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What Is a Cash Management Account

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Cash management accounts were created in response to consumer frustration with complex banking systems. They simplify your money management, allowing you to do all your banking through one account -- without sacrificing competitive rates or other banking features.

A cash management account may be more convenient than spreading your money across several accounts or banks. Moving money between multiple accounts can take days and result in expensive fees.

But what are cash management accounts? Here's a closer look at how these types of accounts work and how to decide if a cash management account is right for you.

How cash management accounts work

A cash management account is a financial account that combines the accessibility of a checking account with the high interest rates of a savings account or a certificate of deposit (CD).

Deposits and withdrawals

Depositing money into a cash management account is simple. In fact, it’s similar to depositing money into an online bank account.

When you need to withdraw funds, you have several options. Some cash management accounts include checks as well as debit cards with ATM fee reimbursements. Alternatively, you could transfer the funds electronically to another bank or use automatic bill pay.

Checking and savings features

Certain cash management account providers offer linked checking and savings accounts (which you open together). Other providers offer a single account that has some features of both.

If your cash management account consists of separate but linked accounts, pay attention to which account holds the bulk of your money. The checking account probably won't earn as much interest as the savings account.

Brokerage funds

Some brokers offer cash management accounts, which you can often link to a brokerage account.

FDIC Insurance

Cash management accounts are protected by Federal Deposit Insurance Corporation (FDIC) insurance. With a traditional bank account, the FDIC protects your money up to $250,000 per person per bank. But with a cash management account, you could end up with FDIC insurance of up to $1 million or more -- if your cash management account spreads your money out over several banks.

Pros and cons of a cash management account

Here's a look at some of the pros and cons of cash management accounts.

Benefits of cash management accounts

Some of the key reasons to own a cash management account include:

  • You can manage all of your money in one place.
  • You have easy access to your funds when you need them.
  • If your cash management account offers ATM rebates, you can use any ATM you want without paying fees.
  • You can transfer and remotely deposit funds (just as you could with a traditional bank account) through your provider’s mobile app.
  • Your money is FDIC-insured at least to $250,000 (and possibly much more).
  • You'll likely earn a higher interest rate than you'd get with a brick-and-mortar bank.

Drawbacks of cash management accounts

Keep these points in mind when deciding whether a cash management account is a good fit for you:

  • You can sometimes find higher interest rates with online saving accounts.
  • Some cash management accounts may have high minimum balance requirements or charge maintenance fees.
  • You won't have access to a branch network with in-person support.
  • Not all cash management accounts offer things like debit cards, check-writing capabilities, mobile payment service integration, or mobile check deposit.

What to look for in a cash management account

Here are a few things to consider when choosing a cash management account:

  • FDIC insurance: Look into which banks your cash management account provider partners with. Additionally, check to see how much FDIC insurance you have. Make sure you never have more than $250,000 in a single bank account at a time. If you go over that limit, you might lose your money if the bank fails.
  • APY: Investigate the APY the cash management account offers. Compare it to what you can find with online savings accounts. Ideally, you should look for a cash management account that offers 1% APY or better.
  • Fees: Understand what expenses are associated with the account. A good way to start is to look at a copy of your cash management account's fee schedule. Pay particular attention to monthly fees and fees associated with activities you do often, like withdrawing cash from an ATM.
  • Minimum balance: Some cash management accounts may require a minimum balance to open your account and avoid maintenance fees. Make sure you can meet this requirement. If not, consider a different cash management account. You could also open a high-yield savings account with no minimum balance requirement.
  • Accessibility: Your account should give you multiple ways to deposit and withdraw money from the account. These should preferably match how you're used to managing your money. For example, if you write a lot of checks, you'll want a cash management account with check-writing capabilities.
  • Mobile tools: Cash management accounts often don't have in-person branches -- you'll have to manage your money online. A strong mobile app can make this much easier. Check out customer reviews of the app to see how user-friendly it is and notice any common complaints.

Is a cash management account right for you?

A cash management account could be a good fit for you if:

  • You want to manage all of your money with a single company.
  • You're comfortable banking online.
  • You want to earn a high interest rate on your savings without giving up accessibility.

Consider a high-yield savings account or a checking account if you don't think a cash management account is the right place for your money.

How to open a cash management account

Choosing a cash management account

Some brokers offer cash management accounts. You can also find these types of accounts with some fintech companies like Simple and Aspiration. Compare your options to find the best cash management account for you.

Applying for a cash management account

Opening a cash management account is essentially the same process as opening any other type of online bank account. You'll start by filling out an application with your personal information. Then, you'll fund your account. The easiest way to do this is by electronically transferring funds from your existing bank account to your cash management account. Some companies may permit you to send a mailed check as well.

If your account includes a debit card, your cash management account provider will mail this to you once you've finished setting up your account. You'll also be able to order checks (if your account features that option).

Cash management accounts have their pros and cons. If you're not satisfied with your current bank accounts, it's worth looking into a cash management account to see if it would be a better fit.

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