A cash management account (CMA) is an alternative to traditional checking and savings accounts that simplifies money management. It is a cash account that combines services and features that are similar to checking, savings, and/or investment accounts under one product. CMAs are typically offered by nonbank financial service providers, such as robo-advisors, online investment firms, and mobile trading apps. Some CMAs can provide high interest rates and reasonable or no fees thanks to low overhead that comes from online-only services. The specific features of a CMA vary depending on the financial institution, but some of the typical features, benefits, and drawbacks of cash management accounts include:
Pros:
- Fewer accounts to manage
- Potentially higher interest rates than standard bank accounts
- Benefits similar to checking and savings accounts
- Federal insurance on your account, often provided through third-party bank partners
Cons:
- Interest rates might be higher with online savings accounts or by investing
- Balances in CMAs are not FDIC-insured, but uninvested cash balances are eligible for FDIC insurance
- CMAs are not intended to replace your existing brokerage account, but rather to complement it
Most CMAs pay higher interest rates than traditional checking and savings accounts at many banks. While you might find higher rates at some banks, CMAs offer much of the flexibility of checking accounts, which often don’t pay interest. Cash management accounts are frequently provided by brokerage firms, and most make it easy to use the money in your cash management account to invest. CMAs also offer enhanced connectivity, as your account is linked to your investment account, allowing you to move funds quickly to take advantage of investment opportunities and automate your investments.
