What is a cash management account?

A cash management account (CMA) is a cash account that combines the features of a traditional checking account and a savings or investment account into one convenient package. Typically offered by non-bank financial service providers like robo-advisors and brokerage firms, these versatile accounts aim to be an all-in-one option for handling your cash.

Let’s dig into more of the details to help you fully understand the answer to “What is a CMA account?”

Cash management account purpose

The primary purpose of a cash management account is to provide a more efficient way to manage your money by combining various financial services into a single account. CMAs offer the convenience of a checking account for daily transactions, the higher interest rates of a savings account, and the potential investment returns of a brokerage account.

With a cash management account, you can deposit your paycheck, pay bills, make purchases with a debit card or checks, and earn interest on your balance, all from one centralized account.

Many cash management accounts also offer features like ATM access, mobile banking, and FDIC insurance, often with much higher coverage than traditional bank accounts.

How do cash management accounts compare to other accounts?

When evaluating whether a cash management account is right for you, it's helpful to understand how they stack up against other common financial account types.

Cash management account vs. checking account

Cash management accounts generally offer higher interest rates and returns on excess funds compared to traditional checking accounts. Both account types typically provide essential features like bill pay, spending tools, debit cards, and ATM access. However, checking accounts may offer more extensive branch access, while CMAs prioritize a robust digital experience.

Additionally, CMAs may have higher minimum opening requirements compared to many checking accounts.

Cash management account vs. high yield savings account

Interest rates offered by CMAs can be comparable to high-yield savings accounts. However, CMAs provide additional checking features like bill pay, debit cards, and check writing that most savings accounts do not offer. Savings accounts, on the other hand, can serve as a dedicated bucket for goal-oriented saving. CMAs often have higher FDIC/SIPC insurance limits compared to savings accounts.

Cash management account vs. money market account

Both cash management accounts and money market accounts generally offer higher interest rates than checking accounts and provide ATM/debit card access. Some money market accounts also offer check-writing capabilities. Investment options may be more diverse with CMAs depending on the institution. Additionally, insurance coverage limits are often higher with CMAs compared to money market accounts.

Brokerage vs. cash management account

A brokerage account is designed for investing in securities like stocks and bonds, focusing on long-term growth. In contrast, a cash management account combines features of a checking and brokerage account, allowing you to hold cash, earn interest, and invest within a single account.

How do cash management accounts work?

When you open a CMA account, you'll fund it much like a regular checking account through direct deposit, mobile check deposit, electronic transfers, and other standard methods. This serves as your primary account for handling incoming and outgoing money.

One of the key features of a cash management account is what happens to your money once it's in the account. Many CMAs automatically transfer or "sweep" any balance over a certain threshold into an investment vehicle, typically a low-risk option like a money market mutual fund. This allows your excess cash to consistently earn a return without requiring constant monitoring and manual transfers on your part. When you need to access those funds, they remain liquid and easily accessible.

Additionally, many CMAs offer overdraft protection. If a large expense causes your balance to dip below zero, the account will automatically pull from your linked investment funds to cover the shortage, helping you avoid costly overdraft fees.

In terms of everyday banking capabilities, cash management accounts generally provide features like online and mobile account access, bill pay, money transfers, debit cards and/or checkwriting, and ATM access (often with rebates for any fees incurred). The financial institutions offering CMAs partner with chartered banks to provide these traditional services and FDIC insurance, frequently with much higher coverage limits compared to standard bank accounts.

Pros and cons of cash management accounts

What are cash management account benefits?

Cash management accounts offer several compelling advantages for consumers looking to optimize their money management:

1. Streamlined finances: CMAs allow you to handle checking, saving, and investing from a single account, simplifying your financial life and reducing the need to manage multiple accounts across different institutions. This streamlined approach can save you time and effort in tracking your money.
2. Higher interest rates: Cash management accounts typically offer higher interest rates compared to traditional checking and savings accounts, helping your money grow faster. These higher rates can help you maximize your earnings on idle cash.
3. Automatic investing: Many CMAs sweep excess cash into low-risk investment vehicles like money market funds, keeping your money productive without requiring constant attention. This automated investing feature can help you put your money to work without the need for manual intervention.
4. Extensive ATM access: Most cash management accounts provide access to a wide network of ATMs, often with fee reimbursements, making it convenient to withdraw cash when needed. This extensive ATM access ensures that you can easily access your money wherever you are.
5. Enhanced FDIC insurance: CMAs frequently offer FDIC insurance coverage well beyond the standard $250,000 limit (by working with partner banks), providing added peace of mind for your deposits. This enhanced insurance can be particularly beneficial for those with larger cash balances.

What are the drawbacks of a cash management account?

While cash management accounts have many benefits, there are some potential downsides to consider:

1. High minimum deposits: Some CMAs require a substantial minimum deposit to open an account, which may be a barrier for those just starting to save and invest. These higher minimum requirements can make it challenging for some individuals to access the benefits of a CMA.
2. Limited physical branches: Many CMA providers operate primarily online and may not have an extensive network of physical branches for in-person banking needs. This limitation can be inconvenient for those who prefer face-to-face interactions or need to handle complex transactions in person.
3. Variable rates and fees: Interest rates and fee structures can vary significantly between CMA providers, requiring careful comparison shopping to find the best fit. These variable rates and fees can make it challenging to compare options and find the most advantageous account for your needs.

How to choose a cash management account

When selecting a cash management account, it's essential to consider your specific financial needs and priorities. Here are some key factors to evaluate:

• Fees and minimum requirements: Compare the fees and minimum balance requirements associated with different CMA providers. Look for accounts that align with your financial situation and offer competitive fee structures.
• Interest rates: Evaluate the interest rates offered by various CMAs and consider how they compare to other high-yield account options. Keep in mind that rates can fluctuate over time.
• ATM access and fees: If you frequently need to withdraw cash, look for a CMA with a wide network of ATMs and fee reimbursements to minimize costs.
• Insurance coverage: Verify the level of FDIC or SIPC insurance provided by the CMA provider, especially if you plan to maintain a high cash balance.
• Investment options: If you're interested in leveraging the investment features of a CMA, review the types of investment vehicles offered and ensure they align with your goals and risk tolerance.
• Integration with other financial tools: Consider how easily the CMA integrates with your existing financial management tools, such as budgeting apps or accounting software.
• Customer support: Evaluate the quality and accessibility of customer support offered by the CMA provider, particularly if you anticipate needing assistance with account management or technical issues.
• User reviews and ratings: Read user reviews and ratings to gauge the experiences of other customers with the CMA provider, paying attention to factors like ease of use, responsiveness, and overall satisfaction.
• Security features: Assess the security measures implemented by the CMA provider to protect your financial information and prevent unauthorized access to your account.

By carefully weighing these factors and comparing the features and benefits of different cash management accounts, you can find the most suitable option for your unique financial situation and goals.

Is a cash management account right for you?

Ultimately, whether a cash management account is the right choice depends on your unique financial situation and priorities.

A cash management account may be a good fit if you:

• Prefer a centralized account for daily banking and investing
• Tend to maintain a high cash balance in checking or low-yield accounts
• Want to maximize your return on idle funds
• Value a seamless digital banking experience
• Desire higher FDIC coverage for your deposits
• Are comfortable conducting most banking activities online or through a mobile app

Conversely, a cash management account may not be the ideal solution if you:

• Heavily rely on in-person banking services and local branch access
• Frequently need to deposit physical cash
• Prefer to keep different types of accounts strictly separated
• Seek a wide variety of specialized investment options beyond cash equivalents

Turn idle cash into working capital with automated treasury management

Managing business cash effectively is harder than it should be. You're likely juggling multiple bank accounts, manually moving money between them, and watching cash sit idle while you focus on more pressing tasks. Meanwhile, that dormant cash could be earning returns—but who has time to constantly monitor rates and shuffle funds around?

Ramp's automated cash management features tackle these exact pain points. The platform's treasury management capabilities let you automatically sweep excess cash from your operating accounts into higher-yield savings or money market accounts. You set the rules—like maintaining a minimum balance for operations—and Ramp handles the rest. No more logging into multiple banking portals or setting calendar reminders to move funds.

Real-time cash flow visibility changes the game for optimization decisions. Ramp consolidates all your accounts into a single dashboard, showing you exactly where cash sits across your business at any moment. This bird's-eye view helps you spot patterns, like recurring periods of excess cash that could be earning returns instead of sitting idle. For instance, if you notice cash regularly builds up between payroll cycles, you can set automated rules to invest those temporary surpluses.

The platform's intelligent forecasting takes optimization further by predicting future cash positions based on your historical patterns. This means you can confidently invest longer-term without worrying about liquidity crunches. When Ramp projects you'll have excess cash for the next 30 days, you can move those funds to higher-yield instruments rather than keeping everything in low-interest checking accounts "just in case." These automated features transform cash management from a time-consuming chore into a strategic advantage, helping you maximize returns without sacrificing liquidity or operational flexibility.

How Ramp's automated cash management helps you earn more on idle funds

Managing business cash effectively is harder than it should be. You're likely juggling multiple bank accounts, manually moving money between them, and watching potential returns slip away while funds sit idle in low-yield checking accounts. Meanwhile, your team spends hours each week on cash management tasks that could be automated.

Ramp's automated cash management features tackle these challenges head-on. The platform automatically sweeps excess cash from your operating accounts into higher-yield savings options, ensuring your money works as hard as your business does. Instead of manually monitoring account balances and initiating transfers, you can set custom rules that move funds based on your cash flow patterns and minimum balance requirements. This means you're always maximizing returns without risking overdrafts or missing payment obligations.

The real-time cash flow visibility Ramp provides transforms how you manage liquidity. You can see all your accounts in one dashboard, track incoming and outgoing payments, and forecast future cash positions with accuracy. This comprehensive view helps you make smarter decisions about when to invest excess cash and when to keep it readily available. For businesses with complex payment cycles, this visibility is invaluable—you can optimize cash positions daily rather than relying on weekly or monthly reconciliations.

By automating these traditionally manual processes, finance teams save significant time while capturing returns they'd otherwise miss. One finance manager might spend 5-10 hours monthly on cash management tasks that Ramp handles automatically. That recovered time can focus on strategic initiatives while your idle cash generates meaningful returns through optimized placement. The combination of automation and visibility ensures you're never leaving money on the table.

Maximize your operating cash with Ramp Treasury

Open a free Ramp Treasury account in under a minute and earn a competitive 2.5% APY with FDIC insurance up to millions of dollars. Free, same-day ACH lets you extend vendor payment terms and schedule bills to be paid precisely when due—avoiding fees and strengthening vendor relationships.

Beyond automated cash management, Ramp's spend management platform delivers the complete financial toolkit: corporate cards, expense management, bill pay, and accounting integrations. You'll save an average of 5% through reduced time and money spent on manual processes.

_{1) Ramp Business Corporation is a financial technology company and is not a bank. All bank services provided by First Internet Bank of Indiana, Member FDIC.}

_{2) Get up to 2.5% in the form of annual cash rewards on eligible funds in your Ramp Business Account. Cash rewards are paid by Ramp Business Corporation and not by First Internet Bank of Indiana, Member FDIC. Cash rewards are subject to change. See the Business Account Addendum for more information.}

_{‍3) Customers with a Ramp Business Account can use the ICS service provided by IntraFi Network LLC. Ramp is a financial technology company, not an FDIC-insured depository institution. Banking services are provided by First Internet Bank (FIB), member FDIC. Subject to the terms of the applicable ICS Deposit Placement Agreement, FIB will place deposits at FDIC-insured institutions through IntraFi’s ICS service. A list identifying IntraFi network banks appears at https://www.intrafi.com/network-banks. Certain conditions must be satisfied for “pass-through” FDIC deposit insurance coverage to apply. To meet the conditions for pass-through FDIC deposit insurance, deposit accounts at FDIC-insured banks in IntraFi’s network that hold deposits placed using an IntraFi service are titled, and deposit account records are maintained, in accordance with FDIC regulations for pass-through coverage. Deposits are insured by the FDIC up to the maximum allowed by law; deposit insurance only covers deposits in the Ramp Business Deposit Account in the event of the failure of the FDIC-insured bank.}