Cash Management Accounts – What They Are and What to Know
Joy Wallet is advertiser-supported: we may earn compensation from the products and offers mentioned in this article. However, any expressed opinions are our own and aren't influenced by compensation. To read our full disclosure, click here.
In an era marked by ever-increasing financial complexities, it's more important than ever to effectively and seamlessly manage your cash. Enter the cash management account (CMA), a versatile financial tool that merges the functionalities of a traditional checking account with the advantages of a savings account and investment options. With the potential to revolutionize personal finance management, CMAs have gained popularity as a centralized hub for individuals to optimize their monetary resources, earning potential, and financial convenience.
Jump To
What is a cash management account?
A cash management account (CMA) is a financial account that combines the features of a traditional checking account with the benefits of a savings account and investment options. It is typically offered by banks, brokerage firms, or other financial institutions.
A cash management account is a centralized hub for various financial activities. It allows individuals to hold and manage their cash and conduct transactions such as deposits, withdrawals, and bill payments. CMAs often provide additional services like debit cards, check-writing capabilities, and online banking features.
One of the key advantages of a cash management account is the ability to earn interest on the cash held in the account. The interest rates offered by CMAs may be more competitive than traditional savings accounts. However, they are generally lower than the potential returns from investing in the stock market or other higher-risk assets.
In addition to cash and transactional features, CMAs often provide investment options. These can include access to money market funds, mutual funds, stocks, bonds, and other securities. By offering these investment opportunities within the same account, CMAs provide a convenient way for individuals to manage their cash and investments holistically.
Different types of cash management accounts
CMAs can vary in features and offerings depending on the financial institution.
Bank cash management accounts
Offered by traditional banks, these accounts typically provide a combination of checking, savings, and investment features. They may offer competitive interest rates on cash holdings and provide access to various banking services such as bill payment, debit cards, and online banking.
Brokerage cash management accounts
Offered by brokerage firms, these CMAs provide a range of investment options along with cash management features. They often integrate seamlessly with brokerage services, allowing individuals to manage their investments and cash in one account. Brokerage CMAs may offer access to a wider array of investment products, including stocks, bonds, mutual funds, and exchange-traded funds (ETFs).
Robo-advisor cash management accounts
Some robo-advisor platforms provide CMAs that combine automated investment services with cash management features. These accounts typically offer low-cost investment portfolios tailored to the individual's risk tolerance and investment goals. The cash management component may include features like high-yield savings accounts or the ability to sweep excess cash into investment portfolios.
Fintech cash management accounts
With the rise of financial technology companies, several fintech firms offer CMAs. These accounts often provide modern, user-friendly interfaces and innovative features. Fintech CMAs may offer high-interest savings accounts, budgeting tools, expense tracking, and various cash management features to help users optimize their financial activities.
High-yield cash management accounts
Some financial institutions specialize in high-yield CMAs that focus on offering competitive interest rates on cash balances. These accounts typically yield higher than traditional savings accounts, helping individuals earn more on their cash holdings.
Affordable Loans by BHG Money
- Approval in as few as 24 hours
- Calculate your payment without impact on credit score.
- Business loans focused on the needs of busy professionals.
- Terms up to 12 years.
- Business loans typically range from $20,000 to $250,000.
Best cash management accounts
Charles Schwab Bank
Charles Schwab offers a cash management account that integrates seamlessly with its brokerage services. It provides a range of features, including a high-yield investor checking account, a wide network of fee-free ATMs, no account minimums or monthly service fees, and the ability to link external accounts.
Fidelity Cash Management Account
Fidelity's CMA offers a comprehensive suite of features, including a high-yield savings account, ATM fee reimbursement, bill payment, mobile check deposit, and access to investment options. The account has no monthly fees or minimum balance requirements.
SoFi Money
SoFi Money is a fintech cash management account that combines the features of a checking and savings account. It offers a high-yield savings component, no account fees, reimbursement for ATM fees worldwide, and additional perks like access to financial planning tools and career coaching.
Betterment Cash Reserve
Betterment's cash management account, Cash Reserve, provides a high-yield savings account with competitive interest rates, no minimum balance, and no fees. It offers FDIC insurance on balances and integrates with Betterment's investment services.
Wealthfront Cash Account
Wealthfront offers a cash management account with a high-yield savings option with no fees, minimum balance requirements, and FDIC insurance up to $1 million. It also offers additional benefits like direct deposit, mobile check deposit, and automated investing options.
Pros and cons
Pros
- Convenience. CMAs provide a centralized platform to manage cash, transactions, and investments. They often offer features like debit cards, check-writing capabilities, bill payment services, and online banking, making day-to-day financial management more convenient.
- Competitive interest rates. Many CMAs offer higher interest rates on cash holdings than traditional savings accounts. While not as high as potential investment returns, CMAs can still provide a reasonable yield on cash balances.
- Investment integration. CMAs typically offer access to various investment options, such as money market funds, mutual funds, stocks, and bonds. This integration allows individuals to manage their cash and investments in one account, providing a holistic approach to financial management.
- FDIC insurance. CMAs banks offer are usually FDIC-insured up to $250,000 per depositor, providing security for cash holdings.
- Flexibility. CMAs often have no or low minimum balance requirements and no monthly maintenance fees, making them accessible to many individuals. They may also offer the ability to link external accounts for added flexibility.
Cons
- Lower returns than investments. While CMAs offer competitive interest rates, they generally yield lower returns than riskier investment options. If your primary objective is to maximize investment returns, other avenues may provide higher potential gains.
- Limited investment choices. CMAs may not offer the same breadth of investment options as dedicated brokerage accounts. A dedicated brokerage account may be more suitable if you have specific investment preferences or want to engage in more complex trading strategies.
- Potential fees. While some CMAs have no monthly fees or minimum balance requirements, others may charge transaction fees, ATM fees, or other service fees.
- Varying terms and conditions. Financial institutions may have different terms, interest rates, and services associated with their CMAs.
- Integration limitations. While CMAs aim to provide a unified platform for managing cash and investments, integrating services may have limitations.
Affordable Loans by BHG Money
- Approval in as few as 24 hours
- Calculate your payment without impact on credit score.
- Business loans focused on the needs of busy professionals.
- Terms up to 12 years.
- Business loans typically range from $20,000 to $250,000.
FAQs
Are there any fees associated with CMAs?
The fees associated with CMAs vary depending on the financial institution. Some CMAs have no monthly fees or minimum balance requirements, while others may charge transaction fees, ATM fees, or other service fees. It's important to review the fee structure before opening an account.
Can I access my money easily from a CMA?
CMAs generally provide easy access to funds through features like debit cards, check-writing capabilities, and online banking.
What investment options are available within CMAs?
CMAs typically offer access to money market funds, mutual funds, stocks, bonds, and other securities. The range of investment options may vary depending on the financial institution.
Can I link external accounts to a CMA?
Some CMAs allow you to link external accounts, providing flexibility in managing your finances. Linking external accounts may enable you to transfer funds between accounts or view balances and transactions in one consolidated view.
Are CMAs suitable for long-term investing?
CMAs are primarily designed to provide a centralized platform for managing cash, transactions, and investments. While they may offer investment options if your primary objective is long-term investing, dedicated brokerage or retirement accounts may be more appropriate.
The bottom line
CMAs have emerged as powerful tools in personal finance management, offering individuals a comprehensive solution to streamline their cash holdings, conduct transactions, and explore investment opportunities. By combining the features of traditional checking and savings accounts with investment options, CMAs provide a centralized hub for individuals to maximize their financial potential.
Joy Wallet is an independent publisher and comparison service, not an investment advisor, financial advisor, loan broker, insurance producer, or insurance broker. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. They are not intended to provide investment advice. Joy Wallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. We encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Featured estimates are based on past market performance, and past performance is not a guarantee of future performance.
Our site doesn’t feature every company or financial product available on the market. We are compensated by our partners, which may influence which products we review and write about (and where those products appear on our site), but it in no way affects our recommendations or advice. Our editorials are grounded on independent research. Our partners cannot pay us to guarantee favorable reviews of their products or services.
We value your privacy. We work with trusted partners to provide relevant advertising based on information about your use of Joy Wallet’s and third-party websites and applications. This includes, but is not limited to, sharing information about your web browsing activities with Meta (Facebook) and Google. All of the web browsing information that is shared is anonymized. To learn more, click on our Privacy Policy link.
Images appearing across JoyWallet are courtesy of shutterstock.com.
Share this article
