Fidelity FCASH is equal to cash, and the Fidelity website explains that it is not the same as a money market mutual fund; it is akin to a free credit balance. Fidelity holds the money in your FCASH balance, but it is payable to account holders on demand. It can be compared to a holding tank and contains cash that is not currently invested. FCASH monies can come from cash dividends, trade proceeds and deposits. This option is only available for non-retirement accounts.
What Is Fidelity Core Account for FCASH?
Fidelity uses the term "core account," "core position" or "core money" to describe FCASH because this money can be used as the foundation for funding things like bill payments, mutual card and check card purchases and ATM withdrawals. Just like a checking or savings account, it is a good idea always to know how much money you have in your FCASH account.
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You can compare your core account to a miniature, private central bank located within your Fidelity account. If you purchase securities, you can use cash from the core position to pay for it. Dividends and trade proceeds also go here automatically unless you have another arrangement set up. When you first open an account, you are assigned a core account, but you can easily change this if you prefer.
Interest-Earning Core Accounts
If you are looking for a core account that earns you interest, FCASH might not be the optimal choice. The Fidelity website posted that on April 1, 2020, the interest rate was 0.01 percent.
Fidelity has other options for core accounts that will hold your money, and you always have the option of changing to another one if you desire. You can only have one core position at a time, though. It makes sense to see the other choices, especially if you are looking to earn more interest.
If you are willing to look outside of Fidelity for a high-interest account, consider products from Discover Bank. As of this writing, account holders can earn money for using a debit card associated with a Discover checking account. In addition, Discover offers high-yield savings bank options that pay 0.40 percent interest. They also have CD options for those inclined. For these options, the money is immediately added to your account, rather than held elsewhere in a specific fund, as in the case of FCASH.
Changing a Fidelity Core Position
You can call Fidelity at 800-544-6666 to change your core position or you can do it online, but it will certainly help to understand the different options first. Aside from FCASH, the other two choices for non-retirement accounts are the Fidelity Government Money Market Fund (SPAXX) and the Fidelity Treasury Fund (FZFXX). SPAXX is a taxable money market mutual fund designed for investors who want a current income level that is higher and consistent with preserving their capital and liquidity. This fund invests in U.S. Government Agency and Treasury debt. SPAXX's average annual return over three years was +0.81 percent, and its gross expense ratio was 0.42 percent.
FZFXX is also a taxable money market mutual fund but invests in U.S. Treasury securities plus related repurchase agreements. Other than that, it is quite similar to SPAXX, and FZFXX's average annual return over three years and gross expense ratio were the same as SPAXX. Both are very low risk and provide marginally higher interest rates. The two core positions for retirement accounts are SPAXX and Fidelity's FDIC Insured Deposit Sweep Program.
Consider also: How to Sell Fidelity Mutual Funds