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Fidelity allows payments with insufficient funds
Old 02-10-2017, 10:08 AM   #1
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Fidelity allows payments with insufficient funds

I'm new to all this and I mistakenly tried paying my rent without enough "cash available to trade" in the account I paid from. I noticed this the next morning. The Fidelity Billpay account (which annoyingly has a separate login from the brokerage and IRA accounts and I almost thought there was no record of my attempt to pay) says my payment was "completed" or "processed" or something. So, I'm not sure what happened, but I just sold enough shares from the mutual fund that was in the account to pay that bill. I guess when the trade goes through, the cash will be added to my "core position" and I'm hoping it won't be too late. I should have received a warning or something.
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Old 02-10-2017, 10:24 AM   #2
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Originally Posted by Boho View Post
I should have received a warning or something.
I had an interesting/embarrassing situation with Fido a few years ago.

I was the executor of my uncle's estate and had written some hefty checks to a number of charities and beneficiaries.

By my own mistake I signed the checks using my first initial instead of my full first name (I interchange from time to time)...ok, I was wrong to do that.

All the checks bounced!

According to Fido, what SHOULD have happened was that 1) Fido was supposed to contact me and double check and if this was legit and 2) They should have notified me that the checks had come back.

They did neither! I ended up getting a call from one of the beneficiaries asking what was going on. I checked the balances and saw that all the checks had been returned. I'm talking several million dollars. Not a good process for one of the largest houses in the country!

They agreed that they had dropped the ball but the damage was done.
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Old 02-10-2017, 12:33 PM   #3
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be careful selling stocks and etf's which take 3 days to clear and buying mutual funds the same day to .

mutual funds take the money next day , the trade won't clear for 3 days
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Old 02-10-2017, 12:42 PM   #4
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Originally Posted by Boho View Post
I'm new to all this and I mistakenly tried paying my rent without enough "cash available to trade" in the account I paid from. I noticed this the next morning. The Fidelity Billpay account (which annoyingly has a separate login from the brokerage and IRA accounts and I almost thought there was no record of my attempt to pay) says my payment was "completed" or "processed" or something. So, I'm not sure what happened, but I just sold enough shares from the mutual fund that was in the account to pay that bill. I guess when the trade goes through, the cash will be added to my "core position" and I'm hoping it won't be too late. I should have received a warning or something.
I find your comment about having to sign in separately into Billpay interesting. I haven't experienced this. It is simply under the cash management tab in my brokerage account. Have you talked to FIDO about this?
As far as the funding goes. Here's their policy:
https://www.fidelity.com/bin-public/...nformation.pdf

So if you had no cash balance, they would put it on margin and then go from there according to the agreement. There is no need for a warning. You already agreed to the debit process when establishing the account.
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Old 02-10-2017, 12:50 PM   #5
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i would think you need a margin account set up
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Old 02-10-2017, 12:54 PM   #6
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I find your comment about having to sign in separately into Billpay interesting. I haven't experienced this. It is simply under the cash management tab in my brokerage account.
I see it now. After you click Manage Money you have to click the Fidelity BillPay tab. The payment wasn't on the default Manage Money page under Transaction Details or Recent Transactions and I didn't look for another tab before.

Quote:
So if you had no cash balance, they would put it on margin and then go from there according to the agreement. There is no need for a warning. You already agreed to the debit process when establishing the account.
Good, I meant to look it up there.

Quote:
...it can also provide overdraft protection for your cash
management activities. For information on the benefits, costs,
and risks of margin, see “Important Information about Margin
and Its Risks.”
I can't find "Important Information about Margin and Its Risks" but I'll look more.
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Old 02-10-2017, 12:54 PM   #7
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i would think you need a margin account set up
The agreement says if no margin, then they will force sell a security.
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Old 02-10-2017, 01:01 PM   #8
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The agreement says if no margin, then they will force sell a security.
That's pretty good, I guess. Bad if there's fraud but good if I mess up like I did. But I didn't see anything trying to be sold until I sold it the next day.
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Old 02-10-2017, 01:05 PM   #9
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That's pretty good, I guess. Bad if there's fraud but good if I mess up like I did. But I didn't see anything trying to be sold until I sold it the next day.
Float probably.

Your comment though about fraud is what keeps me up at night.
I don't use a debit card for this reason. Someone could clean out the account.

I also ordered checks from FIDO. They never showed up and I forgot about them. A few months later I called FIDO to talk about the problem and they immediately put stop payments on the missing numbers. My bad for not contacting them earlier. Dodged a bullet on that one.
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Old 02-10-2017, 01:09 PM   #10
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I have 2 bill pay accounts. One (the older one) used a brokerage account. The newer one is specifically made for bill pay and is set up to pull $ from the brokerage account when it needs more $. I try to leave a little cash in the brokerage account to cover all checks plus some wiggle room because I don't want to run into issues.

I don't have margin enabled in any of my accounts. This seems to work fine for me.

I have never had/used a separate login for bill pay
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Old 02-10-2017, 03:13 PM   #11
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I only do bill pay from my Fidelity cash management account. Investments are in brokerage. I never wanted check writing or a debit card on my brokerage account.

For bill pay I just select the cash management account or the bill pay tab. Easy. No separate login.
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Old 02-10-2017, 03:29 PM   #12
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I have never had/used a separate login for bill pay

+1 on that - have used this setup for 20+ years and never had an issue or need for separate login
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Old 02-10-2017, 03:35 PM   #13
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I only do bill pay from my Fidelity cash management account.
I just created one and I'll be doing that.

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.
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Old 02-10-2017, 03:54 PM   #14
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Well it sure beats having to go by a branch to deposit a check or mail in a check. I guess desktop computers don't have standard enough API access to their camera. Since we have smart phones and iPads it's been no burden on us.
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Old 02-10-2017, 05:04 PM   #15
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Well it sure beats having to go by a branch to deposit a check or mail in a check. I guess desktop computers don't have standard enough API access to their camera. Since we have smart phones and iPads it's been no burden on us.
+1
Love the app for deposits.
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Old 02-11-2017, 08:18 AM   #16
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I only do bill pay from my Fidelity cash management account. Investments are in brokerage. I never wanted check writing or a debit card on my brokerage account.

For bill pay I just select the cash management account or the bill pay tab. Easy. No separate login.
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.
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Old 02-11-2017, 08:41 AM   #17
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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.
Did you have margin on the account?
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Old 02-11-2017, 08:53 AM   #18
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Did you have margin on the account?
No margin.
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Old 02-11-2017, 08:55 AM   #19
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No margin.
I have margin. I have never incurred a charge for it, but it acts like overdraft so when you have short term cash issues like you mentioned you never have to worry about not having access to funds.
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Old 02-11-2017, 09:14 AM   #20
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I have margin. I have never incurred a charge for it, but it acts like overdraft so when you have short term cash issues like you mentioned you never have to worry about not having access to funds.
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.
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