Thursday, October 19, 2006

Using my Fidelity brokerage account as a bank account

I'm now a couple of steps closer to using my Fidelity brokerage account as my main "bank" account.

Last week I requested checks and I just received a confirmation letter that assures me that "the checks are in the mail." Once I have checks with their routing and account numbers, I can start arranging electronic payment of things like my utility bills.

I had parked a pile of cash in my ShareBuilder account back in June. That was my main "rainy day" fund. I have since stashed away more cash so that it was finally time to decide what to do with that parked cash. I used a chunk of it to pay off my back New York income taxes, as I had originally intended. I left a modest chunk in ShareBuilder, simply to keep more cash "out of site, out of mind." The rest I just transferred from my bank account to my Fidelity brokerage account.

I now have enough money in the brokerage account to meet the minimum asset requirement to get a debit card from Fidelity. They have a $5,000 asset minimum. I'll be able to use the card for ATM withdrawals and to use it as a credit card for purchases. Actually, I'll continue to use my CapitalOne credit card for purchases, but I'll now have a "backup" card so that I'm not so critically dependent on one card.

I also have enough cash in the brokerage account to make an initial "buy" of the Fidelity Cash Reserves money market mutual fund (FDRXX) which pays a fat 4.97% 7-day yield. That's equivalent to a 5.08% APY. A bank "teaser" APY of 5.05% is comparable to a 7-day yield of 4.94%.

I left a little money in "core cash" which will earn 3.06% tax-free (FTEXX), which is equivalent to a 4.24% taxable yield (at the 28% marginal tax bracket). That's not as good a yield as FDRXX, but much better than any checking account that I know of. I'll move excess cash to FDRXX whenever possible, but money that comes in at payroll time and is destined to flow out for monthly expenses will at least earn a semi-decent rate of return without me lifting a finger.

The next big step will be to shift my payroll direct deposit to this account, but I want to accumulate some more cash before I do that since the I still have a lot of payments that I make electronically from my current bank account (Wells Fargo). I'll want to try out the checks and debit card and switch a few of my smaller electronic payments over to Fidelity before making the big leap. It's easy enough to transfer cash from my bank account to the Fidelity account. I might split my direct deposit and divert enough to Fidelity so I can move the bulk of my electronic payments to my Fidelity account. This is a little more complicated than I'd like it to be, so it may take a month or two to get it finalized.

Ultimately, I'll probably keep my bank account because it does occasionally have uses, such as fee-free ATM withdrawals. I use minimal cash these days, but I still need to get a little cash each week. Once I have my Fidelity "bank" account fully up and running, I'll look around for a true bank that I can use for my real-world banking, as minimal as it is.

-- Jack Krupansky


At 10:59 PM EDT , Anonymous Anonymous said...

So, comments on the new job @ Microsoft?


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