What is a Cash Management Account?

Have you noticed a recent rise in the number of “cash management accounts?”

If the term is new to you, you’re not alone. I only learned about these a few weeks ago and they’re fascinating. They are not technically bank accounts. The companies that have them are not banks. They’re usually some other type of financial company like a robo-advisor or brokerage or even a student loan refinancing company.

If they aren’t bank accounts, what exactly are these things?

Table of Contents
  1. What is a Cash Management Account?
  2. “Quirky” FDIC Insurance Converage
  3. Key Benefits
  4. Key Drawbacks
  5. Closer Look at A Few Programs
    1. Robinhood Cash Management
    2. SoFi Money
    3. Betterment Cash Reserve & Checking
    4. Yotta Savings
  6. Are These Safe?

What is a Cash Management Account?

The terms for each account may be different but the basic idea is the same. You have a company that’s the “face” of the account and a bank, or series of banks, that provide the actual bank account.

What you’re getting is a Deposit Sweep account. It’s operated by the Insured Network Deposit (IND) Sweep Service and your cash is periodically swept into your bank accounts. IND is run by the Promontory Interfinancial Network, which is the same company that runs CDARS.

CDARS stands for Certificate of Deposit Account Registry Service. It’s very similar to a cash management account but for certificates of deposit (CD). The service helps you save in multi-million-dollar CDs while still earning typical CD rates. They spread the deposit across several banks’ CD offers.

For example, with Betterment Cash Reserve, the “face” is Betterment. There are seven partner banks (The Bancorp Bank+, Barclays Bank Delaware, Citibank, N.A., Cross River Bank, HSBC Bank USA, N.A. State Street Bank and Trust Company, and Wells Fargo Bank, N.A.) providing the banking services. The banks they partner with are the ones offering the FDIC insurance, which is why you get $1,000,000 of FDIC insurance. That’s $250,000 per bank across four.

SoFi Money is a cash management account that has FDIC insurance up to $1,500,000 – this just means they have six partner banks. SoFi Money isn’t any “better” or “worse” because of the higher FDIC insurance, they just have more partner banks. (here’s a list of SoFi welcome bonus promotions)

The key thing to look for is the perks of the account. Most of them will have a high-interest rate, no account minimums, and no account fees.

The FOMC lowered the federal funds rate as of 10/30 and banks are responding. Some of the higher rates on the list below have not yet updated their rates so I wouldn’t view them as all on even footing.

Here are rates as of publishing:

As you can see, they are comparable or slightly higher than what you’d see at an online savings account. I have Ally Bank as a reference for online banks and the Vanguard Money Market Fund, which is their sweep fun, as a reference for a brokerage.

The Vanguard Money Market Fund is not FDIC insured, it’s covered by SIPC.

“Quirky” FDIC Insurance Converage

There is one quirk you need to know about cash management accounts. When the money is with the partner company, your money is NOT FDIC insured because the partner is not a bank. The money is swept into the bank account regularly (usually daily, but it varies) but when it’s in the partner company, it’s not FDIC insured yet.

If the partner is a brokerage, your funds are protected by SIPC insurance. SIPC insurance is similar to FDIC insurance except for brokerages.

If the partner isn’t a brokerage, there’s no federal program that the partner can pay into to protect you.

Key Benefits

The key benefits of a cash management account are what you’d expect from online savings and checking accounts PLUS whatever the partner offers. That’s the added value.

You want:

  • A competitive interest rate
  • No minimum balances, no account maintenance fees
  • Very few other fees, if any
  • A versatile mobile app
  • A debit card, potentially with cash rewards

Key Drawbacks

While these offer higher interest rates, it’s not a great place to be saving money for the long term. It’s not a knock specifically against cash management accounts but against the idea that you should even ever need $250,000 of FDIC insurance, let alone a million dollars. That money should be invested in the stock market or put into a different type of safe investment vehicle.

You will never see physical branches, so you will be missing some of the features a physical location offers. That said, most will give you ATM reimbursements to make up for that.

You also never run into the 6 transfer limit for savings accounts. Regulations require a bank to limit the number of transactions on a savings account. If you go over six, you will often be warned and sometimes be penalized. If you do it too often, the bank may close your account. It’s only for savings accounts, you can transact as often as you want on a checking account. Cash management accounts are not limited either.

There are usually no other banking products. No money markets, no certificates of deposit, no loans, etc.

If you already have an account at a partner bank, it’s subject to the same FDIC limit. For example, if you’re using Robinhood and you already have a Citi account with $250,000 in it – you’ve hit the limit. (and congrats! you should move that money!) In some cases, you can designate the partner bank you’re using so you don’t exceed limits.

Closer Look at A Few Programs

Here is a look at four cash management accounts to give you a sense of what you are getting:

Robinhood Cash Management

Robinhood’s Cash Management account offers a 0.30% APY and it takes all un-invested cash in your Robinhood account. This is similar to a sweep account at any other brokerage. What’s interesting is that brokerages that offer free trades often don’t pay interest on cash balances because they keep that interest as income. This interest income helps offset revenue they aren’t booking from trades.

At Robinhood, they have 5 partner banks so you get $1.25 million in FDIC insurance. The banks are Wells Fargo, HSBC, Goldman Sachs, Citibank, U.S. Bank and Bank of Baroda. There are no account minimums, no maintenance fees, and no foreign transaction fees. They also offer a Mastercard debit card and a 75,000 ATM network.

Robinhood gives you a free share of stock when you open a brokerage account.

SoFi Money

SoFi Money is currently available and they even give you $100 when you have $1,000 or more in total direct deposit transactions within any consecutive 30-day window by 9/30/21. SoFi started as a student loan company and SoFi Money is a cash management account with $1,000,000 in FDIC insurance. There are no account fees, no account minimum, and no foreign transaction fees on their Visa debit card. They will reimburse any ATM fees as long as the ATM is part of the Visa, Plus or NYCE network. They also offer personal checks, bill pay, and transfers out of the account.

Here is our in-depth review on SoFi Money for more details.

Betterment Cash Reserve & Checking

Betterment Cash Reserve is their high-yield savings cash management account and there is a separate checking component. Cash Reserve (savings) has up to $1,000,000 of FDIC insurance (4 partners) whereas the Checking has just $250,000 (1 partner, nbkc Bank). There are no fees, no minimums, and ATM fees are reimbursed worldwide.

Our review of Betterment Cash Reserve discusses this more.

Yotta Savings

Yotta Savings is a prize-linked savings account where you get a low base rate of 0.20% APY but there’s a weekly lottery. For every $25 you deposit, you get a recurring ticket into the weekly drawing. It’s just like a lottery where there are numbers drawn (one a night, plus a “Powerball” like Yottaball on Sunday). The more numbers you match, the bigger the prize you earn that Sunday.

When you sign up through a friend (such as myself), you get a one time bonus of 100 tickets to the next week’s drawing.

Get 100 Tickets for Yotta Savings

Are These Safe?

The only potentially “unsafe” aspect is the lack of FDIC insurance before they sweep funds to a partner bank. For the companies with SIPC insurance, you’re safe. The ones that don’t have coverage are a little riskier.

We haven’t gone through a financial period where these companies have been tested but I have trouble picturing a scenario in which you would lose money. That said, pick a partner with SIPC insurance or transfer smaller amounts to mitigate the risk.

Cash management accounts are a nice evolution in banking and I hope to see more of them for companies doing interesting things!

Other Posts You May Enjoy:

Steady App Review

The Steady app is a mobile app that makes finding work and side hustles easier. And it can help you make money from a variety of income sources from work at home and seasonal jobs to full time traditional jobs.

Ando Money Review: A Bank that Fights Climate Change

Ando Money is a newbank that seeks to fight climate change by only investing in projects (with bank deposits) that fit that mission. They do all this while still offering perks you associate with online banks.

5% High Interest Savings Accounts – Earn up to 5% or More

With interest rates so low it's tough to find savings accounts that pay even 1%. However, there are several options to earn more interest on your deposits. Some require you to jump through some hoops, such a certain number of transactions per month, but not all.

About Jim Wang

Jim Wang is a thirty-something father of four who is a frequent contributor to Forbes and Vanguard's Blog. He has also been fortunate to have appeared in the New York Times, Baltimore Sun, Entrepreneur, and Marketplace Money.

Jim has a B.S. in Computer Science and Economics from Carnegie Mellon University, an M.S. in Information Technology - Software Engineering from Carnegie Mellon University, as well as a Masters in Business Administration from Johns Hopkins University. His approach to personal finance is that of an engineer, breaking down complex subjects into bite-sized easily understood concepts that you can use in your daily life.

One of his favorite tools (here's my treasure chest of tools,, everything I use) is Personal Capital, which enables him to manage his finances in just 15-minutes each month. They also offer financial planning, such as a Retirement Planning Tool that can tell you if you're on track to retire when you want. It's free.

He is also diversifying his investment portfolio by adding a little bit of real estate. But not rental homes, because he doesn't want a second job, it's diversified small investments in a few commercial properties and a farm in Illinois via AcreTrader.

Reader Interactions

Leave a Comment:

As Seen In: