What Is A Cash Management Account & How CMA Works (Complete Guide)

Last Updated on 3 years ago by Antony C.

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Looking to earn interest by simply parking your money at a special account operated by brokerage firms or other financial institutions?

Cash management account (CMA) offers high interest rate option for investors to grow their uninvested cash while giving you all the flexibility to withdraw cash anytime you like.

Sounds too good to be true? Let’s find out if CMA is really that good!

KEY TAKEAWAYS

Cash Management Account (CMA) is an all-in-one account where you combine investment account, saving account and checking account all in one place.
All investment have some form of risk, and this includes Cash Management Account. However, a CMA is considered one of the lowest risk investment where the interest rate are generally stable.
Opening a Cash Management Account is a great way for investors to park their uninvested cash while enjoying competitive interest rate that rival T-bills and Government-Bonds, getting an interest return that is often higher than savings account and fixed deposit.

What Is A Cash Management Account (CMA)

Cash management account traditionally a non-bank account that is typically managed and operated by financial service institutes where you can earn a competitive interest rates and have the flexibility of depositing and withdrawing your money anytime you need.

So what do we mean by “non-bank”?

Basically, these are brokerage firms and investment advisory that are not considered as traditionally banks which are mainly operated online.

While is extremely rare for traditional banks to offer cash management account but it is not impossible.

How Do Cash Management Account Works?

A cash management account combines the products and services offered by the investment advisory or brokerage services together with traditional bank into one money management account.

Like a checking account, CMA gives you the ability to deposit or withdraw money anytime you want.
Like a saving account, CMA offers high-yield savings solution for you to earn money from your cash account.
Like an investment account, CMA gives you the option to invest into stock directly from your account.

CMA give investor the option to combine their investment account with their checking and savings account all in a single account making your life as an investor and an saver much easier.

Interest Rate Offers By Cash Management Account Can Vary

Cash management account offers high interest rate through its investment in the money market funds where it is a type of trade in the short-term loans between banks and other financial institutions.

Like any other investment, the actual returns of CMA will vary greatly and depend on various factors including personal and market conditions.

The projected returns as advertised by any CMA is highly determined by how the CMA is constructed, meaning the change of the portfolio allocation and the underlying risk level.

However, cash management account offer stable, low-risk returns with high liquidity compared to many other low risk investments such as ETFs and Bonds.

Features And Services of Cash Management Account

Generally, cash management accounts offers the basic features of:

Let you earn high-yield interest by simply depositing your money with them.
Give you the flexibility of deposit or withdraw money from the CMA anytime you want.
Provide online customer support for any enquiries.

However some CMA have some other additional features that make it comparable online banks that offers traditional checking or savings account.

Additional features of some CMA in the market are:

ATM access
Linked debit cards access
Bill and payment service
Check writing services

These CMA are considered as alternative to traditional banking in additional to earning competitive interest rates and the ability to buy or sell particular stocks or investment products directly from your account.

Pros And Cons Of Cash Management Account

Cash management account like all other money management account have it’s own potential benefits and drawbacks.

While opening a cash management account might be a good choice for most people it is good to have a better understanding of a CMA before making any form of financial decision.

Pros and benefits of a CMA

High-Yield Interest Rates: Cash Management Accounts often offers higher interest rates than any high-yield savings accounts or even term deposit offered by tradition banks. This offers you the opportunity to earn more with your savings passively.
Funds are Insured: Most Cash Management Accounts offered by reputable financial institutions are insured by the respective insurer backed by the government through partnership with banks, giving your money the protection similar to traditional banks. However, the amount insured varied according to which countries you reside in.
High Level of Convenience: Cash Management Accounts offers you the ability to deposit and withdraw your funds anytime you want while letting you earn an competitive interest rate, giving you the flexibility not offered by saving account.
Higher Cost Savings: Cash Management Accounts often offers minimal to no monthly account management fees or ATM fees, letting you to pass the savings onto growing your account passively.
No Minimum Balance Requirements: Cash Management Accounts generally do not have a minimum balance requirements, making CMA accessible to a wider range of investors and savers.

Cons and potential drawbacks of a CMA

Investment Options Are Limited: Cash Management Accounts unlike traditional brokerage account offers a limited investment options.
No Guarantee High APY Returns: Returns on Cash Management Accounts can vary and not capital guaranteed. The returns on investment is comparatively lower when compared with ETFs and Bonds which are also considered as low risk investment.
Limited Insurance Coverage: Funds in a Cash Management Account is insured up to a certain limit per account type, thus if you have balances that exceed the insured coverage, it will not be protected.
Limited Features: Cash Management Accounts offers a limited feature compared to traditional bank accounts, most CMA don’t offers debit cards, payment services or face-to-face customer support.
Not for Long-Term Saving: Cash Management Accounts are designed for keeping cash balances that you may need to access in the near future and not for keeping large amount of money like what you do with your saving about in your bank.

How To Set Up Cash Management Account

Setting up a Cash Management Account can typically be done through any of the reputable brokerage firms or financial institutes.

Here is the general steps you’ll need to take to open your cash management account:

Research: Research and choose the cash management account provider which best fits your needs. Look at criteria such as interest rates, fees structure (management fees, account fees, ATM fees etc.), investment options available, and any other account features such as debit cards or payment option.
Register and Open an Account: Account setup are generally done through online or by phone. You’ll just need to provide your basic personal information such as your name, address, and social security number. Other information that maybe asked are your investment goals and risk tolerance level.
Funding your account: For you to start your Cash Management Account, you will need to fund it with cash which can be as low as $1. Funding of your account can generally be done through direct deposit of your cash through electronic transfer or linking your CMA with your bank account.
Set up account features: Most accounts are setup once funded, but some Cash Management Accounts come with features such as debit card access and check writing service which may requires additional setup steps. Set up these additional features according to your preferences.
Manage your account: Making transactions through one online Cash Management Account you get to do all your investment management and money management all in one place. Keep track of your balance, review your transaction and make adjustment to your investment strategy whenever neccessary.

Different Cash Management Account provider have different specific requires or restrictions when opening and managing your account. Thus, always review and read through the terms and conditions carefully and understand the platform prior to opening the account.

How Safe Are Cash Management Accounts?

CMA invest in money market funds, short-term bonds, Certificate of Deposit (CDs) and Treasury bills (T-bills), the funds invested are highly stable offering more predictable returns than other low risk investment such as ETFs and Bonds.

Cash management account are considered one of the safest ways to park your cash while earning an attractive interest rate.

Depending on where you are located, some Cash Management Account keep your money safe by being insured by the respective government agencies:

Australia: Financial Claims Scheme (FCS) can insure up to a limit of AUD$250,000 per account holder.
Canada: The Canada Deposit Insurance Corporation (CDIC) can insure up to CAD$100,000 per CDIC – insured bank or financial institution.
United States: The Federal Deposit Insurance Corporation (FDIC) can insure your fund after it is transit to the program banks that are member FDIC. FDIC insurance coverage insure up to USD$250,000 per depositor for FDIC-insured bank or financial institution.
United Kingdom: Financial Service Compensation Scheme (FSCS) can insure up to £85,000 per eligible person.

Nonetheless, you should always check with your respective CMA provider and look into the details to understand the insurance coverage before making any financial decisions.

Cash Management Account is not always insured:

Singapore: Cash Management Account in Singapore is not insured by Singapore Deposit Insurance Corporation (SDIC). SDIC only insure Deposit Insurance (DI) Scheme member bank or finance company. Member of SDIC are insured up to SGD$75,000 per account.
Most Countries: Cash balances that exceed the insurance coverage amount will not be insured, thus it prudent to understand the limitation on the protection of your cash placed in the Cash Management Account.

Cash Management Account are considered one of the safest low risk investment available.

However finding the best cash management accounts to park your money is probably the most important step you’ll need to take as an investor and a saver.

How Are Cash Management Account Different From Savings Account and Traditional Checking Account?

Cash Management Account is similar to checking and saving accounts in many ways, but like all investment, it is not for everyone and different individuals may benefit from opening a Cash Management Account while others may not.

Here is a comprehensive comparison table where we look at how a Cash Management Account compare with a savings account and checking account.

Features	Cash Management Account	Savings Account	Checking Account
Insurance Coverage	Depends	Yes	Yes
Interest Rate	Higher than Savings Account	Typically Low	Typically Low
Minimum Balance Requirement	Low or No Requirements	Varies by Provider	Varies by Account Type
Withdrawals	Limited by Provider	Limited by Federal Regulations	Unlimited
Check Writing	Typically Not Available	Typically Not Available	Typically Available
Debit Card Access	Typically Not Available	Typically Not Available	Typically Available
Fees	Low or No Fees	Low or No Fees	Varies by Account Type
Investment Options	Limited	None	None
Accessibility	Generally Available	Limited by Federal Regulations	Generally Available
Purpose	Investing Cash Balances	Saving Money	Everyday Transactions
For Investors	Yes	No	No
For Savers	No	Yes	No
Penalty for Excessive Transactions	Possible	Yes	Yes

Comparison Table Between Cash Management Account vs. Savings Account vs. Checking Account

Cash Management Account are suitable for investors as it gain the investors quick access to the investment fund allowing investors to buy and sell stocks quickly while earning a high interest rate on the uninvested funds.

Savings Account are suitable for savers who are not looking to use their money anytime soon, Insured by the government, the savers get to save their money safely with the banks.

Checking Account are suitable for day to day use to make cash withdrawals, featuring debit cards and online payment features, it allows the user to conveniently make quick transaction without much limitations.

Is Cash Management Account Worth It?

Cash Management Account have many benefits such as flexibility of the fund usage, lower fees and management cost and higher interest rate, that overweight the drawbacks of having limited investment options and lack of face-to-face options for customer support.

I personally think Cash Management Account is a cash account where investors can park their uninvested cash aside while waiting for opportunities to use their cash for different investment.

It is also a great way for savers to park their money for the short term while earning high interest rate if they are going to use the money in the near future.

Nonetheless, when opening a CMA account choosing the right CMA provider is crucial.

TOP PICK

Moomoo Stock Market Trading Platform — **Moomoo Cash Plus** by *Moomoo SG*

4.01%

p.a. (Approx.)

$2,005

Est. earning over 1 year at $50,000

$1 Min.
No Lock-in
No Redemption Fee
No Subscription Fee

Check Promotion ➜

Offer details

WeBull Stock Market Trading Platform — **Moneybull** by *Webull SG*

3.50%

p.a. (Approx.)

$1,750

Est. earning over 1 year at $50,000

$1 Min.
No Lock-in
No Redemption Fee
No Subscription Fee

Check Promotion ➜

Offer details

Note: The information is accurate at the time of writing.

I have open my Cash Management Account account with Moomoo which is a brokerage dealer regulated by Monetary Authority of Singapore (MAS). Currently, I am enjoying a whooping 5% per annum for all of my uninvested cash in the Cash Management Account.

While 5% may not sounds like a lot, but it is way higher than other low risk investment options found in Singapore, and you get to earn extra cash passively which make it a much better place to park my cash than in saving accounts or buying bonds.

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Antony C.

Founder & Financial Writer at Income Buddies | Website | Posts by Author

Antony C. is a Singaporean dividend investor focused on building passive income through REITs, ETFs, and Dividend Stocks. With 15+ years of experience investing in Singapore, Hong Kong, and China markets, he founded IncomeBuddies.com to share practical wealth-building strategies tested in his own portfolio since 2008. His expertise has been featured in Yahoo Finance, Nasdaq, and NFAA, and he’s the published book author of "Start Small, Dream Big".