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Understanding Cash Sweep Accounts
A cash sweep account is designed to automatically move uninvested cash from a bank or brokerage account to higher-yielding options such as banks, money market funds, or short-term Treasury securities. These alternatives are generally low-risk and ensure that cash remains easily accessible.
Uninvested cash in a sweep account may include account deposits, dividends, interest from investments, or proceeds from selling investments.
The primary goal of a cash sweep account, also known as a sweep account, is to earn interest on idle funds. Additionally, many sweep accounts offer banking features like electronic payments and check-writing services. Interest rates on sweep accounts can vary.
When opening an investment account, you may be required to select a cash sweep program or be automatically enrolled in one. Some programs are free, while others may have fees such as account management or maintenance fees. Certain cash sweep accounts also have minimum balance requirements.
Both entities have cash coverage limits of $250,000 per customer.