@SuperFlyEDSguy wrote:
I'm with Fidelity for Brokerage and like them a lot, but I was under the impression that they fall under brokerage rules instead of banking rules, thereby precluding them from having direct FDIC coverage on banking accounts. So, they as well as most brokerages providing banking services, simply partner up with a number of banks and use white-label accounts through actual banks that do carry FDIC coverage. This is why some brokerage's banking accounts could be insured for massive amounts, basically they will allow up to $2.5M in FDIC coverage by placing a maximum of $250K in each account and use 10 total accounts on the backend. I believe that each account must be with a separate banking partner because the $250K rule applies to each bank, depositor, and account type. So, no way to double or 10x dip with the same bank unless there's another loophole that I'm not aware of.
I thought about using some of Fidelity's banking products, especially mofe recently with the money market rates, but going with that kind of account will likely not come with FDIC insurance since brokerage money markets are different than banking money market accounts, and being brokerage are not FDIC insurable. The one thing that I think you won't have to worry about with Fidelity is insolvency as they practically print their own money and won't be going anywhere anytime soon! You wouldn't need to worry about insurance for insolvency anyways and could get those core money market brokerage rates with the right banking account. I say "right" because it's been a while since looking, but Fidelity had a handful of banking products available, each one being pretty unique.
I ran across this and wanted to respond. While Fidelity is a brokerage, they have a Cash Management program that is fully FDIC insured. In fact, it has increased insurance coverage (up to 5 million). The 2.5 million max/250k Per is a misconception. There are FDIC insurance tiers. Some FDIC deposit programs charge more for them.
What I like about Fidelity is its FDIC insured program is a sweep deposit account. All the money isn't stored at a single bank.
Fine Print:
2.The Cash Balance in the Fidelity Cash Management Account is swept into an FDIC-Insured interest-bearing account at one or more program banks and, under certain circumstances, a Money Market mutual fund (the "Money Market Overflow"). The deposits swept into the program bank(s) are eligible for FDIC Insurance, subject to FDIC insurance coverage limits. Balances that are swept to the Money Market Overflow are not eligible for FDIC insurance but are eligible for SIPC coverage under SIPC rules. At a minimum, there are 20 banks available to accept these deposits, providing for up to $5,000,000.00 of FDIC insurance. If the number of available banks changes, or you elect not to use, and/or have existing assets at, one or more of the available banks, the actual amount could be higher or lower. All assets of the account holder at the depository institution will generally be counted toward the aggregate limit. For more information on FDIC insurance coverage, please visit www.FDIC.gov. Customers are responsible for monitoring their total assets at each of the Program Banks to determine the extent of available FDIC insurance coverage in accordance with FDIC rules. The deposits at Program Banks are not covered by SIPC. For additional information please see the Fidelity Cash Management Account FDIC Disclosure Document (PDF).
https://www.fidelity.com/spend-save/fidelity-cash-management-account/overview
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