I often find myself explaining to friends how they can save some money by using a couple Fidelity Investments products. The other day it occurred to me that I might as well turn my typical rant into a post. Full disclosure — I worked at Fidelity for four years, but am no longer compensated by the firm in any way. It’s a great company, and they have many products that are extremely useful.
The two products I’m going to explain work well together. The first is the Fidelity Cash Management Account. While Fidelity’s brokerage company isn’t technically a bank, the firm has a bank-like cash management product that’s quite similar to a traditional checking account, with some added features. The account comes with a checkbook and deposits default into an FDIC insured mutual fund. So the account is just as safe as any normal bank account.
Before I get to the savings part, there are a couple nice features worth noting. First, you can deposit checks into the cash account (or any Fidelity account) by taking a picture of both sides of the check with a smartphone. I’ve been doing this for six months, and it works extremely well. It’s much easier and faster than dealing with an ATM or teller. Second — and this feature is only for people comfortable making investment decisions — the account lets you buy other funds and securities that are not FDIC insured. Since interest rates are essentially at 0%, I like to keep my cash in a relatively safe floating rate bond fund. It’s riskier, and it’s a personal decision, but I like having the option.
The main reason I like the account though — and the reason it can save you money — is because Fidelity will reimburse any ATM fees incurred when you withdraw from your account. Whether it’s a $2 fee from using a Bank of America ATM in Boston, or a $7 fee for using an international ATM, Fidelity will cover it. It’s nice not having to worry about which ATM I use, and for many people, the fees can add up. It also allows me to withdraw less money when I’m away from home, as I know I can hop into any ATM and get more cash without being charged any fees.
While the fee savings are great, the second product is where you can really save some money. It’s the Fidelity American Express Rewards Card. This is a Fidelity sponsored American Express credit card that provides 2% cash back on all purchases. That’s 2% off everything you buy with the card. Whether it’s a $500 flight or a $5 sandwich — 2% off. And the cash rewards can be deposited directly — and automatically — into a Fidelity Cash Management Account.
As far as I know, this is among the best credit card rewards programs available. Some cards offer confusing schemes like 5% cash back on gas and groceries on weekends, but 1% otherwise. Or double miles most of the time, and triple miles when the moon’s full. But why take miles when you can have cash. Unless you’re someone who really optimizes these airline and hotel rewards programs, you’re probably leaving money on the table by using them.
I know many people who charge most of their expenses on a debit card. You can save a lot of money by charging everything on a credit card with rewards, and then paying off the card in full every month. For example, if you average $2,000 a month in expenses, and you put them all on the Fidelity American Express, you’d receive $480 per year in rewards from Fidelity, deposited right into your account. Not bad in my book. If you’d be inclined to keep a balance on the card, then it won’t save you any money, as credit cards have some of the highest interest rates of any type of loan.
Also, for those who prefer Visa over American Express, Fidelity has a similar program — the Fidelity Investment Rewards Visa Signature Card. It only pays 1.5% cash back, but that’s still pretty good.
So there you have it — with two Fidelity products you can avoid all ATM fees and save 2% on nearly all of your expenses. Hopefully this was useful.
Also, tangentially related — earlier this week it was announced that Fidelity invested $15 million in Spotify. In the words of my former boss, “We are very hip!”
And for the record, the purpose of this post is to provide general information about some Fidelity products. It does not represent financial advice.