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Money

What is a cash management account?

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🗓️

Updated: January 23, 2024

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A cash management account, or CMA, is a banking product that combines the high interest of a high-yield savings account and the easy access of a checking account.

Cash management accounts are usually offered by non-bank financial institutions as an alternative to conventional banking services. There are a number of advantages to opening a CMA, but there are also a few trade-offs.

Here's how to determine if opening up this type of bank account is right for you.

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.

Pros and cons of a cash management account

Pros

Pros

  • 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.

Cons

Cons

  • To keep fees low, some cash management accounts may not staff as many customer support agents.

  • Certain cash management accounts may also charge a fee if you fail to maintain a minimum balance.

  • Not as good for long-term savings. Consider best high-yield savings account for your long-term savings — while still using a cash management account for shorter-term goals and daily spending.

Factors to look for when choosing your account

  1. 1.

    APY: Unsurprisingly, the APY of a cash management account is one of the most important factors since you want to ensure your idle cash earns as much as possible.

  2. 2.

    Minimum Deposit: These days, most cash management accounts have very low minimum deposit requirements. This is also why CMAs can be superior to money market accounts in some instances. But still check minimum requirements, including for other products and services the company in question offers in case you want to use more than just its cash management account.

  3. 3.

    Other Features: Features like free ATM withdrawals, online bill pay, and a debit card can make one cash management account better than others, even with slightly lower interest rates.

  4. 4.

    Fees: Monthly fees aren't always a dealbreaker. For example, paying for Aspiration Plus might be worth it for the higher APY. But factor in fees to the interest rate to see if it's really worth paying for.

  5. 5.

    Potential Bonuses: Robo-advisor and stock broker promotions are fairly common. Before opening an account, check to see if you can snag some free cash by becoming a new customer somewhere else.

5 best cash management accounts for 2024

Wealthfront Cash Account

APY: 4.55%

Minimum Deposit: $1

Fees: $0

Wealthfront is a leading robo-advisor that's known for its portfolio customization options and low management fees. But it also has one of the best cash management accounts that currently pays 4.55% APY and just has a $1 funding requirement. You don't pay any account fees either, and you get up to $5 million in FDIC insurance.

We also like Wealthfront's Cash Account since it provides checking and ATM features. Customers get a free debit card and can withdraw funds fee-free from 19,000+ ATMs. You can also pay bills, receive checks, and enjoy unlimited fee-free transfers to your external accounts.

If you're looking for a robo-advisor, Wealthfront is already an excellent choice. But its cash management account is excellent even if you're just looking for somewhere to hold your emergency fund or idle cash.

Empower Cash™

APY: 3.35% – 3.45%

Minimum Deposit: $0

Fees: $0

Empower is one of our favorite wealth management tools at Moneywise. For starters, it has plenty of free features like budgeting tools, a net worth tracker, and an investment fee analyzer. And if you invest at least $100,000, you can work with its advisory service to build a custom investment portfolio that matches your goals.

But Empower Cash, its cash management account, is also one of the most competitive accounts on the market even without the company's other features. It pays 3.35% APY to start and 3.45% APY for Empower Advisory clients. Plus, you get up to $2 million in FDIC insurance and don't pay any fees.

Empower Cash also supports joint accounts and an unlimited number of monthly transfers. Overall, it's one of the best cash management accounts as a standalone product, so the range of other features you can use only sweeten the deal.

Empower Personal Wealth, LLC (“EPW”) compensates Webpals Systems S. C LTD for new leads. Webpals Systems S. C LTD is not an investment client of Personal Capital Advisors Corporation or Empower Advisory Group, LLC.

Betterment Cash Reserve

APY: 2.25%

Minimum Deposit: $10

Fees: $0

Like Wealthfront, Betterment is a popular robo-advisor with a very competitive cash management account, Betterment Cash Reserve. This account pays 2.25% APY and doesn't charge any fees. You also get up to $1 million in FDIC† insurance or up to $2 million for joint accounts.

Betterment Cash Reserve also supports unlimited transfers like its main competitors. And if you want checking account features, you can explore Betterment Checking to make it easier to spend your funds and also earn cash-back rewards.

Betterment Cash Reserve APY Disclosure - Annual percentage yield (variable) is as of 9/26/2022. Cash Reserve is only available to clients of Betterment LLC, which is not a bank, and cash transfers to program banks are conducted through the clients’ brokerage accounts at Betterment Securities.For Cash Reserve (“CR”), Betterment LLC only receives compensation from our program banks; Betterment LLC and Betterment Securities do not charge fees on your CR balance.

Aspiration Spend and Save

Aspiration Spend & Save is a cash management account by Aspiration that's the best option if you're an eco-conscious consumer who also wants the highest interest rates. This account pays 3.00% APY for regular customers and 5.00% APY for Aspiration Plus customers. All customers also earn cash back for shopping at eco-friendly companies, and you get free ATM withdrawals at 55,000+ locations.

Aspiration has other eco-friendly features as well. For example, you can opt to plant a tree after every purchase by rounding up your purchase to the nearest dollar. And Aspiration also gives you an overall personal impact store so you can see how environmentally-friendly your spending habits are.

The regular plan uses a pay-what-is-fair model, so you choose how much to pay even if it's $0. As for Aspiration Plus, it costs $7.99 per month or $5.99 if you pay annually.

Fidelity

APY: 2.47%

Minimum Deposit: $0

Fees: $0

Fidelity is a leading online broker that lets you trade securities like stocks, ETFs, mutual funds, and bonds. Its cash management account currently pays 2.47% APY and doesn't charge any monthly fees. There's no minimum deposit requirement either, and you get up to $1.25 million in FDIC insurance.

This account also comes with a debit card and has check-writing capabilities as well. Fidelity also reimburses ATM fees at ATMs with a Visa, Plus, or Star logo.

Ultimately, this isn't the best cash management account if you just want the highest APY. But Fidelity is an excellent, commission-free online broker, so housing your cash management account and brokerage account under one roof might make sense.

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.

About our authors: faces of finance

Shane Murphy
Shane Murphy, Reporter

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.

His work has appeared on the Financial Post, MSN Money, and Yahoo Finance.

Tom Blake
Tom Blake, Staff Writer

Tom Blake is a personal finance blogger. His work has featured in Business Insider, Frugal Rules, MoneyCrashers, and a number of other financial blogs. When he’s not in Canada Tom lives as a digital nomad, writing from locales like Colombia and Dubai. You can connect with Tom at his blog This Online World.

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