SPAXX vs. HYSA: Should Your Cash Leave Fidelity for a Bank?

Yields move. SPAXX’s figure is Fidelity’s published 7-day yield for August 31, 2026; money market funds have no licensed daily feed, so it is a dated snapshot. Bank rates have none either, so you type your own. The government-securities percentage is for tax year 2025.

The short version

SPAXX is where cash lands at Fidelity by default. It yielded 3.33% on August 31, 2026, and 50.90% of its 2025 income came from US government securities, which should make about half of it exempt from state tax. It does not, in the three states where that would matter most: California, Connecticut and New York require a fund to hold 50% in government obligations at every quarter end, and SPAXX missed that, so those states tax all of it, the same as a bank. In every other taxing state the exemption is real but applies to only half the income. On one modeled $50,000 balance against a bank paying 3.40%, the gap ran about $20 a year, in the bank’s favor in California and Washington and in SPAXX’s favor in a 5% state. At those numbers the choice comes down to whether the cash needs to be at Fidelity to fund purchases.

The question here is narrower than most cash comparisons: you already have money in SPAXX because Fidelity put it there, and you are wondering whether it should go to a bank instead. That is a different decision from picking the highest-yielding place for cash, which is covered in SPAXX vs. SGOV. This is only SPAXX against a savings account.

What SPAXX is

SPAXX is Fidelity’s government money market fund and the default core position for a brokerage account. Every deposit lands in it, every purchase draws from it, and it settles the same day. Its 7-day yield was 3.33% on August 31, 2026 and its expense ratio is 0.42%, which the yield already reflects.¹

It holds Treasury securities and repurchase agreements backed by them. The repurchase agreements are why it is a “government” fund rather than a “Treasury only” fund, and they are also why its tax treatment is weaker than people expect.

The three states where SPAXX has no tax edge

Interest from direct US government obligations is exempt from state income tax. Fidelity reported that 50.90% of SPAXX’s 2025 income came from such securities.² In most states that means about half of SPAXX’s interest escapes state tax, and a bank’s interest escapes none of it.

California, Connecticut and New York apply an extra test: a fund must have held at least 50% of its assets in government obligations at the end of each quarter, or none of the income is exempt.³ Fidelity marks SPAXX as having missed that test for 2025.² A 50.90% income figure can still fail a 50% quarter-end holdings test, because the two measure different things. The result is that a Californian or New Yorker pays state tax on all of SPAXX’s interest, exactly as they would on a bank account. In those states the comparison is yield against yield, and SPAXX’s 3.33% has to stand on its own.

Elsewhere the edge is small

In a state with, say, a 5% income tax, half-exempt income is worth a little. At a 32% federal rate, SPAXX’s 3.33% comes to about 2.18% after tax and a bank would need to pay about 3.46% to match it. In a state with no income tax the exemption is worth nothing and the bank needs only to match 3.33%.

Put numbers on one balance. On $50,000 against a bank paying 3.40%, modeled at a 32% federal rate, the bank came out about $20 a year ahead in California and about $24 ahead in Washington, while SPAXX came out about $20 ahead in a 5% state. Any of those is less than the interest on a single week. Whichever way it falls, $20 a year does not justify the transfer.

Run your own numbers

The calculator carries SPAXX’s threshold status, so picking California or New York zeroes its exemption automatically and shows the result. Enter the APY your bank pays and it reports the rate a bank would need to match SPAXX at your rates.

Same-day access at Fidelity

Cash in SPAXX is available the moment you want to buy something at Fidelity, and it settles a sale the same day. Cash in a bank has to be transferred in first, which takes one to three business days by ACH. That convenience matters for money that funds purchases, where a one-to-three day transfer would get in the way. It does nothing for money that sits untouched for months.

The guarantees differ in kind. A bank deposit is insured by the FDIC up to $250,000 per depositor, per bank, per ownership category.⁴ SPAXX is not insured; its value rests on the Treasuries and repurchase agreements it holds, and the brokerage account around it is covered by SIPC against Fidelity itself failing, which is a different protection.⁵ Fidelity also offers an FDIC-insured sweep as an alternative core position, at a lower yield, for people who want the deposit guarantee without leaving.⁶

When the bank wins, and when it does not matter

A bank wins when it pays more than SPAXX’s threshold rate at your tax rates, which in California, New York and no-tax states is simply more than 3.33%, and when the cash is going to sit rather than fund purchases. Several online banks paid above that in mid-2026, so a saver in those states with a stored balance was modestly better off at the bank.

It does not matter below a few tens of thousands of dollars, where the gap is a rounding error either way. And if the aim is yield rather than convenience, neither of these is the best answer at Fidelity: a Treasury bill ETF or the Treasury-only money market fund both beat SPAXX after tax, especially in the three states above. That comparison is SPAXX vs. SGOV.

Key takeaways

SPAXX has no state-tax edge in California, Connecticut or New York. It missed the quarterly 50% holdings test for 2025, so those states tax all of its income, like a bank’s.
Elsewhere the edge covers half the income. 50.90% of 2025 income was government securities; at a 5% state rate a bank needs about 3.46% to match SPAXX’s 3.33%.
On a modeled $50,000 the gap was about $20 a year against a 3.40% bank, in either direction depending on state.
Access decides it. Cash that funds Fidelity purchases belongs in the core; cash that just sits can go wherever pays more.
For yield, look past both. SGOV or FDLXX beat SPAXX after tax at Fidelity.

How Summitward helps

Cash tracker

Enter your core position and bank balances and see what each yields after your own federal and state rates, side by side.

Open the cash tracker

Frequently asked questions

Is SPAXX better than a high-yield savings account?

On yield, within about $20 a year on a modeled $50,000. SPAXX paid 3.33% on August 31, 2026 and several online banks paid a little more. In California, Connecticut and New York SPAXX gets no state-tax break, so a bank paying above 3.33% wins outright there. SPAXX wins on convenience for cash that funds purchases at Fidelity.

Is SPAXX taxed by my state?

Partly, in most states: about half of its 2025 income was from government securities, which states exempt. Fully, in California, Connecticut and New York, because SPAXX did not hold 50% in government obligations at every quarter end in 2025, which those states require.

Is SPAXX FDIC insured?

No. It is a money market fund, and its value rests on what it holds. Fidelity offers a separate FDIC-insured sweep as a core option at a lower yield. The brokerage account is covered by SIPC against Fidelity failing, which does not insure the fund’s value.

Should I move my SPAXX cash to a bank?

Only the part that is stored rather than spent, and only if the bank pays more than SPAXX’s threshold at your rates. On a modeled $50,000 the difference was about $20 a year either way, so it is rarely worth the transfer friction. If you want more yield without leaving Fidelity, SGOV or FDLXX are the better move.

Related guides

SPAXX vs. SGOV: the higher-yielding alternatives inside Fidelity.
Best Fidelity Core Position: SPAXX against FZFXX, FCASH and the FDIC sweep.
SGOV vs. HYSA: the same comparison with a Treasury bill ETF on the fund side.
SPAXX vs. HYSA at a glance: the compact version with the table.

Sources

Fidelity Institutional, “Fidelity Money Market Funds: Month-End Yields,” as of August 31, 2026 (SPAXX 7-day yield 3.33%; expense ratio 0.42%). institutional.fidelity.com
Fidelity, “2025 Percentage of Income from U.S. Government Securities,” supplemental letter (Fidelity Government Money Market Fund 50.90%, marked as not meeting the California, Connecticut and New York minimum). fidelity.com (PDF)
Vanguard, “U.S. government obligations income information,” tax year 2025 (statement of the California, Connecticut and New York requirement that 50% of assets be in US government obligations at each quarter end). investor.vanguard.com
FDIC, “Deposit Insurance” (coverage of $250,000 per depositor, per insured bank, per ownership category). fdic.gov
SIPC, “What SIPC Protects” (protection against a broker’s failure; no protection against a decline in value). sipc.org
Fidelity, FDIC-insured deposit sweep program (the insured core alternative to SPAXX). fidelity.com

Author disclosure

I have a Fidelity account with SPAXX as its core and hold cash elsewhere as well. I have no relationship with Fidelity or any bank named here. Every figure is the issuer’s own on the date given; the bank rate in the calculator is a dated snapshot you are expected to replace. Nothing here is tax advice, and the state treatment described depends on facts this article cannot see.