Fidelity allows payments with insufficient funds

[mathjak107]

whether we kept it separate or not really wouldn't have mattered . once the account number and pins are stolen all is shut down anyway .

luckily we use a local bank too so that kept us going over the 2 weeks .

no idea how those numbers were even stolen since we never log in with my wife's info . fidelity has teams of hackers that seek out these underground sites and penetrate them and look for fidelity accounts and info

 

[Boho]

I'm in trouble now. On February 10 (four days ago) I sold enough shares of a mutual fund to cover the bill I paid with Fidelity BillPay but the amount I got from the sale is listed under "cash credit" not "settled cash" or "cash available to withdraw" or "cash (core)". So, when they try again to get the money, I guess they'll fail again. How do I fund the core account from the "cash credit" so I can make payments with Fidelity BillPay? Is it just going to happen on its own? If so, after how long?

 

[Boho]

Or...could I make payments from cash credit? I don't think I had any cash credit the first time I tried to pay and maybe I could pay now...

 

[REWahoo]

Why don't you call Fidelity first thing tomorrow and ask them?

 

[Boho]

Why don't you call Fidelity first thing tomorrow and ask them?

I could even call them now but I prefer doing things in writing. Unfortunately, I sent a secured message about something earlier and they told me I have to call to do what I wanted. My 11:00 PM level of energy isn't ideal for this. So, yes, tomorrow morning.

 

[audreyh1]

I'm in trouble now. On February 10 (four days ago) I sold enough shares of a mutual fund to cover the bill I paid with Fidelity BillPay but the amount I got from the sale is listed under "cash credit" not "settled cash" or "cash available to withdraw" or "cash (core)". So, when they try again to get the money, I guess they'll fail again. How do I fund the core account from the "cash credit" so I can make payments with Fidelity BillPay? Is it just going to happen on its own? If so, after how long?

Mutual fund sales usually only take 1 day to settle. Feb 10 was a Friday, the sale should have settled on the 13th, and the funds available already.

 

[COcheesehead]

I might look into that. But I wasn't having short-term cash issues. There was plenty of available cash to cover the bill-pays. The Fidelity system reclassified my available cash balance due to the trading activity. What's weird is they honored the bill-pays with zero cash "available for withdrawal." In any case, like audreyh1 suggested, it's probably more appropriate and secure to keep cash management separate from investments.

What I meant by "short term cash issues" was in regard to settlement issues. Without margin for instance, you couldn't sell an ETF and immediately buy something else unless you had sufficient cash to cover it because of settlement delays. With margin, you can sell/buy in the same day. I have never (yet) had it trigger an actual margin charge.

 

[Animorph]

No margin is required to sell one stock/ETF and buy another with the proceeds, at least at Fidelity. I do that all the time without a margin account. That doesn't work for mutual funds, though I'm pretty sure I've sold a stock and bought a mutual fund with the proceeds on the same day without a complaint from Fidelity. Certainly their online interface allows you to do that, but the settlement dates don't work out and I think I've only done it that once.

You do run into problems, I think, if you sell the newly purchased stock before the money used to purchase it has settled. I've done that too, and was on probation for a year I think.

 

[COcheesehead]

No margin is required to sell one stock/ETF and buy another with the proceeds, at least at Fidelity. I do that all the time without a margin account. That doesn't work for mutual funds, though I'm pretty sure I've sold a stock and bought a mutual fund with the proceeds on the same day without a complaint from Fidelity. Certainly their online interface allows you to do that, but the settlement dates don't work out and I think I've only done it that once.

You do run into problems, I think, if you sell the newly purchased stock before the money used to purchase it has settled. I've done that too, and was on probation for a year I think.

In thinking about it further, I think the situation I had is what they call a "good faith" violation. That is what motivated me to add the margin.

There are a whole bunch of cash trading violations that can occur, if anyone has an interest in reading.
https://www.fidelity.com/learning-center/trading-investing/trading/avoiding-cash-trading-violations

 

[Cobra9777]

...Without margin for instance, you couldn't sell an ETF and immediately buy something else unless you had sufficient cash to cover it because of settlement delays. With margin, you can sell/buy in the same day...

Not true at all, as Animorph already pointed out. Upon sale of one ETF/stock, you immediately have "cash available to trade," which can be used to purchase another ETF/stock. I've done it many, many times. There is certainly no requirement to wait until settlement.

The issue I pointed out originally was that "cash available to withdraw" is consumed first when purchasing a stock/ETF immediately after selling another. Evidently, Fidelity's system consumes cash in order of liquidity. This effectively reclassifies your "cash available to withdraw" to "cash available to trade," which would be problematic if, for example, you had checks outstanding or bill-pays scheduled using the same brokerage account. Thus, IMO, it is not a good idea to mingle cash management and investing activities in the same brokerage account. There are valid security concerns as well.

 

[Boho]

The issue I pointed out originally was that "cash available to withdraw" is consumed first when purchasing a stock/ETF immediately after selling another. Evidently, Fidelity's system consumes cash in order of liquidity. This effectively reclassifies your "cash available to withdraw" to "cash available to trade," which would be problematic if, for example, you had checks outstanding or bill-pays scheduled using the same brokerage account.

That would be an issue for me. Nothing I can do about it now. Fidelity said "Franklin Income Class C (FCISX) has a settlement period of three business days, so the proceeds of your sale on February 10, 2017, became available for withdrawal on February 15, 2017." Maybe the order-of-liquidity rule is why I never saw the proceeds listed as cash or "available to withdraw." But the next day I sold more so my cash may be available tomorrow. I'm waiting to see a surprise penalty or to learn what this "probation" will do to me.

 

[COcheesehead]

Not true at all, as Animorph already pointed out. Upon sale of one ETF/stock, you immediately have "cash available to trade," which can be used to purchase another ETF/stock. I've done it many, many times. There is certainly no requirement to wait until settlement.

The issue I pointed out originally was that "cash available to withdraw" is consumed first when purchasing a stock/ETF immediately after selling another. Evidently, Fidelity's system consumes cash in order of liquidity. This effectively reclassifies your "cash available to withdraw" to "cash available to trade," which would be problematic if, for example, you had checks outstanding or bill-pays scheduled using the same brokerage account. Thus, IMO, it is not a good idea to mingle cash management and investing activities in the same brokerage account. There are valid security concerns as well.

I already acknowledged my mistake in my post above. Sorry. My issue was a "good faith" violation.