Cash Sweep Accounts
Many brokerages do not leave your cash sitting idle. Instead, they automatically “sweep” it into an interest earning place. That can be great, but it helps to understand what your cash is actually sitting in.
What “cash sweep” means
The simple version:
Cash sweep means your brokerage automatically moves idle cash into an interest earning position, then moves it back when you need cash for trades or withdrawals.
You usually do not have to do anything. The sweep is the default behavior.
Where the cash can be swept
Some brokerages sweep cash into partner bank deposits. This often behaves like bank cash.
Insurance can be FDIC, depending on the setup.
Some brokerages sweep cash into a money market fund. It aims to be stable, but it is an investment, not a bank deposit.
Protections and rules differ from FDIC.
Why this matters
Both can earn interest. They just have different rules, protections, and sometimes different timing for moving cash out.
Why availability can feel weird
You may be able to trade with cash before you can withdraw it.
Sales and transfers can take business days to fully settle.
Bank deposits and investment funds do not have identical insurance rules.
Common misunderstanding
A brokerage is not a bank, even when it offers “cash management.” Expect investing style timing, not instant bank style access.
Teen friendly rule:
Keep your “need it any day” money in a real bank account. Brokerage cash is best for investing money.
What to check in your brokerage
What your cash is swept into, bank deposits or a money market fund
Whether the sweep is automatic, and whether you can change the sweep option
How long transfers typically take, and whether there are holds
What protections apply to your swept cash, and where to find that info
Key Takeaway
Cash sweeps help idle brokerage cash earn interest automatically. The tradeoff is that brokerage cash can follow investing rules for timing and protections. Know what your cash is swept into, and keep everyday spending money in a bank account.