A cash management account (CMA) is an alternative to a traditional bank account that simplifies money management. Its goal is to help keep your money secure while offering a competitive annual percentage yield (APY) and similar features to traditional bank accounts. Typically offered by brokerage firms and investment banks, it can be used to hold cash, invest in securities, and make payments.
Understanding investment types
What is a cash management account?
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May 20, 2024
Understanding investment types
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How do cash management accounts work?
CMAs feature bank sweeps that move any uninvested cash in the account to program banks where they earn interest. The partnership that CMAs have with banks allow them to offer competitive interest rates and keep more of your cash federally insured.
What to consider when choosing a CMA
It's important to compare the features and benefits of different CMAs before you make your decision. Here are a few key considerations:
1. Accessibility.
CMAs may offer other features that can be helpful for managing cash flow—like routing and account numbers or partnerships with vendors like Venmo and PayPal. Since they're offered by brokerage firms and investment banks, you can also easily use the money to invest in securities.
2. Federal Deposit Insurance Corporation (FDIC) coverage.
While CMAs are typically low risk, highly liquid, and secure, it's beneficial for the cash in the account to be insured. While only the bank sweep balances are eligible for FDIC coverage, money market funds and any other securities may be eligible for protection by the Securities Investor Protection Corporation (SIPC). FDIC and SIPC protection limits may vary depending on the financial institution that manages the account. It's best to ask any potential providers about the coverage they offer.
3. Don't just look at the APY.
Some additional things to consider are minimum balances required to earn interest, the frequency of compounding interest, and any additional fees or charges associated with the account.
Does Vanguard have a cash management account?
Yes! The Vanguard Cash Plus Account is a cash management account that features a bank sweep that offers FDIC insurance1 and a competitive APY2 on your short-term savings. There are no fees3 to open the account and no minimum balance requirements. You can use the bank sweep as a low-risk place to keep cash for both your short-term needs and any potential emergencies. You'll also get routing and account numbers so you can easily access your money if you need it to pay bills, set up direct deposit with your employer, and more.4
Interested in the Vanguard Cash Plus Account?
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1Bank Sweep program balances are held at one or more participating banks, earn a variable rate of interest, and are not covered by SIPC. See the list of participating program banks (PDF). Balances are eligible for FDIC insurance subject to applicable limits.
2The APY will vary and may change at any time.
3A low annual account service fee of $25 is waived when you elect e-delivery of documents. You can sign up for e-delivery during and after the process of opening an account. There may be low fees for certain types of transactions.
4Some third-party institutions may not accept the Cash Plus Account routing number for transactions. If you have any issues using the routing number on a third-party website, contact the provider.
Savings accounts may have characteristics that differentiate them from bank sweep programs offered by Vanguard Cash Plus. For example, they may offer overdraft protection, ATM access (immediate access to your money), and other convenience features. Each company's products differ, so it's important to ask questions to understand account features.
There may be other material differences between products that must be considered prior to investing.
All investing is subject to risk, including the possible loss of the money you invest.
The Vanguard Cash Plus Account is a brokerage account offered by Vanguard Brokerage Services, a division of Vanguard Marketing Corporation, member FINRA and SIPC. Under the Sweep Program, Eligible Balances swept to Program Banks are not securities: they are not covered by SIPC, but are eligible for FDIC insurance, subject to applicable limits. Money market funds held in the account are not guaranteed or insured by the FDIC, but are securities eligible for SIPC coverage. See the Vanguard Bank Sweep Products Terms of Use (PDF) and Program Bank list (PDF) for more information.