What a cash sweep account does

A cash sweep account is a bank or brokerage account that automatically moves money between two linked accounts based on rules you set. The most common version moves idle cash from your investment account into a money market fund or savings account when your balance rises above a certain level, then moves it back when you need it for trades or withdrawals. The "sweep" happens overnight or within a business day, without you having to do anything.

The purpose is to put your money to work instead of letting it sit in a non-interest-bearing checking account. Cash sitting in a brokerage account earns nothing. Cash in a money market fund or high-yield savings account earns interest. A sweep automates that shift so you don't have to move money manually every time your balance changes.

Sweep accounts are most common at brokerages—firms like Fidelity, Charles Schwab, and E*TRADE use them as a standard feature. Some banks offer them too, usually linking a checking account to a savings account. The mechanics vary by institution, but the idea is always the same: move money automatically to where it earns more.

Key Takeaways

  • A cash sweep moves money automatically between two linked accounts based on a balance threshold you set, usually overnight.
  • At brokerages, sweeps typically move uninvested cash into a money market fund so it earns interest instead of sitting idle.
  • At banks, sweeps often link a checking account to a savings account to avoid overdraft fees or earn interest on excess funds.
  • The interest rate or fund your cash sweeps into depends on your institution and account type, and rates change over time.
  • You can usually turn a sweep on or off, or change the threshold amount, through your account settings or by calling the institution.

How the sweep actually works at a brokerage

When you have a brokerage account, you deposit cash to buy stocks, bonds, or funds. That cash sits in a settlement account—a holding area—until you use it. At many brokerages, any cash you don't immediately invest gets swept into a money market fund or a sweep money market account (SMMA) overnight. The fund invests that cash in short-term, low-risk securities like Treasury bills and commercial paper, which pay interest.

You set a threshold, often $0 or a number you choose. When your uninvested cash balance exceeds that threshold, the sweep moves the excess into the fund. When you place a trade and need cash, the fund automatically sells shares to cover it, moving money back into your settlement account. This happens without you logging in or placing a request.

The interest rate your swept cash earns depends on which fund or account the brokerage sweeps into. Some brokerages sweep into their own proprietary money market fund; others sweep into a partner bank's savings account. Rates vary widely—from near zero to 4% or 5% depending on current market conditions and the institution. Check your brokerage's website or call to see which fund your cash sweeps into and what it currently pays.

How the sweep works at a bank

Banks use sweeps differently. A typical bank sweep links your checking account to a savings account. If your checking balance drops below a threshold (say, $500), the bank automatically transfers money from savings to checking to cover it. If your checking balance rises above a higher threshold (say, $5,000), the bank moves the excess into savings where it earns interest.

This protects you from overdraft fees and puts your money to work. Some banks also use sweeps to move money into a money market account or certificate of deposit (CD) if the balance gets very high. The thresholds and the destination account are set up when you open the account or through your online banking portal.

Bank sweeps are less common than they used to be, partly because checking accounts now often pay interest themselves. But they still exist, especially at regional banks and credit unions. Ask your bank whether sweep accounts are available and what the interest rates are on the destination account.

Interest rates and what you actually earn

The money your cash earns in a sweep depends entirely on where it sweeps into and what that investment or account pays. A money market fund at a brokerage might pay 4% to 5% in a high-rate environment, but only 0.01% in a low-rate environment. A bank's sweep savings account might pay 4% to 5% if it's a high-yield savings account, or 0.01% if it's a standard savings account.

Rates change constantly. The Federal Reserve sets the benchmark rate, and banks and brokerages adjust their rates in response. Check your account statements or log into your account to see what your sweep is currently earning. Many institutions also publish their current rates on their websites.

Some brokerages and banks charge fees for sweep accounts, though most do not. Read the fine print or ask directly. A fee can wipe out the interest you earn, especially if your balance is small.

Turning a sweep on, off, or changing it

Most institutions let you control your sweep through your account settings. You can usually turn it on or off, change the threshold amount, or choose a different destination fund or account. Log into your account online and look for "sweep settings," "cash management," or "account preferences." If you can't find it, call your bank or brokerage—they can make the change for you.

Some people turn off sweeps if they want to keep cash available for immediate trades without waiting for a transfer. Others change the threshold if they want to keep more or less cash uninvested. There's no penalty for making these changes, and they usually take effect within one business day.

If you're unhappy with the interest rate your cash is earning, you can ask your institution what other sweep options are available. Some brokerages let you choose between multiple money market funds. Some banks let you sweep into a CD or money market account instead of a savings account. Shop around if the rate matters to you.

Risks and things to watch for

A cash sweep is generally safe—your money is still yours, and it's still insured by the FDIC (at banks) or SIPC (at brokerages) up to the standard limits. The main risk is that you might not realize your cash has been swept into an investment, and you might not be able to access it instantly if you need it urgently. Money market funds are very liquid, but they're not checking accounts—a sale can take a business day to settle.

Another thing to watch: some brokerages sweep cash into their own money market fund, which may not pay the highest rate available. If rates are low, you might earn more by moving your cash to a high-yield savings account at a different bank. The difference can be small, but it adds up over time if you hold a large balance.

Finally, be aware that if your brokerage fails or your bank fails, your swept cash is still protected by insurance, but only up to the limits ($250,000 at FDIC banks, $500,000 at SIPC brokerages for cash). If you have more than that, some of it may not be covered.

Frequently Asked Questions

Can I access my swept cash immediately if I need it?

At a brokerage, money market funds are very liquid—a sale usually settles within one business day. At a bank, a transfer from savings to checking is instant. In either case, you should be able to access your money quickly, but not always instantly. If you need cash for an immediate trade, keep some uninvested in your settlement account.

Will I lose money if the money market fund goes down?

Money market funds are designed to hold a stable value of $1 per share, so they don't fluctuate like stock funds. However, they are not may provide, and in rare circumstances a fund can "break the buck" and lose value. This is extremely rare and has happened only a handful of times in history. Your cash is safer in a money market fund than in an uninvested brokerage account earning nothing.

What happens to my swept cash if I don't trade for months?

It stays in the money market fund or savings account, earning whatever interest that account pays. There's no time limit—your cash can sit there indefinitely. You can withdraw it or move it anytime without penalty.

Do I have to use a sweep account?

No. Most brokerages and banks offer sweeps as an option, but you can turn them off if you prefer to manage your cash manually. Some people do this if they want to keep all their cash in a checking account or if they prefer to move money themselves.

Can I choose which money market fund my cash sweeps into?

At some brokerages, yes. Fidelity and Schwab, for example, let you choose from multiple sweep options. At others, the brokerage picks the fund for you. Ask your institution what choices you have. If you're unhappy with the default, you may be able to switch.