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Cash Management Accounts vs. High-Yield Savings Accounts: How They Compare

Dec. 11, 2019
Banking, Banking Basics, Personal Finance, Savings Accounts
Cash Management Accounts vs. High-Yield Savings Accounts: How They Compare-story
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Cash management accounts and high-yield savings accounts are both solid options for earning high interest on your cash in the short term. Their APYs usually fall within the range of 1.00-2.00%, which is lower than what can you make over the long term in a retirement or investment account, but much higher than the average 0.09% savings rate that traditional brick-and-mortar banks offer.

So which should you choose? While features of cash management accounts differ, it may come down to a question of how easily you can deposit or withdraw your money and whether you want to link a brokerage account. CMAs don’t restrict the number of transactions or withdrawals you can make per month — savings accounts at banks are federally limited to six — and customers may find it more convenient to have their brokerage account and CMA under one roof.

» To learn more about this financial product, read NerdWallet’s guide to cash management accounts

High-yield savings accounts, on the other hand, have the convenience, familiarity and benefits typical of banks, so they can be a good place to park cash and let it earn interest without frequent withdrawals.

Read on to learn more about the features of cash management and high-yield savings accounts and which one might be right for you.

What’s the difference between cash management accounts and high-yield savings accounts?

Similarities

  • High interest rates.
  • Good short- to medium-term parking for savings, like an emergency fund.
  • Funds are federally insured.
  • Have similar things to consider before opening an account, such as fees, minimum balances, ATM access and whether you can link accounts.
  • Funds are subject to fluctuating interest rates that are dependent on the federal funds rate (the rate at which banks can lend money to each other).

Differences

  • Cash management accounts are typically provided by nonbank financial service providers (like robo-advisors or investment firms) while high-yield savings accounts are provided by banks.
  • High-yield savings accounts have a federally regulated limit on the number of withdrawals a customer can make; CMAs aren’t restricted by number of withdrawals.
  • Federal insurance is provided using different methods.
  • CMAs can often be linked to a brokerage or investment account with the same provider.
  • Check-writing is available with some CMAs.

Cash management account definition

A cash management account is a cash account offered by a nonbank financial service provider and typically has an interest rate that is much higher than traditional brick-and-mortar bank accounts.

This financial product is fairly new to the market and there are a couple of things to consider before getting one.

First, there may be restrictions on how easily you can deposit or withdraw your cash: some CMAs only allow electronic transfers to take money in and out of your account.

Second, the Federal Deposit Insurance Corp. coverage on your money doesn’t come from the CMA provider. Instead, the provider sweeps customer funds into FDIC-insured partner banks that provide coverage.

» Ready to open a CMA? Here are NerdWallet’s picks for best cash management accounts

Cash management accounts with high interest rates

Check out these three cash management accounts to get started:

Wealthfront

at Wealthfront

NerdWallet rating:
4.0 NerdWallet rating
Betterment

at Betterment

NerdWallet rating:
4.0 NerdWallet rating
Aspiration

at Aspiration,

Deposits are FDIC Insured

NerdWallet rating:
4.0 NerdWallet rating


APY

0.26%





Monthly fees

$0





Bonus features

Highly rated mobile app



APY

0.30%





Monthly fees

$0





Bonus features

ATM fees reimbursed worldwide



APY

0.25%





Monthly fees

$0





Bonus features

Up to 5% cash back on debit spending



Compare top cash management accounts

High-yield savings account definition

High-yield savings accounts are savings accounts that offer interest rates that are usually much higher than traditional savings accounts. The best high-yield savings accounts are usually offered by online banks because online banks don’t have the business overhead that brick-and-mortar banks do, and they’re able to pass on the savings to their customers in the form of high APY.

» Looking to open an account? Check out NerdWallet’s list of the best high-yield online savings accounts

High-yield online savings accounts to consider

Compare three online savings options below.


NerdWallet bank rating:



NerdWallet bank rating:




NerdWallet bank rating:



APY

1.70%





Monthly fees

$0





Bonus features

Excellent CD options



APY

1.50%





Monthly fees

$0





Bonus features

Large ATM network



APY

1.50%





Monthly fees

$0





Bonus features

Solid CD options



Which type of account is best for me?

With both CMAs and high-yield savings you’ll likely get high interest rates on your cash, so when it comes to choosing what account you want, consider the following.

Research what kind of access you’ll have to your funds. Savings accounts and cash management accounts can have very different means of depositing and withdrawing money. While savings accounts tend to have pretty standard access via branches, ATMs and online banking, CMAs can be trickier.

Depending on the type of cash management account you choose, ATM access may be available through a large network or you may not be able to withdraw cash from an ATM at all. Some CMAs only allow customers to deposit and withdraw cash through electronic transfer to outside accounts. Also, some CMAs don’t allow check deposits. Be sure to look into these types of restrictions before you open a cash management account to see if it’ll work for you.

Keep in mind that savings accounts have withdrawal limits. The Federal Reserve Board puts a limit of six transactions per month on transfers and withdrawals from bank savings accounts. CMAs, on the other hand, aren’t bank accounts, so customers don’t have the same restrictions on how many transactions they can make per month. If you’re planning to open a new account that you want to use for regular daily purchases, you may want to look at a CMA that offers a debit card. If you would rather park your money for a while and not touch it, a high-yield savings account might be a better bet.

Think about what kind of extra features you want with your account. Debit cards and check-writing aren’t always standard with cash management accounts, although they’re very common options for bank checking accounts, which are typically available to link to savings accounts.

Some cash management accounts offer bonus perks as well. Aspiration’s Spend & Save account, for example, gives a bit of cash back for spending money at socially conscious businesses.

Think about whether you want to link other accounts. If you have a high-yield savings account, you’ll likely be able to open a checking account with the same bank, allowing for quick and easy transfers. Banks also sometimes allow customers to create sub-accounts so that you can have different savings accounts for different goals.

Some cash management account providers allow you to link brokerage or investment accounts at the same firm, which can make it easier to transfer money back and forth.

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