Cash Management Account Overdraft
Here’s a summary of the main problem reported and the solutions discussed:
- Main Problem: The user wants to know if they can invest fully in SPAXX within their Cash Management Account (CMA) and still be able to write checks and make payments that would automatically sell SPAXX to cover those transactions.
- Solution 1: SPAXX cannot be designated as the Core Position in the CMA, but it can still be used for transactions like withdrawals and checks once the core funds are exhausted.
- Solution 2: If the core position funds have been exhausted, other eligible money markets in the CMA will be liquidated automatically to cover debit transactions.
Here’s the full thread
Hello,
I have a cash management account.
I would like to invest 100% (or even better change my core position) to SPAXX since the interest rate is so much higher.
I would like to be able to write checks, pay credit cards, etc against this balance and have it sell the according amount of SPAXX.
Is this possible? I am aware of the brokerage account auto selling for overdraft protection feature. Is the correct move to achieve this to move all funds to a brokerage account and then set it as the overdraft protection account and then “overdraft” the cash management account whenever I need to withdraw funds?
Thank you all in advance!
Hi @phop1, welcome to our server! Happy to assist today.
Currently, the Cash Management Account (CMA) only offers the FDIC-Insured Deposit Sweep Program as a Core Position. You can invest in other money markets within the CMA, but they cannot be designated as the Core Position. You can review details about the CMA accessing the link below:
CMA FAQs: https://www.fidelity.com/cash-management/faqs-cash-management-account
While the Fidelity Government Money Market Fund (SPAXX) may not be an eligible core position, it can still be used for transactions like withdrawals, checks, and debit card transactions once the core funds have been exhausted.
If you hold two or more Fidelity money market funds that are eligible for auto-liquidation against cash debits, we will deduct the funds from the taxable money market fund before any tax-free money market fund. If there are multiple funds for each kind, we will take funds from the fund with the highest balance.
Feel free to let me know if any additional questions come up.
Thank you!
I am trying to set this up but perhaps I should ask more percisely.
Assume I have $1000 in a CMA, and I invest 100% into SPRXX.
If I have an outgoing debit transaction (Venmo, CC payment, ATM withdrawal etc.) it will automatically sell SPRXX to cover that debit payment, yes?
Thanks for the follow up. That is correct. Assuming your core position has been exhausted, your other eligible money markets within the CMA will be autoliquidated to cover the transactions.
Perfect thank you so much!!
Glad I could help. Thanks for joining us here! 🟢