What Is Brokerage Cash? And How Should I Use Mine? (2024)

So you've piled up a bit of cash in your brokerage account. Maybe you bought low and sold high, transferred funds from a bank, or haven't reinvested your dividends. You've got cash—and this a good problem.

Before making plans for that little sum of green—which may be titled brokerage cash in your statements— you have to figure out what is yours to use immediately. Then you can have fun.

Key Takeaways

  • Brokerage cash is a top-line cash total in your investing account. It's the cash amount before stripping out items like unsettled trades and collateral.
  • Not all of your brokerage cash is immediately available for trading or withdrawing. That would be a bottom-line number which may be called buying power, cash available for withdrawal, or something similar.
  • Cash in these accounts can be parked to collect interest, reinvested, or withdrawn for paying bills.

Brokerage cash for some may be categorized as found cash—that surprise stash that piled up as you weren't watching. Others might carefully nurture it, monitoring assets from stock sales, dividends, and transfers. You can let it ride and collect a bit of interest, take it out and spend it, or invest it.

Whatever you choose, you have to know what's yours to spend. And brokerage cash, as it's labeled in the Robinhood app, isn't necessarily available to spend at that moment. That's because the brokerage cash line is a top-line number, meaning you have to strip out some things like funds from unsettled trades and collateral before arriving at a sum that you can spend. Brokerage cash is a tricky number; it's not the same as money in your wallet.

Keep looking in your account and you'll find the true bottom line, the amount you can spend immediately. Schwab calls it “cash available for withdrawal.”

Now that you know what's yours, the time is here to figure out what to do with it. What you do of course depends on factors like how much you have in that bottom-line account as well as your immediate needs—like bills or vacations—and long-term requirements or time horizon. Since everyone's needs are different, the following are some rough guidelines for what to do with your brokerage cash.

Buy More Stocks, Bonds, ETFs

If your appetite for risk means that you can afford short-term dips in pursuit of long-term gains, then keep investing for growth. If you make a gain on a stock sale, then put it back into the market. If you're getting dividends, opt to have them reinvested, and they won't pile up in your brokerage account.

Put the Cash in a Short-Term Debt Instrument

Do you think you'll need the money soon? But not immediately? Some financial experts recommend putting your brokerage cash into a so-called ultra-short bond fund. Ultra-short bond funds hold fixed-income securities that typically mature in less than one year and pursue higher yields by investing in riskier securities than traditional bond funds. In high-interest-rate environments, ultra-short bond funds of certain types may be extra susceptible to losses.

Leave It Alone

You can let it sit. Yes, keep your powder dry. It will be there when you need it. In most cases, it'll be swept into an FDIC-insured account. Still, the problem is you'll earn interest equivalent to that of a bank savings account. Pretty crummy, but it'll be there.

Spend It

Most brokerages will let you pay bills with your brokerage cash. Charles Schwab, Interactive Brokers, and many others permit this, and you just need to set up a payment account. Or spend it on your vacation, or get some nice shoes. Go ahead—it's your money.

What's the Difference Between Brokerage Cash and Buying Power?

Brokerage cash is a top-line cash total in your investing account. It's the cash amount before stripping out items like unsettled trades and collateral. Buying power is the bottom-line amount of cash available to you immediately. It might be called "cash available for withdrawal" or some variant on that.

What Are Some Examples of Low-Risk Things To Do With Brokerage Cash?

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. Ultra short-term funds are another low-risk option.

Can Bills Be Paid With Brokerage Cash?

They sure can. Users just need to set up a cash management account with the brokerage.

The Bottom Line

Brokerage cash can be seen as found money—it might slowly accumulate over the years through dividends and stock sales. It can be reinvested or left alone to wait for the next investing opportunity. Another option is to set up a cash management account and pay bills with the cash. Or have some fun and go on vacation!

What Is Brokerage Cash? And How Should I Use Mine? (2024)

FAQs

How do you spend brokerage cash? ›

Brokerage cash can be seen as found money—it might slowly accumulate over the years through dividends and stock sales. It can be reinvested or left alone to wait for the next investing opportunity. Another option is to set up a cash management account and pay bills with the cash. Or have some fun and go on vacation!

What is brokerage cash in Robin Hood? ›

Uninvested brokerage cash is any available cash that you have in your individual investment account that you have not yet invested or spent. This money is what is swept (or moved) to program banks where it starts to earn interest. For those with a Robinhood Gold account, this doesn't include margin.

Can I cash out my brokerage cash? ›

Can you pull money out of a brokerage account? Yes, you can pull money out of a brokerage account with a bank account transfer, a wire transfer, or by requesting a check. You can only withdraw cash, so if you want to withdraw more than your cash balance, you'll need to sell investments first.

How do you use brokerage? ›

You deposit cash in a brokerage account and use the funds to purchase investment assets like stocks, bonds, mutual funds and exchange-traded funds (ETFs). Brokerage accounts are used for day trading to earn short-term profits, as well as investing for long-term goals.

How do I transfer my brokerage cash to my bank account? ›

To transfer funds to your bank from your individual investing account:
  1. Go into your Cash tab.
  2. Tap Transfer.
  3. Tap Transfer to Your Bank.
  4. Select the external bank account you want to move funds to.
  5. Input the amount you want to transfer to your bank.

How long does it take for brokerage cash to become withdrawable cash? ›

Proceeds from selling a stock or security will settle in your brokerage account 2 business days after the sale. Once the proceeds from your sales have settled, they will be available to withdraw.

How do I cash out my Robinhood brokerage cash? ›

To withdraw money from Robinhood to your bank account, simply follow these steps: Open the app, go to the menu, select “Transfers,” choose “Transfer to Your Bank,” enter the amount you wish to withdraw, review the details, and confirm.

Why can't i pull out my brokerage cash Robinhood? ›

Following a sale in your investing or retirement account for equities or options, the transaction usually needs to settle before you can withdraw the proceeds to your bank account. The settlement period for equities is the trade date plus 2 trading days (T+2), sometimes referred to as regular-way settlement.

How to turn brokerage cash into withdrawable cash Robinhood? ›

How To Withdraw Buying Power From Robinhood To Bank
  1. Step 1: Open the Robinhood App or Website. ...
  2. Step 2: Log in to Your Account. ...
  3. Step 3: Navigate to the Account Menu. ...
  4. Step 4: Select "Transfer" ...
  5. Step 5: Choose "Transfer to Your Bank" ...
  6. Step 6: Enter Transfer Details. ...
  7. Step 7: Confirm and Submit. ...
  8. Step 8: Wait for Processing.
Oct 20, 2023

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

In the context of fund withdrawals, trade settlement is when proceeds from a trade convert to cash that can be withdrawn. If you have not made a trade or your trades have already settled then there may be a withdrawal hold due to anti-money laundering rules/regulations, see below.

Is brokerage cash taxable? ›

Many people falsely believe that any gains or income earned in a taxable brokerage account are not taxable until withdrawn, but that isn't the case. You'll pay taxes on brokerage account income in the tax year you earn it.

How long does it take for brokerage cash to be transferable? ›

How long does a brokerage transfer take? A brokerage account transfer typically takes up to 10 business days. This is dependent on a few factors, including the firm you're transferring from.

What is the biggest disadvantage of a brokerage account? ›

Cons of Brokerage Accounts
  • May Charge Fees. You are likely to encounter a variety of fees when you open a brokerage account and purchase investments. ...
  • They're Taxable. ...
  • They Involve Risk. ...
  • May Have Minimum Deposit and Balance Requirements.
Sep 16, 2023

When should you use a brokerage account? ›

For example, if you want to buy a house with cash or save up a very large down payment, a brokerage account might be a good option if you plan to save for about five years. But for savings goals that will take less than five years, you might want to use a regular savings account or a money market account.

What is the best brokerage to use? ›

Best Online Brokerage Accounts and Trading Platforms of 2024
  • Best Overall: Fidelity.
  • Best for Low Costs: Fidelity.
  • Best for Beginners: Charles Schwab.
  • Best for Advanced Traders: Interactive Brokers.
  • Best for ETFs: Fidelity.
  • Best for Options Trading: tastytrade.
  • Best for International Trading: Interactive Brokers.

Can I spend money from my brokerage account? ›

In brokerage accounts, not only can you invest in stocks, bonds and funds, you can often use the account as an omnibus financial account. In other words, you can write checks and pay bills with your account, often while collecting interest, too.

Should you keep cash in brokerage account? ›

Holding cash here is appropriate if you plan to spend the money within a few days or would like to quickly place a trade. Assets in your brokerage account are protected up to $500,000 per investor, including a maximum of $250,000 in cash by SIPC in the event a SIPC-member brokerage fails.

Can you cash out brokerage cash on Robinhood? ›

Following a sale in your investing or retirement account for equities or options, the transaction usually needs to settle before you can withdraw the proceeds to your bank account. The settlement period for equities is the trade date plus 2 trading days (T+2), sometimes referred to as regular-way settlement.

Why is my brokerage cash not withdrawable Robinhood? ›

Why can't I withdraw money from Robinhood? You probably can't withdraw money from Robinhood because your funds are unsettled. You can only withdraw “settled funds”, money that hasn't been transacted with in the last 2 business days. This is known as Robinhood Withdrawable Cash.

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