Best Cash Management Accounts of December 2021

Katie Stiner

Cash management accounts give customers a higher interest rate on their savings, checking account features, FDIC insurance of their money, and low or no fees. We’ve evaluated the best accounts on fees, APY, customer service, and overall quality. 

Why get a cash management account?

Cash management accounts allow the flexibility of having a checking, savings, and investment account in one. Typically, these accounts are used for short, or mid-term investing and are meant to be liquid. These accounts are not offered by banks but by investment firms, brokerages, or other non-bank financial institutions. The firms will have an interest rate offered on the cash amount but offer quick investing into the stock market from the account.  

How safe are cash management accounts?

The accounts are not fully insured by FDIC or NCUA compared to checking or savings accounts at a bank. This is due to the accounts being maintained by a non-bank group. Without insurance backing, these accounts are vulnerable to theft or loss. Some brokerage firms will partner with a bank to extend FDIC or NCUA coverage to the account and this is an important question to ask. The partnership with outside banks may extend past the typical $250,000 coverage.  In some instances, the non-bank has partnered with enough FDIC insured banks to cover up to $1.25 million per one account.

How do cash management accounts work?

Cash management accounts combine checking, savings, and investing under one umbrella. They offer the liquidity of the traditional checking or savings account but with the capability to link directly to a brokerage account for investing. To this end, transfers back and forth between a brokerage account and a cash management account are smooth and in real-time. Like a checking account, a debit card or checkbook will be issued at the time of account opening. Like a savings account, the cash sitting in the account will accrue interest based on a predetermined rate between the consumer and the brokerage firm. 

What does a cash management account cost?

The costs for a cash management account are limited. Typically, a variety of fees will be incurred depending on the usage. The types of fees are maintenance, overdraft, stop payment, excess activity, ATM.  

  • Maintenance: A monthly fee that is pre-set and based on balance. With a higher balance, this fee may be limited or non-existent. 
  • Overdraft: Spending over the amount of money within the account. The fee associated is set and may be significant. 
  • Stop payment: A fee to stop the transfer of payment out of the account. A verbal and written request may be required, and the fees range from $15+. 
  • Excess activity: Debit card or checking usage may be limited in a cash management account. These fees are typically associated with monthly usages and it is important to understand before opening an account. 
  • ATM: Out-of-network fees may not be paid for by the brokerage firm.  

Cash management account vs traditional checking: What’s the difference?

The major difference between traditional checking and cash management is interest. Most checking accounts do not have interest accrual and are considered short-term cash flow. A cash management account has interest accrual with cash flow to a variety of areas including brokerage accounts. Having the capability to invest in a hot stock without hassling over transferring money, is a significant difference between a cash account and checking.  

Traditional checking

  • Pros
    • Bill payments
    • Debit card or checkbook
    • Limited fees based on the balance
    • Savings account transfers in real-time
  • Cons
    • Usually no interest
    • No immediate transfer to the stock/brokerage account
    • Overdraft penalties

Cash management 

  • Pros
    • High yield interest
    • Bill payments 
    • Debit card or checkbook 
    • Real-time transfers to brokerage account (if using the same brokerage firm)
  • Cons
    • Variety of fees

How to choose the best cash management account?

The following are items to consider when shopping cash management accounts.

  • Fees: The fee structure at the financial instition vary and it is important to understand before opening this type of account.
  • Consolidation: A plan to consolidate all investments and banking under one roof will be necessary to make full use of this account.
  • Interest rate: A major driver is the high yield interest offering for the account, make sure it is an appropriate interest rate for the fees that may be incurred.