Fidelity allows payments with insufficient funds

[Boho]

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.

 

[marko]

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.

 

[mathjak107]

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

 

[COcheesehead]

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...ash-management-and-additional-information.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.

 

[mathjak107]

i would think you need a margin account set up

 

[Boho]

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.

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.

...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.

 

[COcheesehead]

i would think you need a margin account set up

The agreement says if no margin, then they will force sell a security.

 

[Boho]

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.

 

[COcheesehead]

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.

 

[bingybear]

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

 

[audreyh1]

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.

 

[euro]

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

 

[Boho]

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.

 

[audreyh1]

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.

 

[COcheesehead]

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.

 

[Cobra9777]

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.

 

[COcheesehead]

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?

 

[Cobra9777]

Did you have margin on the account?

No margin.

 

[COcheesehead]

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.

 

[Cobra9777]

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.

 

[audreyh1]

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]

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.

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]

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]

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.