If you’re a savvy DepositAccounts.com reader, you may be a bit skeptical about the proliferation of online-only “cash management” accounts. Offering sky-high APYs with no strings attached, you may see them as just another flashy sales tactic deployed by upstart financial institutions eager to attract new customers.
But now might be the time to take a closer look at cash management accounts, or hybrid accounts, as they’re sometimes called. Cash management accounts offer big advantages: high interest rates coupled with the convenient liquidity of a checking account.
You may not want to use one of these accounts for longer-term saving goals, as certificates of deposit and even some high-yield checking accounts can offer better APYs. But if the low interest earned by your traditional checking account is getting you down, you should take a long, hard look at the cash management accounts below.
Cash management accounts vs traditional checking: What’s the difference?
In terms of how the customer uses them, there's very little difference between a cash management account and a traditional checking account. Customers use debit cards, ATMs and paper checks to access funds in cash management accounts, just like they would with a traditional checking account.
Behind the scenes, there are important differences between cash management accounts and traditional checking accounts. Cash management accounts are offered by non-traditional financial companies—fintech startups—that partner with a conventional bank (or banks) which have custody of your money. Deposits made into a cash management account are swept into accounts at the partner bank, where the funds earn high interest and gain coverage from FDIC insurance.
The companies offering cash management accounts disclose to you which bank or banks they partner with, as well as the details of where your money is actually deposited.
How we picked the best cash management accounts
In order to determine the best accounts in this category, we first had to define what constitutes a cash management account — not an easy task given that the term has also been used as a catch-all description for any account that lets customers manage their money with a range of different financial institutions.
We’ve defined a cash management account as a hybrid of a high-yield savings account and a checking account, with the following features:
- A high APY with minimal fees or requirements: The accounts reviewed here all have higher APYs than the current average for standard checking accounts (0.110%) and in many cases higher than current average for high-yield, rewards checking (1.541%).
- A focus on personal banking, not investing: While brokerage accounts have been using the term “cash management account” to describe products where customers can place and access their money much like a checking account, they tend not to offer the high interest rates found with the cash management accounts associated with online banks, like Aspiration. We’ve excluded cash management accounts at brokerages, as they are different animals.
All rates are current as of 2/9/2020
|Account name||APY earned||Minimum balance|
|Aspiration Spend and Save||None, but 1.00% APY on savings account balances up to $10,000 if you upgrade to Plus||For Plus, you must spend $1,000 or more per month with your Aspiration debit card|
|Betterment Cash Reserve and Checking||0.40% APY||$0|
|Wealthfront Cash Account||0.35% APY||$0|
|SoFi Money||0.25% APY||$0 but must have a minimum of $500 in monthly, recurring deposits in order to earn APY|
|Empower Checking Account||0.20% APY||$0|
Aspiration Spend and Save
Aspiration has garnered a great deal of attention thanks to its “pay what you want” fee structure, which includes a promise of 3% to 5% cash back on certain purchases. If you upgrade to a Plus account for $15 per month, you can even earn up to 1.00% APY on funds up to $10,000 in your Save account. Aspiration partners with Coastal Community Bank to hold your funds in FDIC-insured accounts.
Similar to Simple, Aspiration’s cash management account works by linking a savings account with a checking account — marketed here as a Spend account — between which the user can instantly transfer funds. If you upgrade to Plus for $15 per month, the savings account is what actually earns the 1.00% APY on balances up to $10,000, so users wanting to max out the interest they earn should keep the vast majority of their deposit in the savings account portion of this product.
Even if you pay the $15 per month for Plus, though, in order to earn the 1.00% APY you must spend at least $1,000 per month with your Aspiration debit card.
MIN TO EARN: Spend at least $1,000 per month with your Aspiration debit cardLearn More
Betterment Cash Reserve
While Betterment might be best known for its robo-investing services, its cash management platform – which consists of Betterment Checking and Cash Reserve – has made a splash, with a decent APY and a low-fee model.
The money in the Betterment Cash Reserve account is kept in accounts at up to four partner banks, garnering up to $1 million in FDIC insurance. You can make unlimited transfers between your Cash Reserve account and the deposit account of your choosing at another institution, though it typically takes 1-2 business days for the funds to clear.
MIN TO EARN: $0Learn More
Wealthfront Cash Account
Robo-advisor Wealthfront offers a cash management account appropriately named the Cash Account. It earns an APY of 0.35% and functions as a checking account and savings account hybrid. Wealthfront is able to protect up to $1 million of the money in the Cash Account via FDIC insurance, thanks to its decision to deposit your money with several partner banks. This account comes with a Visa debit card, and allows you to easily access your cash from 19,000 ATMs.
MIN TO EARN: $0Learn More
This online-only financial institution, based in San Francisco, may be better known for providing a variety of loan products, but its SoFi Money account ranks as one of the best cash management accounts currently on the market. The 0.25% APY applies to those with recurring monthly deposits of $500 or more each month. SoFi partners with multiple banks to hold your money in FDIC-insured accounts.
MIN TO EARN: Must have a minimum of $500 in monthly, recurring deposits in order to earn APYLearn More
Empower Checking Account
Empower is a fintech company that offers a very attractive yield on its checking account, plus fee-free access to the 25,000 ATMs of the MoneyPass network. Empower’s app also includes a suite of budget management tools that aims to help you better manage your financial life. Empower partners with Evolve Bank & Trust to hold your cash in FDIC-insured accounts.
Unlike other cash management accounts, Empower’s account comprises a single checking account that yields 0.20% APY, so there’s no juggling between a savings and spending portion of the account. With the Empower account, there is no minimum balance to earn the high APY. In addition, the company offers cashback spending rewards and referral bonuses. It’s worth noting, however, that there is a $8 monthly fee for this account.
Empower began as a budget management app, as a place where you could link and monitor multiple different bank accounts, credit cards and brokerage accounts. Those features remain and are well developed, and should help you keep on top of all the extra funds yielded by this attractive cash management account.
MIN TO EARN: $0Learn More
Cash management account vs. high-yield checking: Which is right for you?
As high as the APY can be for cash management accounts, a customer could earn more interest with a high-yield checking account which, like these accounts, provides unfettered access to your funds. So why would anyone choose these cash management accounts over high-yield checking?
High-yield checking accounts also almost uniformly require customers to spend money or bank in a certain manner in order to earn the high APY. A typical set of requirements from the bank might be a certain amount of PIN debit card transactions a month, coupled with enrolling in eStatements and logging into its online banking platform. That’s not too difficult to achieve, but some customers may not like feeling under the gun each month with how they spend their money.