It's worth noting that cash held in a Fidelity brokerage account is handled the same way, by being "swept" into a bank account held by Fidelity at an actual bank so Fidelity can claim it's FDIC insured. I guess if Fidelity folds there would be bigger problems than where the cash balance is, though...

Correct, Fidelity has a list of 25 Program Banks[1] of varying quality, so I prefer sweeps into a money market fund instead of a bank.

I also use Schwab _Bank_'s checking account instead of Fidelity's Cash Management Account for similar reasons. The latter's debit card is issued by PNC Bank and administered by BNY Mellon[2]. They are large institutions, but I have no wish to deal with the finger-pointing when something goes wrong. Whereas at Schwab, I know who to blame: Schwab.

This type of specialization or "deintegration" seen with neobanks in the name of innovation seems to be a common pattern used to skirt accountability, and it is weaponized against the average consumer's already inadequate rights and ability to recover damages.

[1] https://accountopening.fidelity.com/ftgw/aong/aongapp/fdicBa... [2] https://www.fidelity.com/cash-management/help-center/debit-c...