Fidelity allows payments with insufficient funds

[audreyh1]

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Originally Posted by Cobra9777 Originally, I did cash management from the same taxable brokerage account at Fidelity that held our investments. But I ran into some strange problems related to cash availability. For example, I had a cash balance ("cash available to withdraw") of $10K with several large bill-pays scheduled. I then sold one stock for $50K and purchased another for $50K. I still had a cash balance of $10K, but now it was "cash available to trade", i.e. not available for withdrawal until after settlement. Apparently, in Fidelity's system when I purchased the 2nd stock, it first used up the $10K "cash available for withdrawal", then used "cash available for trade" for the remaining $40K, leaving me with $10K of "cash available for trade." I called Fidelity and they confirmed that is how their system works, but assured me that bill-pays and checks would be paid on time, but they could not provide a clear answer as to whether an ATM withdrawal would be allowed until settlement. Anyway, the easy solution was to set up a separate brokerage account to hold the securities and use the original account only for operating cash. Also, same as others, there is no separate log-in to access the cash management account or bill-pay functions.

That's correct - that is how it works. Stock sales take 3 days to clear when the funds become available. Fidelity will float you the funds to make another investment, but will not allow any funds to be withdrawn in any way until the stock sale clears. I did not know about such a purchase using up any "funds available to withdraw" however - that's good to know.

For mutual funds, there is 1 day to clear. You can't sell a fund and immediately buy another, you have to wait until the next day unless you do an exchange between Fidelity funds.

For these reasons, and really, for security reasons, I think it best not to have bill pay, debit cards, and check writing mixed up in the brokerage account. I wouldn't want to have to deal with fraudulent checks or fraudulent debit card usage in an account that had a large $ amount invested.

[sengsational]

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Originally Posted by Boho I hate that I need a mobile app to deposit checks electronically. Too bad you can't do that from a desktop computer. They make mobile device simulators for app developers who want to work on their desktop. I wonder if one of those work work to install the proper app to deposit checks without getting too technical.

Several reasons why this is probably not going to work well. The emulators are used primarily in a development environment (IDE) and fed by the application under development. You probably could get a packaged app to run in an emulator, but that might be quite the uphill battle since it's not the typical use-case. Then, the emulators are prone to do strange things or not behave right when using "hardware devices", such as a camera. Then they're super "resource intensive", meaning they might take several minutes just to start-up. I also find it annoying that there are things you can only do on a phone nowadays, but trying to emulate a phone on a computer, I'm afraid, isn't something that's going to be a practical solution at this point.

[Boho]

I received a reply from Fidelity. I wonder what the insufficient funds fee is.

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Fiserv, the service provider for Fidelity BillPay with Fidelity Brokerage Services, processes the payments that you make through Fidelity BillPay. At your request, Fiserv processed the payment to [company] on 02/10/2017 for $2,897.04. However, after sending money to [company], Fiserv could not withdraw the funds from your payment account. You do not need to send this payment again, or contact [company], because [company] has been paid. Fiserv Will Try a Second Time to Withdraw the Funds Fiserv will try again to withdraw the funds from your payment account for the payment sent to [company] on your behalf, and will notify you if this second attempt fails. To avoid additional fees or problems with your Fidelity BillPay service, make sure your payment account has the funds to cover the transaction. You might need to add money to your account. Service Fees Any service fees associated with insufficient funds in your account to pay [company] will be withdrawn in accordance with your Fidelity BillPay terms of service. Other standard processing fees may apply.

[mathjak107]

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Originally Posted by audreyh1 That's correct - that is how it works. Stock sales take 3 days to clear when the funds become available. Fidelity will float you the funds to make another investment, but will not allow any funds to be withdrawn in any way until the stock sale clears. I did not know about such a purchase using up any "funds available to withdraw" however - that's good to know. For mutual funds, there is 1 day to clear. You can't sell a fund and immediately buy another, you have to wait until the next day unless you do an exchange between Fidelity funds. For these reasons, and really, for security reasons, I think it best not to have bill pay, debit cards, and check writing mixed up in the brokerage account. I wouldn't want to have to deal with fraudulent checks or fraudulent debit card usage in an account that had a large $ amount invested.

we keep a large sum in our core and do everything from the core from pay bills to buy our investments .

we had a fraud on the debit card once and that was given back in a day .

we did have a situation a few months ago where my wife's account info and passwords were found on an under ground site so fidelity locked all accounts when they saw it and notified us .

it took two weeks to get all new accounts ,checks and debit cards . no money in any account could be accessed in the interim

[audreyh1]

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Originally Posted by mathjak107 we keep a large sum in our core and do everything from the core from pay bills to buy our investments . we had a fraud on the debit card once and that was given back in a day . we did have a situation a few months ago where my wife's account info and passwords were found on an under ground site so fidelity locked all accounts when they saw it and notified us . it took two weeks to get all new accounts ,checks and debit cards . no money in any account could be accessed in the interim

I keep very little cash in the brokerage account with MM funds paying so little. Once it gets to a certain level it is transferred to a high yield savings account, where it is gets FDIC protection as well as at least a 1% rate.

I never opened checking or debit cards on that brokerage account as I wanted it isolated and we already had check writing available on a separate Fidelity mutual fund account. A few years ago I opened a Fidelity cash management account and have used it for some bill pay and debit/ATM access particularly when traveling. It's easy to limit the funds in that account.

[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]

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Originally Posted by REWahoo 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]

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Originally Posted by 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?

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]

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Originally Posted by Cobra9777 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]

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Originally Posted by 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.

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-ce...ing-violations

[Cobra9777]

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Originally Posted by COcheesehead ...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]

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Originally Posted by Cobra9777 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]

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Originally Posted by Cobra9777 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.