Cash Management Account
A cash management account (CMA) is a brokerage-style account designed to function like a high‑utility checking/savings hub at a broker. It often combines cash sweeps (to earn some yield) with features like a debit card, bill pay, and ATM access. Exact features, yields, and protections depend on the firm.
The core idea (in plain English)
You keep cash (and sometimes a limited set of cash-like investments) at a brokerage, and the broker ‘sweeps’ idle cash into partner banks or money market funds to try to earn interest.
Think of it as a bridge between day‑to‑day spending and investing — more flexible than a traditional savings account, but not always as straightforward as a bank checking account.
Common features (varies by provider)
- FDIC sweep program to one or more partner banks, or a money market sweep
- Debit card and ATM access (sometimes with fee reimbursements)
- ACH transfers, direct deposit, and bill pay
- Online/mobile banking-style tools
- Optional linking to a brokerage account for investing
How taxes typically work
Interest
Interest from a bank sweep is generally taxed as ordinary income.
If a money market fund is used, distributions are also commonly ordinary income (and may include state-tax nuances depending on the underlying holdings).
Benefits
- Convenient place to park short-term cash while staying close to your brokerage
- Potentially higher yield than a typical checking account (not guaranteed)
- Good for budget ‘buckets’ (cash buffer, upcoming bills, near-term goals)
Tradeoffs and common pitfalls
- Yield can change quickly; promotional rates may expire.
- Protections differ: FDIC applies to bank deposits; SIPC applies to brokerage custody (not market losses).
- Some providers use money market sweeps that can have small price/yield risks compared to insured deposits.
- Withdrawal/transfer timing and ATM fee policies vary.
If you want a flexible hub for cash that stays close to your investing accounts, a cash management account can be useful — but confirm the sweep type (bank vs money market), the current yield, fees, and what protections apply.
Educational only. Always confirm eligibility, limits, and plan rules with IRS guidance or plan documents.