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How does a cash management account work?

A cash management account lets you spend, earn and manage your money all in one place.

You’ll work with a single financial institution rather than several, and get fewer bank statements and tax forms each year.

You can instantly transfer funds between the savings and checking portions of your cash management account, so you’ll be able to use your deposits anytime you need them without extra hassle.

Most CMAs also come with a debit card so you can access your money on the go — like when you're at the grocery store. Many also offer rebates any time you get hit with an ATM fee.

Cash management accounts are insured by the FDIC, so your money will be safe even if your financial institution goes under.

In fact, some accounts offer as much as $2 million in FDIC insurance per depositor, which is eight times more than the coverage offered by most banks.

More: Aspiration Review: Online cash management account

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Pros of a cash management account

The benefits of a CMA can vary depending on which financial institution you work with, but many can offer benefits like:

  • Generating better interest on money stored, even up to 1.00% annual percentage yield (APY) — 11 times higher than interest on traditional bank accounts.
  • Earning cash-back rewards on all purchases — [sometimes up to 10%].(
  • Low-to-free monthly account fees.
  • Unlimited cash withdrawals and no ATM fees.

You could save hundreds of dollars per year in fees with a cash management account compared to a similar type of account from a traditional bank.

Cons of a cash management account

Cash management accounts are a great vehicle for saving and managing your money efficiently, but there are also a few trade-offs to using one.

To keep fees low, some cash management accounts may not staff as many customer support agents. That means you might have to wait a little longer to resolve statement errors.

And although the interest you’ll earn on your money with a cash management account is miles ahead of a conventional checking or savings account, you may want to look for the best high-yield savings account for your long-term savings — while still using a cash management account for shorter-term goals and daily spending.

Certain cash management accounts may also charge a fee if you fail to maintain a minimum balance, so make sure to investigate the terms and fee structure before you commit to an account.

More: Is putting money in a CD worth it?

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How to open a cash management account

Signing up for a cash management account is surprisingly easy — the whole process can usually be done at home using your computer or mobile device.

Opening an account can take just minutes, and involve a simple online form.

Once signed up, you’ll typically be emailed a softcopy of your debit card so you can start using it right away even before your plastic card comes in the mail.

If you’ve been looking for a way to simplify your banking, a cash management account is a great option.

You’ll have your checking and savings rolled into one convenient service, save hundreds in monthly banking fees, and boost your savings.

More: Get started with a cash management account from Aspiration

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About the Author

Shane Murphy

Shane Murphy


Shane is a reporter for MoneyWise. He holds a bachelor’s degree in English Language & Literature from Western University and is a graduate of the Algonquin College Scriptwriting program.

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