Best Cash Management Accounts

Cash management accounts are a relatively new type of financial product that combines the features of checking and savings accounts with the ability to invest in the stock and bond markets. These accounts are typically offered by brokerage firms and online banks, and they are designed to provide customers with a high degree of flexibility and convenience in managing their finances. In this guide, we will explore the key features of cash management accounts, their benefits and drawbacks, and how to choose the best one for your needs. We will also provide tips on how to make the most of your cash management account and answer some frequently asked questions.

What are cash management accounts?

Cash management accounts are hybrid financial accounts that offer a range of features found in both traditional checking and savings accounts, as well as investment accounts. They typically provide higher interest rates than traditional checking accounts, but also offer the ability to invest funds in a variety of financial instruments, such as stocks, bonds, and exchange-traded funds (ETFs). Cash management accounts are often offered by online financial institutions and brokerages and have become increasingly popular among individuals looking to manage their finances and investments in one place. In this guide, we will explore the features, benefits, and drawbacks of cash management accounts, as well as provide recommendations for the best options available on the market.

Common features of the best cash management accounts

The best cash management accounts typically offer a combination of high-yield savings, checking, and investment options. They are designed to provide a convenient and seamless experience for managing your finances. Some of the common features of the best cash management accounts include:

1. High interest rates: Cash management accounts typically offer higher interest rates compared to traditional savings or checking accounts. This allows you to earn more on your cash balances.
2. No monthly fees: The best cash management accounts do not charge any monthly maintenance fees, allowing you to keep your money without any extra cost.
3. ATM fee reimbursement: Some cash management accounts reimburse you for ATM fees charged by other banks, providing you with greater flexibility in accessing your funds.
4. FDIC insurance: Cash management accounts are typically FDIC-insured up to $250,000 per account, providing you with peace of mind that your money is safe.
5. Investment options: Some cash management accounts offer investment options, such as stocks, bonds, and mutual funds, allowing you to grow your wealth in addition to earning interest on your cash balances.
6. Mobile banking: The best cash management accounts offer mobile banking apps that allow you to manage your accounts on the go, deposit checks, transfer funds, and pay bills.
7. Low minimum balance requirements: Cash management accounts typically have low minimum balance requirements, allowing you to start with a small amount of money and grow your balance over time.

Benefits of cash management accounts

Cash management accounts (CMAs) can offer several benefits to users. Here are some of the most common ones:

1. High-interest rates: Cash management accounts typically offer high-interest rates compared to traditional checking accounts. This can help you earn more money on your cash reserves.
2. FDIC insurance: Most cash management accounts are FDIC-insured, which means that your deposits are protected up to $250,000.
3. Easy access to cash: With a cash management account, you can easily access your funds through debit card transactions, ATM withdrawals, or electronic transfers.
4. Low fees: Many cash management accounts have low or no fees, making them an attractive option for those looking to save money on account maintenance.
5. Integration with other financial services: Some cash management accounts are offered by fintech companies that provide additional financial services, such as investment management, bill payment, and budgeting tools.

Overall, cash management accounts can provide a convenient and flexible way to manage your cash reserves while earning a competitive interest rate.

Downsides of cash management accounts

Although cash management accounts offer several benefits, they also come with a few downsides. One of the biggest drawbacks is that most cash management accounts are offered by online banks, which means that they don’t have physical branches. This can be a problem for customers who prefer to do their banking in person or need to deposit cash. Another downside is that some cash management accounts may have higher fees than traditional checking or savings accounts. Additionally, while cash management accounts typically offer higher interest rates than traditional savings accounts, they may not offer the highest rates available on the market.

How to choose the best cash management accounts

When it comes to choosing the best cash management accounts, there are a few factors to consider. First and foremost, you’ll want to look at the interest rates offered by each account. The higher the interest rate, the more money you’ll earn on your deposits.

You should also consider any fees associated with the account, such as monthly maintenance fees or transaction fees. Look for accounts that have low or no fees.

Another important factor to consider is the account’s accessibility. Some cash management accounts may have limitations on withdrawals or transfers, so be sure to read the account terms carefully.

Finally, consider the account’s overall reputation and track record. Look for accounts offered by reputable financial institutions with a strong history of customer service and satisfaction.

How do cash management accounts work?

Cash management accounts (CMA) are financial accounts that combine the features of a checking account, savings account, and investment account in one place. They are offered by non-bank financial institutions, such as robo-advisors, brokerages, and fintech companies.

A CMA typically provides a high-yield savings account or money market account, with the ability to write checks, use a debit card, and make electronic transfers. Some CMAs also offer investment options, such as stocks, bonds, and exchange-traded funds (ETFs).

When you deposit money into a CMA, the funds are usually held by a partner bank, which is FDIC-insured up to $250,000. This means that your money is protected from bank failure, similar to a traditional savings account.

Unlike traditional bank accounts, CMAs often come with no monthly maintenance fees, minimum balance requirements, or ATM fees. However, they may have other fees, such as foreign transaction fees, wire transfer fees, or trading fees for investment options.

Types of cash management accounts

There are several types of cash management accounts available in the market. Some of the most common types include:

1. Traditional banks: Many traditional banks now offer cash management accounts, which are typically FDIC-insured and may have higher interest rates than traditional checking accounts.
2. Online banks: Online banks, also known as internet-only banks, are financial institutions that operate entirely online. They offer cash management accounts with competitive interest rates and low fees.
3. Brokerage firms: Some brokerage firms offer cash management accounts that are linked to investment accounts, allowing customers to easily transfer funds between their investment and cash management accounts.
4. Robo-advisors: Some robo-advisors offer cash management accounts with high-interest rates and low fees. These accounts are typically linked to investment accounts and offer features like automated investing and goal-based savings.
5. Non-bank financial institutions: Some non-bank financial institutions, such as payment processors, also offer cash management accounts that are designed for businesses. These accounts may offer features like cash flow management tools and online invoicing.

What are joint cash management accounts?

Joint cash management accounts (CMAs) are CMAs that are held by two or more people who share ownership and access to the account. Joint CMAs work similarly to joint bank accounts, where both account holders have equal rights to use the account and make transactions.

Joint CMAs can be a good option for couples, families, or business partners who want to pool their funds together for common expenses or investments. With a joint CMA, each account holder can deposit and withdraw funds, view account activity, and manage investments as needed.

However, it’s important to note that joint CMAs can also have some potential drawbacks. For example, both account holders may be held responsible for any overdrafts or fees incurred on the account, and there may be restrictions on the types of transactions that can be made without the consent of both account holders.

Additionally, joint CMAs may not be the best option for everyone, especially if there is a risk of conflict or disagreement between the account holders. It’s important to carefully consider the benefits and risks of a joint CMA before opening one and to discuss expectations and responsibilities with all account holders involved.

What’s the difference between cash management accounts and and regular bank accounts?

Cash management accounts (CMAs) and regular bank accounts have some similarities, but there are some key differences as well. Here are a few key differences to consider:

1. Investment options: CMAs typically offer a wider range of investment options than traditional bank accounts. With a CMA, you can often invest in stocks, bonds, ETFs, and other investment products, while traditional bank accounts typically don’t offer these options.
2. FDIC insurance: While both CMAs and traditional bank accounts are typically FDIC insured, there may be differences in the amount of coverage offered. Some CMAs offer FDIC insurance through partner banks, which can result in a higher level of insurance coverage than traditional bank accounts.
3. Fees: CMAs may have higher fees than traditional bank accounts, particularly if you use the investment features. You may also be required to maintain a higher minimum balance to avoid fees.
4. Interest rates: CMAs may offer higher interest rates than traditional bank accounts, but this is not always the case. It’s important to compare the interest rates and fees of different CMAs and traditional bank accounts to find the best option for your needs.
5. Account features: CMAs may offer additional features, such as budgeting tools, mobile apps, and ATM fee reimbursement, that traditional bank accounts may not have.

Overall, CMAs may be a good choice for individuals who want to combine their banking and investment needs into a single account. However, it’s important to compare the features and fees of different CMAs and traditional bank accounts to find the best option for your needs.

Pros and cons of cash management accounts

Some potential pros of cash management accounts include:

1. Higher interest rates: Cash management accounts can offer higher interest rates than traditional savings accounts.
2. Easy access to funds: Cash management accounts often come with debit cards or check-writing abilities, allowing you to easily access your funds when needed.
3. No fees: Many cash management accounts come with no fees, or lower fees than traditional bank accounts.
4. Convenience: Cash management accounts combine the benefits of a checking and savings account into one, making it a convenient option for those who want to simplify their finances.

Some potential cons of cash management accounts include:

1. Limited FDIC coverage: Cash management accounts may have limited FDIC coverage, which means that only a certain amount of your funds will be insured.
2. No physical branches: Many cash management accounts are offered by online banks, which means that there may not be any physical branches for you to visit.
3. Limited account features: Cash management accounts may not offer as many account features as traditional bank accounts, such as bill pay or wire transfers.
4. Higher minimum balance requirements: Some cash management accounts may have higher minimum balance requirements than traditional bank accounts, which may not be feasible for everyone.

It’s important to weigh the pros and cons of cash management accounts and determine if they are the right fit for your financial needs and goals.

How to compare the best cash management accounts

When comparing cash management accounts, there are several factors you should consider, such as:

1. APY (annual percentage yield): This is the interest rate you earn on your money. Look for accounts with higher APYs to maximize your earnings.
2. Fees: Cash management accounts may come with various fees, such as monthly maintenance fees, ATM fees, and overdraft fees. Choose an account with low or no fees.
3. FDIC insurance: Make sure the account is FDIC insured, which means your money is protected up to $250,000 in case the bank fails.
4. Minimum deposit and balance requirements: Some cash management accounts require a minimum deposit to open, as well as a minimum balance to avoid fees. Consider your financial situation and choose an account that suits your needs.
5. Account features: Look for accounts with features that fit your needs, such as free ATM access, mobile banking, and bill pay.
6. Customer service: Consider the quality of customer service offered by the bank, such as availability, responsiveness, and helpfulness.
7. Reputation: Research the bank’s reputation, including its financial stability, history, and customer satisfaction.

By considering these factors, you can compare and choose the best cash management account for your needs.

How many cash management accounts can I get?

You can open multiple cash management accounts, but it’s important to keep in mind that each account may have its own set of terms, fees, and features. Having multiple cash management accounts can help you diversify your cash holdings and potentially earn higher interest rates, but it can also make it more difficult to manage your finances and keep track of your account balances. It’s a good idea to evaluate your financial needs and goals before opening multiple cash management accounts.

What are common fees associated with cash management accounts?

Cash management accounts may have several fees associated with them. Some of the common fees are:

1. Account maintenance fee: Some cash management accounts charge a monthly fee to maintain the account. This fee can range from a few dollars to several hundred dollars per month.
2. ATM fees: If you use an ATM that is not in the cash management account’s network, you may be charged a fee by the ATM operator and by your cash management account provider.
3. Overdraft fees: If you spend more than what is available in your account, you may be charged an overdraft fee. Some cash management accounts offer overdraft protection, which may come with its own fees.
4. Transaction fees: Some cash management accounts may charge a fee for certain transactions, such as wire transfers or foreign currency transactions.
5. Minimum balance fee: Some cash management accounts require you to maintain a minimum balance to avoid a fee. If your balance falls below the minimum, you may be charged a fee.

It’s important to read the terms and conditions of a cash management account carefully to understand the fees associated with the account.

Glossary for cash management accounts

Here are some common terms related to cash management accounts:

1. Cash Management Account (CMA) – A financial account that combines various financial services into a single account, including banking, investing, and cash management.
2. FDIC insurance – The Federal Deposit Insurance Corporation (FDIC) is an independent US government agency that provides insurance to depositors in the event of a bank or financial institution failure.
3. Annual Percentage Yield (APY) – The total amount of interest earned on an account over the course of a year, expressed as a percentage of the account’s balance.
4. Minimum balance requirement – The minimum amount of money that must be kept in an account in order to avoid fees.
5. Debit card – A payment card that deducts money directly from a checking account to pay for purchases.
6. ATM fees – The fees charged by a bank or financial institution for using an ATM that is not part of their network.
7. Bill pay – A service offered by banks that allows customers to pay bills electronically from their checking account.
8. Transfer – Moving money from one account to another, such as from a checking account to a savings account.
9. Overdraft fee – A fee charged when a customer spends more money than they have in their checking account.
10. Account aggregation – The ability to view and manage multiple financial accounts from a single interface.

How to get the most out of cash management accounts

To get the most out of cash management accounts, consider the following:

1. Maximize your cash balance: Since cash management accounts typically offer higher interest rates than traditional savings accounts, it makes sense to keep as much cash in the account as possible to earn the most interest.
2. Take advantage of features: Cash management accounts often come with features such as ATM fee reimbursements, mobile check deposit, and bill pay. Be sure to use these features to make managing your money easier and more convenient.
3. Use budgeting tools: Some cash management accounts offer budgeting tools to help you track your spending and stay on top of your finances. Take advantage of these tools to better manage your money.
4. Consider linking accounts: If your cash management account is with the same institution as your other accounts, consider linking them to make it easier to move money between accounts and avoid overdrafts.
5. Review fees: While cash management accounts often have lower fees than traditional bank accounts, it’s still important to review the fee schedule to make sure you’re not being charged for services you don’t need or use.
6. Keep an eye on FDIC insurance limits: Cash management accounts are typically FDIC insured, but the coverage limit is $250,000 per depositor per institution. If you have more than $250,000 in cash, consider spreading it across multiple institutions to ensure it’s all fully insured.

What are the requirements to get cash management accounts?

The requirements to get cash management accounts vary depending on the financial institution offering the account. However, there are some common requirements that you might need to meet:

1. Minimum balance: Some cash management accounts require you to maintain a minimum balance to avoid fees or to earn higher interest rates.
2. Verification of identity: You will need to provide personal identification information, such as your name, date of birth, Social Security number, and address.
3. Bank account: Many cash management accounts require you to have a linked bank account in order to transfer funds to and from the cash management account.
4. Application: You may need to fill out an application, either online or in person, to open a cash management account.
5. Credit check: Some cash management accounts require a credit check to ensure that you have a good credit history.
6. Age: You may need to be at least 18 years old to open a cash management account.

It’s important to review the specific requirements for each cash management account you are interested in before opening an account.

How to apply for cash management accounts

To apply for a cash management account, follow these steps:

1. Research and compare: Look for various cash management accounts offered by different financial institutions, compare their features, fees, and benefits to determine which one is the best fit for you.
2. Check eligibility: Once you’ve found a cash management account that suits your needs, check the eligibility requirements to ensure that you meet them. Typically, you’ll need to be at least 18 years old, have a valid Social Security number, and have a government-issued ID.
3. Gather necessary documents: You may need to provide documentation to prove your identity, such as a driver’s license, passport, or state-issued ID. You’ll also need to provide your Social Security number.
4. Apply online: Most financial institutions allow you to apply for a cash management account online. Fill out the application form and submit any required documentation.
5. Fund your account: Once your account has been approved, you’ll need to fund it with an initial deposit. This can usually be done via an electronic transfer from another bank account or by mailing a check.
6. Start using your account: Once your account is funded, you can start using it to manage your cash, make purchases, and earn interest on your balance.

How to best use cash management accounts

Here are some tips on how to best use cash management accounts:

1. Consider your financial goals: Before opening a cash management account, consider what you want to achieve financially. If you’re looking for higher interest rates, make sure to compare the rates offered by different providers. If you need easy access to your funds, look for accounts that offer ATM withdrawals or online bill payments.
2. Maximize your interest: Some cash management accounts offer higher interest rates than traditional savings accounts, so make sure to take advantage of that. Consider depositing your cash reserves into the account to earn a higher rate of return.
3. Monitor your account: Keep an eye on your cash management account to make sure you are not being charged any fees or overdrafts. Some accounts may require you to maintain a minimum balance, so be sure to keep enough funds in the account to avoid any penalties.
4. Take advantage of the features: Many cash management accounts come with additional features, such as online bill pay or mobile check deposit. Be sure to take advantage of these features to make managing your finances easier.
5. Use it as part of your overall financial plan: Cash management accounts are just one part of your overall financial plan. Make sure to integrate them into your budget and use them in conjunction with other financial products, such as investment accounts and retirement accounts, to help you achieve your long-term financial goals.

Are cash management accounts FDIC-insured?

Yes, most cash management accounts (CMAs) are FDIC-insured, but the level of FDIC insurance may vary depending on how the CMA is structured. CMAs are often offered by non-bank financial institutions, such as robo-advisors or online brokerages, and these institutions may partner with one or more FDIC-insured banks to provide FDIC insurance on the funds held in the CMA.

In some cases, a CMA may be insured up to $1.25 million or more through multiple FDIC-insured banks that participate in the program. However, it’s important to note that FDIC insurance limits apply to the total amount of deposits you have across all accounts held at the same FDIC-insured bank or program. As of 2021, the standard FDIC insurance limit is $250,000 per depositor per insured bank.

It’s important to read the terms and conditions of a CMA carefully to understand how FDIC insurance is provided and what level of coverage is available. If you have questions or concerns about FDIC insurance for a CMA, you can contact the FDIC or the financial institution offering the account for more information.

Are cash management accounts used as primary checking accounts?

Cash management accounts (CMAs) can be used as primary checking accounts, but whether or not they are a good choice for this purpose depends on your individual financial needs and goals.

CMAs typically offer many of the features of a traditional checking account, such as debit cards, ATM access, and online bill payment, as well as a higher interest rate than many traditional checking accounts. Some CMAs also offer other benefits, such as no minimum balance requirements, no monthly maintenance fees, and unlimited transactions.

However, there are some potential drawbacks to using a CMA as a primary checking account. For example, CMAs may have limitations on the number of transactions you can make each month, and some may have higher fees for certain types of transactions or if you don’t meet certain requirements.

Additionally, CMAs may not offer the same level of customer service or branch access as traditional banks, and may not be as widely accepted for certain types of transactions, such as cashier’s checks or money orders.

Ultimately, whether or not a CMA is a good choice for your primary checking account depends on your individual financial situation and needs. It’s important to compare the features and fees of different CMAs and traditional checking accounts to find the best option for your needs.

Alternatives to cash management accounts

Some alternatives to cash management accounts include traditional savings accounts, money market accounts, certificates of deposit (CDs), and individual retirement accounts (IRAs). Each of these options has different features and benefits that may be more suitable for your financial goals and situation. It is important to do your research and compare the options before choosing the one that is right for you.

Are cash management accounts worth it?

Cash management accounts can be worth it for individuals who want an all-in-one financial product that offers high yields, FDIC insurance, and flexible cash management options. However, it’s important to evaluate the fees, minimum balance requirements, and other terms and conditions of different cash management accounts before opening one. Additionally, individuals who have more complex financial needs or who want to invest in a wider range of assets may benefit from using multiple financial products in conjunction with a cash management account. Ultimately, whether or not a cash management account is worth it will depend on an individual’s specific financial goals and circumstances.

Should I get cash management accounts?

Whether or not you should get a cash management account depends on your individual financial situation and goals. Cash management accounts can offer several benefits, including higher interest rates, FDIC insurance, and easy access to your money. However, they may also have limitations, such as withdrawal restrictions and fees.

If you’re looking for a place to store and manage your cash, a cash management account can be a great option. Consider your goals and needs, and compare the features and fees of different accounts to find one that works best for you. It’s always a good idea to do your research and ask questions before opening a new account.

The future of cash management accounts

Cash management accounts are becoming increasingly popular among consumers due to their convenience, high interest rates, and low fees. As technology continues to advance, we can expect to see even more innovative features and services being offered by cash management account providers. For example, some providers are already offering investment options and other wealth management tools, which could be further expanded in the future. Additionally, as more consumers become interested in sustainable and socially responsible investing, we may see cash management account providers offering more options in this area as well. Overall, the future of cash management accounts looks bright, and they will likely continue to be a popular choice for consumers looking for a convenient and flexible way to manage their money.

FAQs about the best cash management accounts