you probably won’t notice the difference.
And you don't have to be a brokerage customer to open this account. Even though the online application page makes it appear as if it is necessary to open a brokerage account, it is not a requirement.
In addition to all the free features, this account actually has some characteristics that make it better than a checking account.
The money in your Fidelity Cash Management Account is regularly "swept" into accounts at at least two "program banks," like Bank of America or Citibank. This action makes your balances eligible for FDIC coverage, which doesn’t apply to brokerage accounts.
You can access your money just as freely and easily as you could if it were in a regular checking account, but since your money is technically held at more than one bank, you’ll benefit from nearly double the regular amount of FDIC protection. A Fidelity Cash Management Account can be FDIC-insured up to nearly $500,000.
You’re probably not holding $500,000 in cash unless you’re extremely wealthy, but it’s still a nice perk.
Here are three other valuable perks:
You can automatically manage your account to make sure you don't have too much or too little cash in your checking account.
Using the mySmart Cash Manager feature, you can set up automatic transfers of money into your account when the balance drops below an amount you specify. These transfers can come from other Fidelity accounts or outside bank accounts that you link to your Cash Management Account.
You can also tell the program to notify you when your balance rises above an amount you specify. In this case, you’ll need to move the money yourself.
Having your brokerage account and your checking account all in one place gives you added convenience.
Fidelity is a good option for your brokerage account, since it offers a wide selection of low-cost, no-load and no-transaction-fee mutual funds and ETFs.
You can avoid overdraft fees.
Self-funded overdraft protection will look for cash in other Fidelity accounts you’ve linked to your Fidelity Cash Management Account to cover any check or bill-pay or direct-debit requests that can’t be covered by your Cash Management Account balance.
If you don’t have enough money to complete a debit card purchase, the transaction will be declined. These features could save you money if you’ve had trouble with overdraft fees with traditional checking accounts.
But this account isn’t perfect. The interest rate it pays is currently a meager 0.07% APY, so you could do better with an interest checking account, where the average rate is 0.54% right now.
There’s also a 1% transaction fee on foreign purchases, but you shouldn’t be using your debit card for foreign purchases, anyway -- credit cards offer better fraud protection.
Overall, Fidelity’s Cash Management Account is on par with the top online banking options, and its many free features and perks make it one of the best checking account options available.
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