Top reasons to open a cash management account

A cash management account, offered by brokerage and investment firms, is a financial option that blends checking and savings features into a single account. Yahoo Finance's Molly Moorhead offers insights into these accounts and highlights their potential advantages.

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This post was written by Angel Smith

Video Transcript

Well, I hope everybody out there has a checking and a savings account.

But have you ever heard of a cash management account?

It basically combines the features of a checking and savings account into a single account and typically offered at a brokerage or investment firm and it could streamline your banking to break this down for us.

We've got Yahoo Finance's very own Molly Moorhead here with more.

Hey, Molly.

Hey Brad, great to see you.

Um I think of these accounts as for people who have investment accounts at places like a vanguard or fidelity and so having Ac Ma lets them do their banking all in the same place.

And the account is gonna include a lot of the same features as a bank account, like a debit card check, writing, you can pay your bills out of the account and it's usually not gonna have any kind of monthly fee associated with it.

So what's the difference between a cash management account?

And uh of course, what we had seen historically, other accounts, checking and savings, particularly the main difference uh as you mentioned is that it's housed at a brokerage or an investment firm So you're not going down to your local bank branch to do your banking.

Um, but it also is gonna earn interest.

Uh, there are of course some interest bearing checking accounts out there, but it's not typical.

And then, um, this account acts like a, like a combo of checking and savings where at a bank, those would be two separate accounts.

So what are the pros and the cons of a cash management account?

Uh uh The cons I would say again, no in person banking, if you like to walk in and talk to a teller and ask about the different products available.

This is not um offered with this type of account.

It's really all managed online.

And uh another potential drawback is that you might find better interest rates at other places.

A high yield savings account at an online bank might pay a better a py than a cash management account.

Um But the pros are that they offer higher insurance limits.

So the FDIC insurance that you get with a bank account is capped at $250,000.

But with this account, the investment firm that manages it for you, partners with a bank to house the money and they can offer a higher uh FDIC limit.

So if you've got, you know, a high balance, all of your money will be insured.

And then again, I think it's that simplified all in one money management.

Uh You use the word streamline.

It just kind of lets you do everything from one place.

Yeah, we finance his own Molly.

Mohead.

Molly.

Thanks so much for helping us end off the show.

Strong here.

Appreciate it.