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Cash management accounts are cash accounts offered by a financial institution other than a bank or credit union — often from a broker. A cash management account can be used instead of a checking or savings account, or in addition to one.
These types of cash accounts are often overlooked as a way to deliver value. If you’re on the hunt for a great robo-advisor or online broker, don’t forget the extra tangible benefits a good cash management account can provide. As fees decline, brokers and robo-advisors are competing increasingly on feature-rich services to differentiate themselves – and that means value for you!
Many top cash management accounts (CMAs) offer a ton of features and benefits. Some of the most popular or desirable features include:
- A competitive annual percentage yield (APY)
- Fee-free ATMs
- A checking account
- Debit card
- No monthly fee
- No overdraft fees
- Early paycheck direct deposit
- “Round-up” investing
- A portfolio line of credit
Many robo-advisors and brokerages offer these services at no extra cost to you, so you can find a truly attractive cash management account with a ton of benefits.
The distinction between a brokerage account and a traditional bank account continues to collapse. Increasingly there are more and more financial institutions that do it all. So in many cases you could actually use the cash management account as a primary bank account even if you don’t take advantage of the related investing features at all.
Best cash management accounts in December 2023
Wealthfront is best known as a robo-advisor, but its cash management account is also a great choice. It offers many of the most popular features: interest on balances, fee-free ATMs, checking benefits, a debit card and no monthly fees.
But you’ll also get some of the rarer features such as access to your direct deposit up to two days earlier and a portfolio line of credit, which allows you to borrow money against your investing balance with no credit check. And, oh yeah, Wealthfront offers a top-flight investing service, too.
Fidelity has rightly earned a reputation as a customer-friendly outfit, and you’ll see that in its CMA. You won’t get socked with an account fee, nor does the account have a minimum. You’ll have ATM fees reimbursed when you use the account’s debit card, and you’ll be able to write checks using the account, along with access to bill pay and mobile check deposit. If you’d prefer to simply add a debit card or bill pay to your existing brokerage account, Fidelity can get that done, too.
You can really turn your brokerage account into an all-in-one account here without the hassle.
Charles Schwab has long been known as an investor-friendly institution, and it takes that rep to its cash management account at Schwab Bank. Schwab’s checking account has no monthly fees or account minimums, and offers unlimited ATM fee rebates across the world if you use the associated debit card. You won’t pay foreign transaction fees either.
If there’s a downside, it’s that Schwab’s interest rate isn’t competitive with other CMAs listed here. You’ll need to have a Schwab brokerage account to open a checking account, but you can open one at the same time, and you won’t pay fees on it. When you’re ready to invest, you can quickly shuffle money between the two accounts.
TD Ameritrade may be most well known for its online brokerage services, but it also offers a solid cash management account. TD Ameritrade’s cash account comes with no overdraft fees or account minimums and you’ll never have to pay ATM fees with its unlimited rebate program. You’ll also get unlimited check writing and can use the mobile app to easily move money between accounts.
Unfortunately, the interest rate available on TD Ameritrade’s cash management account isn’t as high as what’s offered at other top CMAs. You should also be aware that Schwab has purchased TD Ameritrade and the companies expect to combine at some point in 2023, so your account will eventually become a Schwab account.
Interactive Brokers offers one of the best trading experiences but also has attractive cash management features that can make it a true “go anywhere” account. All funds will be held in your investing account, but with the associated debit card, you can pay bills straight from the account. If you run over your available cash, you’ll run up a margin balance, and pay interest rates that are just 1.5 percent above the benchmark rate – so cheap.
You’ll also be able to use mobile check deposit, pay bills to any payee and have automatic payroll deposit. Among brokers, Interactive Brokers pays among the industry’s best rates for cash balances.
What are the pros and cons of a cash management account?
- Easier to invest: With many brokerage firms and robo-advisors offering cash management accounts, it’s easy to start investing your savings.
- Interest boost: Many cash management accounts earn higher interest than is typically available through traditional bank savings accounts.
- FDIC insurance: Many cash management accounts funnel your savings to multiple banks in their program, which allows you to have FDIC insurance on your funds beyond the typical $250,000 limit.
- Interest below high-yield savings accounts: Though cash management accounts can earn higher interest rates than traditional banks, they often fall short of those offered by high-yield savings accounts.
- Online only: Many cash management accounts are offered by institutions that exist only online, so if you prefer to bank in-person, it might not be a good fit for you.
- Minimum balances: Some cash management accounts require high minimum balances or regular deposits in order to receive all the features offered.
What is the difference between a savings account and a cash management account?
Cash management accounts are typically offered by non-bank financial institutions such as brokerage firms or robo-advisors. They come with many of the same features as traditional savings and checking accounts, but also have some investment options. A savings account is usually offered by traditional brick-and-mortar banks and doesn’t offer the ability to invest. You’ll also typically earn less interest in a traditional savings account than what is offered by many cash management accounts.
While you might be looking for a traditional bank account or even a popular fintech app, don’t overlook the benefits of using a broker or robo-advisor for your cash management account. You often won’t have to use the investing features, but they’ll be there as your financial life grows.