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What Is a Cash Management Account?

May 15, 2019
Banking, Banking Basics, Checking Accounts, Personal Finance, Savings Accounts
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A cash management account (CMA) is an account that combines the services and features of checking, savings and/or investment accounts under one product. CMAs are typically offered by robo-advisors, online banks and investment firms. Some CMAs are able to provide high interest rates and reasonable or no fees thanks to low overhead associated with online-only services.

While providers vary in what they offer, here are some of the typical features, benefits and drawbacks of cash management accounts.

Pros and cons of cash management accounts

Pros:

  • Fewer accounts to manage.
  • Higher interest rates than brick-and-mortar banks.
  • Benefits of checking and savings accounts.
  • FDIC insurance on your account.

Cons:

  • You could miss out on higher-interest investments, like index funds.
  • Savings accounts at online banks might have higher interest rates.
  • Customer service might not be face-to-face.

What are the benefits of a CMA?

Simplified account ownership. A CMA can streamline your finances by allowing you to make transactions, earn high-yield interest and use a credit line that’s attached to your investment securities all without having to transfer funds between different accounts.

High interest rates. Some cash management accounts have such stellar annual percentage yield rates that they rival high-yield online banks and blow most brick-and-mortar banks out of the water. For example, SoFi’s cash management account, SoFi Money, has a 2.25% APY, whereas many traditional banks offer 0.01%.

Alternative to checking and savings accounts. Cash management accounts often come with mobile check deposit, check writing, FDIC insurance (sometimes even multiple times the usual coverage), bill pay, money transfers, goal-setting, overdraft programs and more.

Things to consider about CMAs

You might not get in-person customer service. Like online banks, the investment firms that offer CMAs tend to have remote customer service so that they can have lower overhead and pass the savings on to their customers in the form of higher interest rates. While technology is making it easier to get virtual support, online accounts can be a challenge for people who prefer face-to-face interaction.

Other banks, credit unions or financial products may have higher interest rates. While accounts like SoFi Money have a competitive interest rate, some cash management accounts might not be so generous. The Fidelity Cash Management Account, for example, offers only 0.37% APY for balances under $100,000 (and 0.79% for more than that amount). If you’re looking for a strong return on your money, consider checking out NerdWallet’s list of high-yield online accounts. If you’re looking to put away your savings for a long period of time, consider investing it instead for even higher returns.

Is a CMA right for me?

If you’re a fan of online banking, chances are you’ll like what cash management accounts have to offer. While face-to-face customer service might be swapped for virtual assistance, the savings in overhead allows some of these accounts to provide high interest rates and streamlined account features. Make sure you evaluate what a CMA offers and what fees it charges before you pull the trigger on opening an account.

Recommended cash management accounts

Betterment Smart Saver

The Betterment Smart Saver account doubles as an investment account and a savings account — it invests your money into conservative bond funds to produce a high-yield 2.15% interest rate. However, it also has a 0.25% annual account fee, while the other recommended CMAs have no account fees. The account offers an automated cash management feature called “Two-Way Sweep” that moves money back and forth between a customer’s linked non-Betterment checking account and their Betterment Smart Saver account when necessary — such as to cover an overdraft fee or keep your checking account at a desired balance.

SoFi Money

SoFi’s cash management account offers a stellar 2.25% interest rate, and it has no monthly account fees, no minimum balance, no overdraft fees, no ATM fees and no foreign transaction fees. Other benefits include peer-to-peer money transfers, free physical checks and FDIC insurance up to $1.5 million. The downsides are that there are no physical branches for this bank, no cash deposits are accepted, there isn’t online chat customer service and there isn’t 24/7 phone support. Read our review of SoFi Money if you want to learn more.

Fidelity Cash Management

The Fidelity Cash Management account has no monthly fees or minimum balance requirements, and it offers ATM fee reimbursement and free checkwriting. Fidelity’s Cash Management Account has FDIC insurance of $1.25 million, five times the typical coverage offered by most financial institutions. Keep in mind, however, that the 0.37% APY for this account isn’t very high compared with the other recommended accounts. For more information, read our full review.

Aspiration Spend and Save

Aspiration’s Spend & Save is a combination checking/savings account that offers cash-back rewards on every purchase, bonus rewards for spending at socially conscious businesses, a 2.00% APY on the “Save” aspect of the account, a “choose your own monthly fee” feature, no ATM fees worldwide and cell phone protection insurance. The account also has a unique socially conscious feature: Customers receive a score for how often they shop at sustainable businesses. In addition, Aspiration gives 10% of its earnings to charity. To learn more, read NerdWallet’s review of this account.

Radius Hybrid

The Radius Hybrid account has no monthly service fees, no minimum balance requirement after the $100 account opening requirement and unlimited ATM surcharge rebates. The account has a 1.00% APY for balances from $2,500 to $100,000, and 1.20% for balances over that amount. Read the NerdWallet review of Radius Bank for more information.

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