If you’re using a brokerage account to invest in financial assets, like stocks and mutual funds, a cash management account makes a lot of sense.
These accounts can provide individuals with a great personal finance tool that goes a long way towards improving how investments are handled while offering several additional perks.
This article will be looking at CMAs in great detail before revealing the best cash management account on offer today and answering some of the most commonly asked CMA questions.
5 Best Cash Management Accounts
Here are the top 5 best cash management accounts you can open now:
Betterment is a fiduciary that works with NBKC bank to offer their customers an FDIC-insured CMA.
While it’s called Betterment Checking, it is not a regular checking account (though it works like one with some added benefits).
The account promises no fees, including no overdraft fees. Both ATM fees, as well as foreign fees, are reimbursed – on the same day. The account has no minimum balance requirements.
There’s also a Visa debit card with automatic cash back from thousands of brands and free cell phone insurance (when you pay your bill using the Visa).
Accounts are insured up to $250,000 and come with access to the Betterment app, which is available for Android and iOS devices.
Aside from the account management options, the banking app also lets you lock your card and change your PIN, helping you keep your account that much more secure.
Wealthfront’s Cash Management Account comes with virtually no fees and one of the highest APY rates around, making it well worth your consideration.
The minimum opening deposit is $1.00, making it accessible to everyone. You also get FDIC insurance which covers up to $1,000,000.
The account comes with no monthly fees, no account minimum fees, and no overdraft fees on debit cards and account withdrawals.
ATM withdrawals are free from some 19,000 ATMs, and there are no stop payment fees either. The APY rate is set at 5.00%. You can get on all of your money with no tier system in place, allowing you to earn the maximum possible without having to work out different rates.
The account also comes with an account number and a routing number, allowing you to pay your bills directly from the CMA.
You can also receive your pay up to two days earlier and deposit checks straight from your phone. On top of that, you can make payments through PayPal, Venmo, and Cash App – and connect your card to Apple Pay or Google Pay.
While Robinhood has seen more than its fair share of headlines (thanks to the recent furor over GameStop shares), the Robinood Cash Management Account is just as newsworthy.
There are no account opening fees and no monthly maintenance fees either. The FDIC insurance limit is set at $1,250,000, and you also get Mastercard Zero Liability Protection.
The interest rate is set at an APY of up to 5.00%, making it one of the highest rates for this type of account.
You can also withdraw from over 75,000 ATMs free of charge through the Mastercard debit card.
The account also includes several other features, such as the ability to pay bills and send checks. You can also receive your pay directly into your Robinhood CMA. Robinhood is a member of FINRA.
Fidelity’s Cash Management Account comes with a few features that are well worth mentioning.
Fidelity works with many banks to offer FDIC insurance on your deposits through the FDIC-Insured Deposit Sweep Program.
Through this program, money is deposited into different program bank accounts, with the process being transparent to you. All your funds will remain available through the Fidelity account to ensure ease of access.
There are no account fees or minimum balance requirements, making this account very accessible. You also get an unlimited 2% cash back on qualifying purchases.
Any fees incurred from eligible ATM withdrawals are automatically reimbursed without having to use a specific network.
The account also offers a check-writing service, bill pay, and mobile check deposits through the Fidelity app.
You can also get the Fidelity Rewards Visa Signature card, which comes with no annual fees and enhanced fraud monitoring
You can also connect the card to Apple Pay, Google Pay, or Samsung Pay. However, the APY (Annual Percentage Yield) interest rate is relatively low at 0.01% on all cash balances.
SoFi’s cash management account, formerly known as SoFi Money, is now called SoFi Checking and Savings. It offers some of the best parks that you won’t find anywhere else.
SoFi works with six different banks, providing you with FDIC insurance worth a whopping $1,500,000.
There are no account or monthly fees. Overdraft coverage is offered free of charge (SoFi will cover you up to $50 when you set up qualifying direct deposits of at least $1,000). You can also get up to a $300 bonus when switching your direct deposit to this account.
The account is interest-bearing, offering an APY of up to 4.60% when you have direct deposit. Otherwise, you’ll see the rate drop.
You can also earn up to 15% in cash back when paying with SoFi money. You also get access to over 55,000 ATMs from which you can withdraw fee-free.
|J.P. Morgan Self-Directed Investing||up to $700 + $100 BankBonus Exclusive||December 31, 2023||
|Acorns Acorns Invest [Referral Program]||$400||December 9, 2023||
|Fidelity Fidelity Bloom®||$100||December 11, 2023||
What Is A Cash Management Account?
Think of cash management accounts, also known as CMAs for short, as deposit accounts offered by financial institutions that are neither a bank nor a credit union. In most cases, CMAs are offered by brokerage firms, but this is not always the case.
CMAs come in all shapes and sizes. Their main aim is to make cash management more convenient by including the benefits of different account types.
Because of this, you can ditch all of your other accounts and have just one account.
Brokerage firm CMAs also have the added convenience of making investments easier. There’s no need to transfer money from one account to another.
The safety and features of these types of accounts will vary from one financial institution to another. That’s because there are no written rules about what a CMA should or shouldn’t offer.
Are Cash Management Accounts Safe?
Generally speaking, yes – CMAs are entirely safe. There are several verifications you can make to check just how safe they are.
Because CMAs are not offered by banks or credit unions, they are not FDIC-insured or NCUA-insured. However, many firms offering these types of accounts work with banks so that your money is insured anyway. In such cases, your money is ultimately held in a bank account so that it’s insured anyway.
Some firms take it further by working with multiple banks. By doing so, they can get much higher coverage than the $250,000 offered by most banks and credit unions. In some cases, the firm offering the CMA can insure you for $1,250,000 or more.
Make sure you check what insurance, if any, is offered on a CMA as your first step to determine how safe it is.
When it comes to investments, the SIPC, which operates under the Securities Investor Protection Act, can help investor recover their assets should a brokerage firm fail.
It does not have the authority or mandate that the FDIC has but can still help you recover your assets. The brokerage website should display the SIPC logo if it offers this protection.
While the federal reserve regulates banks, brokers are overseen by the FINRA (Financial Industry Regulatory Authority).
This not-for-profit organization works with the SEC to write and enforce certain rules to ensure that registered brokers and broker-dealer firms operate according to a certain standard.
The FINRA can enforce disciplinary action and levy fines against those brokers who do not comply with its regulations and order restitution to harmed investors. That makes dealing with brokers much safer as it provides investors with a legal authority to go to should something go awry.
FINRA’s website includes BrokerCheck – a handy tool for checking the experience of brokers, advisors, and other financial firms.
Why Get A CMA?
You can also get higher interest rates since most firms offering CMAs operate completely online, cutting out the overhead costs that traditional brick and mortar banks can’t avoid.
You might also consider a CMA if you want more than the $250,000 insurance you get on bank accounts – without having to split your deposits into different accounts with different banks. In this case, of course, you will have to look for CMAs that offer higher FDIC insurance.
If you’re an investor or looking to invest, one other benefit that CMAs offer is proximity to your trading and investing accounts. With both accounts held by the same firm, you can avoid having to transfer funds back and forth between two accounts.
Things to consider before getting a CMA:
- APY rate (Annual Percentage Yield). Ideally, you’ll want to make sure that your uninvested cash reserve is earning high interest rates instead of collecting dust. That’s more than possible with many companies offering APYs to match those offered by traditional banks.
- Account Features. If you plan on using your CMA like a traditional checking account, features like Bill Pay, credit card, and online banking can go a long way in increasing the account’s utility.
- Deposit Insurance. Many companies offering CMA accounts work with partner banks to provide deposit insurance on the accounts, with some offering far more coverage than banks.
- Financial services cost money. Monthly service fees, overdraft fees, and foreign transaction fees being some of the biggest expenses you’ll face if left unchecked.
- Transfer Times. If you’re going to be transferring money from a bank account (e.g., a checking account or a money market account), you’ll want to make sure that the money arrives in the least business days possible.
Cash Management Account FAQs
What is a cash management account?
A cash management account is like a bank account but is designed to make it easier to fund investment accounts. Cash Management Accounts have many of the features that you’ll find in traditional bank accounts, including interest, FDIC insurance, and online banking, among many others.
Are cash management accounts good?
Generally speaking, cash management accounts are pretty good. In most cases, they’ll offer better FDIC insurance coverage than traditional banks since they can work with more than one bank.
They also tend to provide high interest rates that match those offered on high-yield savings accounts by online banks.
How does a CMA account work?
A CMA account works just like a bank account. In fact, in most cases, your money is actually kept in a bank account, allowing CMAs to offer more account insurance. You’ll find the bank names disclosed on the website, along with their registered trademarks.
Some accounts include all of the features you’ll find in bank accounts, such as checks, bill pay, online banking, and many others.
Why use a cash management account?
A cash management account can make it easier to invest your money. As it sits close to your investment accounts, there’s no need to wait for the money transfer to go through.
Cash management accounts also offer higher FDIC insurance under one account, making them ideal if you have over the $250,000 the standard FDIC insurance covers.