Yes, Fidelity does pay interest on uninvested cash, and it happens automatically. Every account has a “core position” that sweeps idle cash into an interest- or dividend-paying vehicle from the moment it lands. Recent yields ranged from about 1.82% on the FDIC-insured deposit sweep to roughly 3.32%–3.36% on Fidelity’s government money market fund options.1Fidelity Investments. SPAXX – Fidelity Government Money Market Fund2Fidelity Investments. Interest Rates – Fidelity Cash Management Account
How the Sweep Works
When you deposit money, receive a dividend, or sell a security, the proceeds move into your core position automatically. When you buy something, the cash is pulled back out. There are no manual steps, and you don’t have to opt in.3Fidelity. Trading FAQs: About Your Trading Account
What your core position actually holds depends on the type of account. Standard brokerage accounts and IRAs typically default to a government money market fund. Fidelity Cash Management Accounts use an FDIC-insured deposit sweep, which places your cash in interest-bearing accounts at participating banks.
What Each Option Pays
The gap between the money market funds and the FDIC sweep is currently wide. As of late February 2026:
- Fidelity Government Money Market Fund (SPAXX): 3.32% 7-day yield1Fidelity Investments. SPAXX – Fidelity Government Money Market Fund
- Fidelity Treasury Money Market Fund (FZFXX): 3.33% 7-day yield
- Fidelity Government Cash Reserves (FDRXX): 3.36% 7-day yield
- FDIC-Insured Deposit Sweep: 1.82% interest rate / 1.84% APY2Fidelity Investments. Interest Rates – Fidelity Cash Management Account
On a $50,000 cash balance, the difference between 1.84% APY and 3.32% works out to roughly $740 a year. Rates move with broader interest rate conditions, so it’s worth checking current numbers before you decide.
The money market fund yields are already net of expenses. SPAXX carries a net expense ratio of 0.42%, but nothing is billed separately to your account; the cost is built into the daily yield.4Fidelity Institutional. Government MM (SPAXX) – Fidelity Institutional The FDIC sweep has no expense ratio because it’s a bank deposit rather than a fund.
The trade-off between the two is safety versus yield. Money market funds are covered by SIPC rather than FDIC, and while they aim to hold a stable $1.00 share price, that price isn’t guaranteed. The FDIC sweep spreads deposits across roughly 20 banks in increments of up to $245,000 each, extending eligible FDIC coverage to as much as $5 million.5Fidelity. Safeguarding Your Accounts
When You Actually See the Money
Interest and dividends accrue daily based on your closing balance. If cash sits in the account for two days between a deposit and a trade, you earn for those two days.3Fidelity. Trading FAQs: About Your Trading Account
Payments are credited on the last business day of each calendar month. Money market fund earnings show up as dividends; FDIC sweep earnings show up as interest. Either way, the payment is reinvested into your core position automatically, so the balance compounds without any input from you.
How These Earnings Are Taxed
In a regular taxable account, dividends from a money market fund like SPAXX are taxed as ordinary income at the federal level. A portion may be exempt from state and local income tax because the fund holds U.S. government securities. For tax year 2025, about 50.90% of the Fidelity Government Money Market Fund’s income came from eligible U.S. government obligations, meaning roughly half of the dividends could qualify for state exemption in most states. Rules vary, and California, Connecticut, and New York impose minimum investment thresholds that some Fidelity funds may not meet.6Fidelity. 2025 Percentage of Income from U.S. Government Securities
FDIC sweep interest is taxed as ordinary income federally and generally does not qualify for any state exemption, because it comes from bank deposits rather than government securities. Fidelity reports money market fund earnings on Form 1099-DIV and sweep interest as interest income on your annual tax statement.
Inside an IRA, none of this matters year to year. Interest and dividends earned in a traditional or Roth IRA are not taxed in the year they accrue. Traditional IRA withdrawals are taxed as ordinary income in retirement; qualified Roth withdrawals are generally tax-free.
How to Change Your Core Position
If your account is defaulting to an option that pays less than another one you’re eligible for, you can switch. Log in to Fidelity’s website, open the account, and go to the Positions tab. Your current core position is listed there, and expanding it reveals the option to change it. There’s no minimum balance requirement.7Fidelity Investments. What is a Core Position?
The transition typically takes one to two business days. Your existing balance moves from the old vehicle to the new one, and after that all incoming cash sweeps into the new selection.
Which Options You Can Actually Choose
Your choices depend on the account type. Standard brokerage accounts and IRAs can typically pick among several money market funds. Cash Management Accounts are generally limited to the FDIC-insured deposit sweep. If you hold a large cash balance in a CMA and want the higher money market yield, the cash would need to sit in a separate brokerage account with a money market core position instead.