What Is a Cash Management Account (CMA)?

A cash management account (CMA) is a financial account that combines some of the features of checking and savings accounts and is typically offered by a brokerage firm or other financial services company. Like a savings account, a CMA typically pays interest on your cash. Like a checking account, it may offer checks, a debit card, or both. Many CMAs also make it easy to transfer money to a linked brokerage account.

CMAs can be convenient, but also have some potential drawbacks, including a lack of full-service banking features and limited access to in-person banking. Some may also pay less interest than dedicated high-yield savings accounts.

Is a CMA right for you? This guide explains how cash management accounts work, their pros and cons, and what to consider before opening one.

What Are Cash Management Accounts?

Cash management accounts (CMAs) generally combine features of checking and savings, with the added features of linking to a brokerage account. Depending on the provider, you may be able to earn interest on your cash, spend using a debit card, write checks, and transfer money to and from other accounts.

CMAs are typically offered by brokerage firms and other nonbank financial services companies. Some providers charge low or no account fees, while others may charge for certain services or require a minimum balance to avoid fees. The company may also offer other financial products, such as brokerage, retirement, or financial planning services.

One potential benefit of a CMA is that you can manage your banking and brokerage accounts through the same company. This may make it easier to move money between accounts and keep track of your finances. However, a CMA may not offer every feature you would find at a traditional bank.

How Do Cash Management Accounts Work?

Cash management accounts generally function as a place to hold cash for day-to-day spending and short-term savings goals. Because they are often offered by nonbank financial service companies, however, they may work differently from regular bank accounts.

Some CMAs use a process called a cash sweep. Instead of keeping your cash at the company itself, the provider moves it into one or more partner banks. If those banks are FDIC-insured, the deposits may qualify for FDIC insurance, subject to applicable limits and requirements.

The company may also offer a debit card, checks, electronic transfers, or other way to access your money. If the CMA is linked to a brokerage account, you can generally transfer cash between the two accounts through the same platform.

The specific features, interest rate, fees, and insurance arrangements vary by provider. Before opening an account, it’s important to review how your cash is held and what protections apply.

What Are the Pros of Cash Management Accounts?

Understanding the benefits of a cash management account can help you determine whether it fits your needs and financial goals.

Convenience

One of the biggest advantages of a cash management account is the ability to manage your banking and brokerage accounts through one company. A CMA may offer checking and savings features, along with the ability to move cash to a linked brokerage account.

Keeping your accounts in one place can make it easier to manage transfers, monitor balances, and organize your money. However, the convenience may come with trade-offs, such as fewer banking features or less competitive interest rates.

Traditional Banking Features

Many CMAs offer features you may expect from a checking account. Depending on the provider, these may include:

•   Debit cards

•   Checks

•   ATM fee reimbursement

•   Mobile banking

•   Direct deposit

•   Electronic transfers

Since features vary, you’ll want to make sure the account offers the tools you need before opening an account. For example, if you regularly deposit cash or use mobile check deposit, check whether those services are available.

FDIC Insurance and Sweep Networks

The Federal Deposit Insurance Corporation (FDIC) generally insures eligible deposits at FDIC-insured banks up to $250,000 per depositor, per insured bank, for each account ownership category. If a bank fails, FDIC insurance can protect eligible deposits up to the applicable limit.

Some CMA providers use sweep networks to distribute your cash across multiple FDIC-insured partner banks. This may allow you to receive more than $250,000 in total FDIC coverage, depending on the number of participating banks and how your accounts are structured.

What Are the Cons of a Cash Management Account?

CMAs also come with some potential downsides. Here are a few to keep in mind as you decide whether one is right for you.

Lower Interest Rates

While CMAs may offer better interest rates than traditional checking accounts, their yields are not always higher than those of dedicated high-yield savings accounts or some certificates of deposit (CDs).

If your primary goal is earning the highest possible APY on your savings, it may be worth comparing CMAs with online banks and credit unions. You may find a better place to keep your short-term savings.

Fewer Features

A CMA may not offer all the conveniences of a standard checking account, such as bill pay, mobile check deposit, or cash deposits. As a result, it may not fully replace a checking account.

Before opening a CMA, consider how you use your current bank account. If you need to deposit cash regularly, write checks frequently, or use other specialized banking services, you’ll want to make sure the CMA supports those needs.

No Physical Branches

Many CMAs are offered by online brokerages or financial technology companies, which means you often do not have access to brick-and-mortar locations. If you regularly deposit cash, need services such as cashier’s checks or safe deposit boxes, or prefer in-person assistance, this may be a significant disadvantage.

Cash Management Accounts vs Checking and Savings Accounts

Cash management accounts offer some of the same services as traditional bank accounts, but there are notable differences. Here’s a look at how they compare.

Considerations When Comparing Cash Management Accounts

If you’re thinking about opening a CMA, it’s a good idea to compare the account’s features, fees, interest rate, and how your money is held. Here are some factors to consider.

Customer Service

When you have a question or need help resolving an issue, customer service can make a difference. It’s wise to check the provider’s available support options, including customer service hours and whether you can speak with a representative. If the account is offered entirely online, find out how you can get help with issues involving transfers, debit cards, account access, or other transactions.

Minimum Balance Requirements

Some CMAs may have minimum balance requirements to avoid fees or qualify for certain features. Before opening an account, be sure to check whether there is a minimum balance and determine whether it fits comfortably within your financial situation.

Interest Rate and APY

If you’re primarily using a CMA to hold cash, you’ll want to compare its APY with those offered by other accounts. Keep in mind that rates can change, particularly for accounts with variable rates.

Also consider whether the rate applies to your entire balance or only to certain amounts and whether you need to meet any requirements to earn the advertised rate.

Fees

It’s a good idea to review the account’s fee schedule before opening a CMA. Potential costs may include monthly maintenance fees, ATM fees, wire transfer fees, or fees associated with other financial services.

An account with a competitive APY may not be the best value if its fees significantly reduce the benefit of holding cash there.

FDIC Insurance and Cash Sweeps

If FDIC insurance is important to you, you’ll want to understand exactly how the provider handles your cash. Find out whether funds are swept into FDIC-insured partner banks, which banks participate, and how much coverage may be available.

You might also consider whether you already have deposits at any of the participating banks because those balances may affect your total FDIC coverage at a particular institution.

Investment Services

Many CMA providers also offer brokerage or investment services. If you plan to use those services, you may want to consider the provider’s investment options, account fees, and other features separately from the CMA itself.

A CMA can make it convenient to move money between accounts, but convenience shouldn’t be the only factor when choosing a brokerage or investment provider.

Is a Cash Management Account a Good Fit for You?

A CMA may be a good fit for people who want to manage cash and brokerage accounts through the same company. The all-in-one nature of these accounts can make it easier to move money and keep track of your finances.

A CMA may also be worth considering if you hold a large amount of cash and want to explore whether a sweep network can provide additional FDIC coverage. However, coverage depends on the provider’s arrangements and applicable insurance limits. It’s important to review the details rather than assume all your cash is insured.

Active investors may also prefer a CMA to a traditional checking or savings account if they want to earn interest on uninvested cash while keeping it available for future investment opportunities.

However, a CMA may not be ideal for people who frequently deposit cash or rely on in-person banking services. If your primary goal is maximizing APY, a dedicated high-yield savings account may be a better option. In addition, combining spending, saving, and brokerage funds in one account may make it harder to track sub-balances and could lead to accidentally spending money intended for other saving or investing.

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The Takeaway

CMAs offer a convenient alternative to traditional checking and saving accounts. Since investment firms often offer CMAs, they may allow you to manage your banking and brokerage accounts through one company. As with any financial product, there are pros and cons to these accounts. Determining whether one is right for you will depend on your money management style, the features you need, and your financial goals

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FAQ

What is the purpose of a cash management account?

A cash management account (CMA) is designed to help you manage cash for spending, saving, and other financial needs in one place. Depending on the provider, a CMA may offer features such as interest on your cash, a debit card, check-writing, ATM access, and electronic transfers. CMAs are often linked to brokerage accounts, making it convenient to move money between your cash and brokerage accounts. They can be useful if you want to manage banking and brokerage services through the same company.

What type of account is cash management?

A cash management account (CMA) is a financial account that combines features commonly associated with checking and savings accounts. CMAs are generally offered by brokerage firms and other nonbank financial services companies rather than traditional banks. Depending on the provider, a CMA may offer interest on cash, debit card access, check-writing, ATM access, and electronic transfers. Some providers also use FDIC-insured partner banks to hold customers’ cash.

Is a cash management account the same as a money market account?

No. A cash management account (CMA) and a money market account are different types of accounts. A CMA is typically offered by a brokerage or other nonbank financial services company and may combine checking, savings, and brokerage features. A money market account is a type of deposit account offered by banks and credit unions. Both may pay interest and offer easy access to your money, but their features, rules, fees, and insurance arrangements can differ.

Are cash management accounts safe from market losses?

It depends on where your money is held. Cash held in an FDIC-insured bank deposit through a cash management account’s sweep program may be protected from losses resulting from a bank failure, subject to applicable FDIC limits and requirements. However, money held in investments through a linked brokerage account can lose value. It’s important to understand whether your cash management account balance consists of bank deposits, investments, or another type of financial product and what protections apply.

Can I write checks from a cash management account?

Many cash management accounts offer check-writing privileges as one of their standard features. Providers may also offer debit cards, electronic transfers, ATM access, or other ways to access your money. If writing checks is important to you, be sure to check the account’s features before opening it. You may also want to review any limits, fees, or requirements associated with check-writing.

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