Cash Management Account: What It Is, How It Works and Who It’s Best For

GaudiLab / iStock.com

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

A cash management account is a deposit account that combines features of checking, savings, high-yield cash and even investment accounts into one place. Typically offered by brokerage or investment firms rather than traditional banks, these accounts can simplify your finances by consolidating everyday banking and investing tools. While cash management accounts offer flexibility and convenience, they also come with limitations worth considering.

Cash Management Accounts: At a Glance

• Offered by: Brokerages
• Interest earning: Yes
• FDIC insurance: The cash part of the account is insured
• Debit card or checks offered: Yes
• Best for: Those who want higher interest rates and also the ability to write checks and engage in bill pay. 

How Cash Management Accounts Work

Cash management accounts allow account holders to access more features in fewer accounts. This allows you to save, spend and invest your money seamlessly.

Features of a Cash Management Account

Cash management features vary depending on the financial institution, but they typically include the following:

• Banking and investment: No need for separate accounts. Your cash can flow between deposit accounts and investment accounts.
• Interest-earning: These accounts offer competitive interest rates.
• Easy to use: You’ll have access to debit cards, check-writing, online payments and mobile apps.
• Fast transfers: Many cash management accounts offer instant fund transfers.
• Insurance protection: Most are insured by the FDIC or SIPC up to $250,000. Some have even higher FDIC limits.

Can You Invest Through a Cash Management Account?

Yes, if the cash management account is linked to a brokerage account.

Most brokerage-based cash management accounts are directly connected to investment accounts, which means transferring funds for investing is instant.

Types of Cash Management Accounts

Cash management accounts are offered by three primary types of financial institutions: brokerage firms, fintech companies and bank-based hybrids. Each one caters to different financial needs.

Brokerage Cash Management Accounts

Brokerage firms are popular with those focused on investing. Cash management accounts offered by these institutions are designed to allow for seamless transfers between cash balances and investment portfolios. Here are other features: 

• Higher yields 
• Easy transfer to investment accounts
• Best for people who want cash and investments in one place

Fintech Cash Management Accounts

These companies often offer cash management accounts with higher annual percentage yields (APYs) than either banks or brokerage firms. In addition, they often have no fees and offer advanced digital tools. Here are other features: 

• Preferred by digital-first users
• Budgeting tools 
• Goal-setting tools 

Bank-Based Hybrids

These are banks that offer traditional banking services and investment options. Check out other features: 

• Branch access available
• Can make cash deposits
• Investment options available

Pros and Cons of Cash Management Accounts

Here’s what to keep in mind before choosing a cash management account.

Pros 

• Higher yield: With a cash management account, you could potentially earn a higher interest rate. 
• Bank features: A cash management account allows you to engage in bill pay and provides debit card access. 
• Insurance: The cash portion of the cash management account is protected by the FDIC. 
• One-stop banking: You can invest and do your banking in one place. 

Cons

• Lack of physical access: No physical locations are available with cash management accounts. 
• Rates can be variable: Rates that you earn on a cash management account can change. 
• Traditional banking services are limited: You cannot get cashier’s checks, money orders or deposit cash in a cash management account. 
• Transfers can take time: The transfers between cash and investments can take time. 

Cash Management vs. Checking vs. Savings Accounts

Here’s how cash management accounts compare with traditional savings and checking accounts.

Cash Management Account Rates, Fees and FDIC Limits

Below is a breakdown of typical rates, fees and insurance limits for cash management accounts.

Rates

Here’s a look at the rate differences between cash management accounts and high-yield savings and checking accounts:

• Cash management accounts: Up to 3.90%
• High-yield savings accounts: Up to 5.00% APY
• High-yield checking accounts: Up to 6.75% APY

Interest rates are affected by many factors, including the state of the economy, supply and demand, and inflation. These, in turn, affect the Federal Reserve policy, which raises and lowers interest rates. Finally, good old competition between financial institutions plays a role.

Fees

Some cash management accounts do charge fees, such as annual fees or wire transfer fees and more.

FDIC Limits

FDIC insurance protects deposited amounts in your non-investment account. In most banks, this protection is limited to $250,000. However, in many institutions offering cash management accounts, it can be as high as $5 million, or even $8 million.

SIPC insurance protects you from losses of your cash or investment money, including stocks and bonds. This insurance covers up to $500,000, including $250,000 for cash.

How To Choose the Right Cash Management Account

When shopping around for a cash management account, keep the following in mind: 

• What is the interest rate? How often does it change?
• What is the insurance coverage?
• What are the ATM fees, transfer fees and monthly fees?
• How easy is it to transfer money, write checks and access the ATM?
• Does the account accept physical cash deposits?
• How long does it take to transfer funds?
• How user-friendly is the app or website?

Who Should Consider a Cash Management Account

A cash management account isn’t the right fit for everyone. Here’s who may benefit from one — and who may want to consider other options.

Ideal Cash Management Account Candidate 

• You already keep cash at a brokerage.
• You want an account that has a higher yield. 
• You make transfers from cash to investments.
• You want your brokerage and banking in one place.

Who Probably Doesn’t Need a Cash Management Account 

• You need to deposit cash frequently. 
• You need in-person banking services. 
• You’re more comfortable with standard banking services. 
• You want access to cashier’s checks, money orders or a safety deposit box.

Key Takeaways

• Cash management accounts offer banking and investing services. 
• Cash management accounts have higher interest rates, but these can be variable. 
• Cash balances are typically insured through the FDIC. 
• Traditional banking services are limited with cash management accounts since in-person access is restricted. 

Erin Gobler and Terence Loose contributed to the reporting for this article.

Share This Article: