Yes, Fidelity does pay interest on uninvested cash. Every account has a default holding vehicle called a core position, and any idle dollar — from a deposit, a dividend, or the sale of a security — sweeps into it automatically and starts earning. Recent yields have ranged from about 1.84% APY in the FDIC-insured deposit sweep to roughly 3.32%–3.36% in Fidelity’s government money market funds, so what you actually earn depends on which core position your account uses.1Fidelity Investments. SPAXX – Fidelity Government Money Market Fund2Fidelity Investments. Interest Rates – Fidelity Cash Management Account
What the Core Position Does
The core position is the cash hub of your account. Deposits, dividends, and sale proceeds sweep in automatically; purchases pull from it when you buy a new investment. You don’t have to move money manually, and your cash begins earning the day it arrives.3Fidelity. Trading FAQs: About Your Trading Account
Interest is calculated on your closing balance each day, so a few days of cash between trades still earns something.3Fidelity. Trading FAQs: About Your Trading Account Accumulated earnings post on the last business day of each month and reinvest into the core position automatically. On a money market fund they appear as dividends; on the FDIC sweep they appear as interest.
What You’ll Earn Right Now
As of late February 2026, the gap between Fidelity’s core position options was substantial:
- 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 balance, the difference between the FDIC sweep at 1.84% APY and a money market fund near 3.32% works out to roughly $740 a year in forgone earnings. Rates move with broader interest conditions, so it’s worth checking the current numbers before deciding anything.
One useful note on the money market numbers: the 7-day yield is reported after the fund’s operating expenses, so what you see is what you earn. SPAXX, for example, has a net expense ratio of 0.42%, already reflected in that 3.32% figure.4Fidelity Institutional. Government MM (SPAXX) – Fidelity Institutional The FDIC sweep has no expense ratio because it’s a bank deposit, not a fund.
Which Option Your Account Uses
Your rate depends mostly on the type of account you opened.
Standard brokerage accounts and IRAs typically default to a government money market fund — commonly SPAXX, FZFXX, or FDRXX. These funds invest in U.S. government securities and short-term debt and aim to hold a steady $1.00 share price. They are not FDIC-insured; protection comes from SIPC coverage, which applies if Fidelity itself were to fail, not if the fund’s value declined.5Securities Investor Protection Corporation. What SIPC Protects
Fidelity Cash Management Accounts work differently. Their core position is the FDIC-Insured Deposit Sweep, which spreads uninvested cash across roughly 20 participating banks in increments of up to $245,000 per bank. That structure pushes total eligible FDIC coverage up to about $5 million per depositor.6Fidelity. Safeguarding Your Accounts The trade-off is yield: the FDIC sweep has consistently paid less than Fidelity’s money market funds.
Switching to a Higher-Yield Core Position
If your account allows a choice, you can change the core position through Fidelity’s website. Log in, open the account, go to the Positions tab, and expand the line showing your current core position to see the available alternatives. There is no minimum balance to hold any option.7Fidelity Investments. What is a Core Position?
The transition typically takes one to two business days, during which your existing balance moves to the new vehicle. After that, every incoming dollar sweeps into your new choice.
One boundary to be aware of: Cash Management Accounts are generally limited to the FDIC-insured deposit sweep. If you hold a large cash balance there and want a money market yield, the practical workaround is keeping that cash in a separate brokerage account where a money market fund can serve as the core position.
Taxes on What You Earn
In a taxable account, money market fund dividends are taxed as ordinary income at the federal level, but a portion may be exempt from state and local 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. State rules vary, and a few states impose minimum investment thresholds that not every Fidelity fund meets.8Fidelity. 2025 Percentage of Income from U.S. Government Securities
Interest from the FDIC-insured deposit sweep is also ordinary income federally, but because it comes from bank deposits rather than government securities, it generally doesn’t qualify for a state exemption. Fidelity reports money market earnings on Form 1099-DIV and FDIC sweep earnings as interest income on your annual tax statement.
Inside a traditional IRA, Roth IRA, or other tax-advantaged retirement account, neither type of earning is taxed in the year it’s received. Traditional IRA withdrawals are taxed as ordinary income in retirement; qualified Roth withdrawals are tax-free. The dividend-versus-interest distinction has no practical tax effect inside these accounts, so the yield itself is what matters when you choose.