Don’t Lose Interest: Managing Cash in Your Brokerage Account (2024)

You probably wouldn’t dream of leaving piles of cash lying around your home. But many investors end up doing this with cash in their brokerage accounts. Uninvested cash is a potentially valuable part of your investment portfolio. So it pays to pay attention to it, especially when interest rates move up or down. You should know the facts about your uninvested cash, the different cash management programs available and questions to ask.

What Is a Cash Management Program?

When you open a brokerage account, a firm typically asks you to select a cash management program for uninvested cash in your account. You may have cash that’s not invested because you deposited money in your account, you received cash dividends or interest, or you sold one or more of your investments.

A cash management program ensures that your uninvested cash is available to you when you’re ready to invest it or use it for something else, like paying bills. Some cash management programs let you pay your expenses directly or provide you with a debit card and check writing.

These funds can accumulate slowly, so you might not initially notice. But what happens to the cash in your account when you’re not using it?

Options for Managing Your Cash

Typical options for your uninvested cash include leaving it in your brokerage account, “sweeping” (automatically transferring) it to a bank deposit account as part of a bank sweep program, or sweeping it to a money market mutual fund as part of a money market sweep program. Many full-service brokerage firms offer only a bank sweep program, which can pay far less interest than a money market mutual fund account. Bank sweep programs do provide FDIC insurance up to the $250,000 limit per customer.

Uninvested cash left in your brokerage account is known as a “free credit balance.” Firms may or may not pay you interest on your free credit balance.

In a sweep program, a firm sweeps your uninvested cash each day from your brokerage account into a deposit account at a bank or a money market mutual fund. Firms typically pay you interest on your cash that’s part of a sweep program.

Note that you can always move your uninvested cash in search of higher interest rates. That’s true even if you’ve been automatically enrolled in your firm’s default cash management program. Just because you’re currently in your firm’s default option doesn’t mean you can’t explore other alternatives.

Exploring other options often makes sense because interest rates can vary widely depending on the particular cash management program or firm. Interest rates for money market funds, bank sweep programs and free credit balances sometimes are nearly the same; other times, particularly in a higher interest rate environment, the difference between their interest rates can be as much as 5 percent. You also may decide to invest your cash in securities or withdraw the available funds to invest elsewhere or use for other purposes. Researching the opportunities available will help you make an informed decision.

Understanding Your Uninvested Cash

When evaluating what to do with your uninvested cash, consider the following:

  • How much uninvested cash is in my brokerage account?
  • What cash management program am I in?
  • What other alternatives are available to me?
  • Which alternative offers the highest interest rate?
  • Is FDIC insurance important to me?

To find the answers to most of these questions, check your brokerage account agreement or account statement to see which program you’re in and how much uninvested cash you have. Or discuss your uninvested cash and your options with your registered financial professional.

Also consider these funds in the context of your overall financial planning. Do you need this cash in the short-term or could you use it to support your long-term goals?

Many investors think of cash management programs as short-term resting places, but their uninvested cash often ends up staying there far longer than planned. Make sure your cash is in the best place for you, whether that means maximizing your interest rate or other considerations.

Don’t Lose Interest: Managing Cash in Your Brokerage Account (2024)


Does cash in a brokerage account earn interest? ›

A brokerage account. Uninvested cash from this type of account earns interest and is available for investing or managing expenses. Holding cash here is appropriate if you plan to spend the money within a few days or would like to quickly place a trade.

Is it better to keep money in brokerage account? ›

If you've got a large chunk of cash, you might secure better returns outside of a brokerage account. You could lose money. If your money is swept into a money market fund, that cash won't be insured by the FDIC or SIPC. It's possible to lose money.

Can I leave cash in my brokerage account? ›

Investors can leave the money where it is and it will earn a tiny rate of interest similar to that of a bank savings account. Still, it will be insured if it's swept into an FDIC-covered account.

What is the interest rate for brokerage cash sweep? ›

The brokerage cash sweep annual percentage yield (APY)* paid by program banks minus fees paid to Robinhood is 1.5% as of August 11, 2022, or 5% for Robinhood Gold members as of Nov 15, 2023. The APY your cash earns is subject to change. *The non-Gold cash sweep program APY will switch to 0.01% in May 2024.

Does Charles Schwab pay interest on cash in brokerage account? ›

Interest Feature

Pays interest on uninvested cash in the brokerage account. Available to non-retirement accounts. Detailed information can be found in the Cash Features Disclosure Statement available on Not FDIC insured.

What brokerage pays the most interest on cash? ›

Best for Free Trading: Robinhood

With Robinhood Gold, you can earn 4.9% on your uninvested cash, compared to just 1.5% with a free Robinhood account. To use the program, you must opt-in to cash sweep on the app, which increases your Federal Deposit Insurance Coverage (FDIC) coverage up to $1.5 million.

Is it safe to keep more than $500000 in a brokerage account? ›

They must also have a certain amount of liquidity on hand, thus allowing them to cover funds in these cases. What this means is that even if you have more than $500,000 in one brokerage account, chances are high that you won't lose any of your money even if the broker is forced into liquidation.

Do billionaires use brokerage accounts? ›

Self-directed brokerage account

Some billionaires may use this account because they enjoy researching companies and making stock picks, maintaining investment privacy, managing their own risks, and the low fees that are associated with these accounts.

What should I do with cash in my brokerage account? ›

Typical options for your uninvested cash include leaving it in your brokerage account, “sweeping” (automatically transferring) it to a bank deposit account as part of a bank sweep program, or sweeping it to a money market mutual fund as part of a money market sweep program.

How much cash should you keep in a brokerage account? ›

Cash and cash equivalents can provide liquidity, portfolio stability and emergency funds. Cash equivalent securities include savings, checking and money market accounts, and short-term investments. A general rule of thumb is that cash and cash equivalents should comprise between 2% and 10% of your portfolio.

Why can't I withdraw all my brokerage cash? ›

The main reason is that your money is presumably invested and not available as cash. Fortunately, it's not too difficult to get the hang of this process. Once you learn how to withdraw money from a brokerage account, you'll be able to access your money when you need it.

What are the cons of cash sweep? ›

Drawbacks of an Insured Cash Sweep account

Some ICS accounts charge a monthly fee, while others simply take a portion of the interest earned on your sweep account. You may not earn interest on your full deposit (or at all).

Does Fidelity pay interest on cash balances? ›

A benefit of the core position is that it allows you to earn interest on uninvested cash balances. Interest is calculated on a daily basis and is credited on the last business day of the month.

Does Vanguard pay interest on cash? ›

Any cash in your account will earn interest daily and will normally be paid into your account on the first working day of the month.

What happens when you put money in a brokerage account? ›

A brokerage account is an investment account that allows you to buy and sell a variety of investments, such as stocks, bonds, mutual funds, and ETFs. Whether you're setting aside money for the future or saving up for a big purchase, you can use your funds whenever and however you want.

Does TD Ameritrade pay interest on cash in brokerage account? ›

Interest on cash: TD Ameritrade clients do not earn any interest on cash held in their accounts by default. Clients have to opt into TD Ameritrade's cash sweep program to earn interest on idle cash.

Does Fidelity brokerage cash earn interest? ›

Yes, the Fidelity Cash Management Account pays interest. It currently has a 2.72% APY, which is much higher than the national average interest checking rate of March 18, 2024, according to the FDIC).

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