Some robo advisors that offer sweep accounts may even sweep funds into low-risk exchange-traded funds (ETFs). Funds in excess of a target brokerage account balance.Proceeds from the sale of securities in your portfolio.Dividend payouts that you choose not to reinvest.New deposits you aren’t ready to invest yet.Depending on the brokerage, you may be able to use a sweep account to hold: The goal is the same: helping you earn more interest on money you’re not actively investing. For example, instead of a money market deposit account, your uninvested cash may be swept to a money market mutual fund or a cash management account. Depending on the bank, you may or may not pay a fee to have a sweep account as part of your banking package.īrokerage sweep accounts operate along the same lines, though they can differ from bank sweep accounts in terms of where funds are transferred to. You can earn a steady annual percentage yield (APY) and the money remains easily accessible in case you need to transfer it back to your main account. If funds are swept into a high yield savings account or money market account, for example, that cash isn’t exposed to market volatility. At online brokerages, you may have the option to attach a sweep account to a taxable brokerage account or an individual retirement account. Regular sweep accounts offered by banks make it easy to earn interest on money, typically with little risk. Sweep accounts at banks can be linked to personal and business accounts. Types of Sweep AccountsĪs mentioned, you may be able to set up a sweep account at your bank or your brokerage. If you want to do more than just earn interest on unused cash, you may consider a cash management account in lieu of a sweep account. A cash management account may earn interest on deposits and if offered by an online brokerage or robo advisor, come with fewer fees than traditional bank accounts. Cash management accounts essentially combine features of checking accounts with savings accounts, in that you can use them to pay bills, transfer funds and make purchases or ATM withdrawals if they come with a debit card. Sweep accounts shouldn’t be confused with cash management accounts, which are also available at brokerages and robo advisors. You may be able to specify what target balance you’d like to maintain and when sweeps should occur. Transfers may be triggered when funds in your main account are above or below a certain threshold. For example, your sweep account may push unused cash into a money market mutual fund or money market deposit account. These accounts are designed to maximize funds that may be sitting idly by transferring or “sweeping” them into a higher yield investment option automatically. Consult with a financial advisor to make sure you’re squeezing maximum value out of every investment dollar you have.Ī sweep account is a special type of account that can be linked to a bank account or brokerage account.
If you have an opportunity to leverage a sweep account as part of your financial strategy, it’s helpful to understand how they work.
These accounts work by transferring unused funds into a high-yield savings or investment option at the end of each business day. Sweep accounts allow you to earn interest on money that you’re not actively saving or investing. Setting up a sweep account at your bank or online brokerage is one way to do it. When managing your personal finances, it’s important to make the best use of every dollar.
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