Why a Fidelity brokerage account should be your banking hub account

Using an investment brokerage account as your banking hub account may seem impractical and it’s possibly not something that you’d even consider to manage your everyday finances. One might favor a bank or credit union for their traditional banking services. But, modern brokerages offer the same services, if not more.

Fidelity is one such brokerage, and their standard brokerage account comes with all of the tools that one would need to manage their finances, including bill pay, checks, and a debit card.

While these services alone may not be the catalysts to start using a brokerage account as a banking hub account, Fidelity’s additional account features may be enticing to the margin trader or someone who routinely transfers funds between accounts at different financial institutions. These perks include free incoming and outgoing wires, same-day external transfers, convenient customer service, and most importantly, the ability to earn high yields on uninvested cash.

High interest rates on uninvested cash

Fidelity accounts have a core position that serves as the designated space for holding uninvested cash. Deposits and proceeds from sales are common holdings in the core position. As a Fidelity customer, you have two options for your core position: cash or SPAXX (Fidelity Government Money Market Fund). SPAXX offers a 7-day yield of 4.98% APY, making it comparable to a high-yield savings account. And, this is the highlight of making Fidelity your bank hub account.

Only in recent years have brokerages offered investors the ability to earn rates comparable to traditional bank accounts on their uninvested cash. However, this practice remains uncommon, with typical brokerage accounts offering nominal interest rates. So, savvy investors who aren’t earning competitive rates on their uninvested cash strategically hold just enough funds in their brokerage accounts to cover potential margin calls.

A major drawback to this approach is that it may limit the investor’s ability to quickly take advantage of market opportunities. Even worse, if the investor underestimated how much cash reserves they needed, they could be faced with a liquidation, which could result in rushed decisions and losses.

The high yields and liquidity of SPAXX provide investors with the confidence to maintain a significant portion of their funds in their Fidelity account. By doing so, the investor can earn interest rates comparable to high-yield savings accounts and have peace of mind that they can swiftly respond to margin calls.

Free outgoing and incoming wires

Free wires, even incoming, are virtually unheard of. However, Fidelity offers both free incoming and outgoing wires. This valuable service complements the liquidity of SPAXX quite well. Investors can rely on a wire when funds must be quickly transferred to external accounts. Although Fidelity doesn’t charge for wire transfers, the financial institution on the other end of the transaction may impose a fee.

Fast and free same-day ACH transfers

Transfers into your Fidelity account (when initiated from Fidelity’s side) are available instantly for trading, as is the case with many major brokerages. 

What sets Fidelity apart when it comes to transfers is how quickly they process external transfers. Although its site officially cites longer transfer speeds, Fidelity can actually complete a transfer to an external account in a matter of hours. This can prove valuable when time is critical and a wire cannot be used.

Extended customer support

One of the advantages of doing business with an investment brokerage is that they’re available to answer the tough account and trading questions practically 24/7.

While it’s common for banks and credit unions to offer 24/7 support, too, the depth of assistance during non-business hours may be limited for complex queries. Investment brokerages, on the other hand, usually offer assistance for account-related and trading questions around the clock due to the global nature of financial market.

It’s the norm for financial institutions to provide online support. But, as is the case with phone support, traditional banks and credit unions don’t usually offer chat or any other form of online support outside of normal business hours. However, Fidelity offers the convenience of chat support during extended hours. Fidelity employees are available via chat during the week, from 8 a.m. to 9 p.m. ET, and 8 a.m. to 4 p.m. ET on the weekends. So, by making Fidelity your bank hub account, you’ll likely have more flexibility in obtaining support than you would at a traditional bank or credit union.

Making the transition

Fidelity has different account types, and as of this write-up, they’re offering new and existing customers a $100 bonus for signing up for its Cash Management Account (CMA). However, if you want the ability to buy or sell options or trade using margin, the CMA isn’t recommended since those features aren’t available for this account type.

Fidelity’s standard brokerage account is the ideal choice for you bank hub account as you will have full access to all services that you qualify for, including margin and options trading.