Cash management account vs. high-yield savings account

Learn the differences between these two common account types

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Evaluating all the banking options available to you can feel overwhelming. When it comes to savings alone, you have several account types to choose from. In this article, we take a look at two of these accounts — cash management accounts and high-yield savings accounts — and how they differ.


Key insights

  • Cash management accounts and high-yield savings accounts are both deposit accounts that can help you grow your money faster than traditional savings accounts.
  • Cash management accounts carry some of the same privileges as checking accounts, while high-yield savings accounts typically have more limited functionality.
  • Cash management accounts are best for people who want to combine savings and checking features in one account, and who want that account linked to their brokerage. High-yield savings accounts are best for people who are only looking to safely save and grow their money.

What is a cash management account?

A cash management account (CMA) is a cash account often provided by brokerage firms and robo-advisors. CMAs are relatively new to the market, so their features are still evolving.

Cash management accounts typically aren’t offered by traditional brick-and-mortar banks. And it’s unlikely that you’ll be able to open, fund or receive support for a CMA face to face with its issuing institution; instead, this is usually based entirely online. Furthermore, the Federal Deposit Insurance Corporation (FDIC) does not directly insure these accounts, though many CMA providers will move CMA funds into partner banks that are FDIC-insured. The FDIC is an independent agency established by Congress to protect the integrity of the U.S. financial system, and it insures bank accounts up to $250,000 per depositor.

The money you deposit into a CMA can earn a relatively high interest rate compared with traditional savings accounts.

» MORE: Alternatives to savings accounts: where is the safest place to keep my money?

Pros and cons of cash management accounts

CMAs have both advantages and drawbacks. Make sure to evaluate both to determine if a cash management account is the better choice for you.

Pros

  • Higher interest rates than checking accounts
  • Can be linked to your brokerage account
  • Can be FDIC-insured

Cons

  • Comparatively limited returns
  • Lack of in-person customer service
  • May have limited access to cash

What is a high-yield savings account?

High-yield savings accounts (sometimes called HYSAs) provide higher interest rates than traditional savings accounts. Many of these accounts are offered by online banks, which don’t have the same overhead burden as brick-and-mortar banks. Money that would have been spent on maintaining physical branches is instead passed on to clients, resulting in higher annual percentage yields (APYs).

As with traditional savings accounts, these accounts can have minimum deposit requirements and may be subject to monthly withdrawal limits.

» MORE: What is a savings account and how does it work?

Pros and cons of high-yield savings accounts

Before deciding if you’re going to put your money in a high-yield savings account, weigh the pros and cons.

Pros

  • Higher interest rates than traditional savings accounts
  • FDIC insured
  • Easier access to and availability of cash

Cons

  • Possible withdrawal limits, depending on bank’s policy
  • May not come with debit card or check-writing options
  • Variable interest rates that can fluctuate

Differences between CMAs and HYSAs

While cash management accounts and high-yield savings accounts have some things in common, they also have some key differences. High-yield savings accounts can be offered by both traditional brick-and-mortar banks and credit unions and online-only banks, while CMAs are usually only offered by nonbank financial institutions. In addition, many CMAs come with check-writing privileges and debit cards, while HYSAs generally do not.

A high-yield savings account is usually insured directly at its issuing institution, while CMA funds are routed to your bank so they can be insured. This places the onus on you to understand where your funds are held and whether they’re properly insured.

CMA or HYSA: Which should you choose?

The best option for you depends on a few important factors.

A CMA is the better choice if you value accessing and withdrawing funds whenever you want and as frequently as you want. If you want the peace of mind of knowing exactly where your money is and that it’s directly insured by the FDIC, you’re better off with a high-yield savings account.

It’s important to also consider what type of account linking capability is better for you and how quickly you’d like to be able to move your funds. High-yield savings accounts are generally linked to a checking account, while CMAs can be linked to your brokerage account.

You’ll also want to consider the interest rate, which banking features you might want (e.g., debit card, checks) and how much access you’ll have to your money. For instance, a cash management account is likely a better choice if you want a debit card and easy ATM access.

» MORE: Best online savings accounts

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FAQ

Is it better to invest in a cash management or high-yield savings account?

Choosing a cash management or high-yield savings account is a matter of prioritizing convenience or customization. If you want the simplicity of handling all your banking and investing needs with the same institution, a brokerage-linked cash management account might be a smart choice. If you don’t mind working with multiple financial institutions to satisfy different banking needs, choose the best high-interest savings account you can find to securely grow your savings.

Does a cash management account or a high-yield savings account have better rates?

Top cash management accounts and high-yield savings accounts typically have comparable interest rates. Make sure to compare the two prior to opening an account.

Should I have both a cash management and a high-yield savings account?

Having both a cash management account and a high-yield savings account can be useful if each account offers an advantageous feature that the other doesn't. That said, it may not be worth opening both if their features largely overlap.

Bottom line

If you’re looking for a way to save money, cash management accounts and high-yield savings accounts are two good options. When deciding which is right for you, consider your short- and long-term goals and how you plan on using the account.

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