How Does a Sweep Account Work?
You set a target balance for your primary account. At the end of each business day, any amount above that target is automatically swept into a designated secondary account that earns a higher return. If your primary account balance falls below a certain level, funds are swept back automatically. The process is seamless and requires no manual intervention after initial setup.
What Are the Different Types of Sweep Accounts?
Bank sweep accounts move funds between checking and savings or money market accounts within the same bank. Brokerage sweep accounts move uninvested cash into money market funds or partner bank deposit accounts. Business sweep accounts may move excess cash into overnight investment vehicles. Each type serves the same core purpose — putting idle cash to work automatically.
Are Sweep Accounts Worth It?
For individuals with large checking account balances that sit idle, sweep accounts can generate meaningful additional interest. For those who already maintain low checking balances or actively manage their money, the benefit is minimal. Business accounts with large daily cash flows benefit the most from sweep arrangements, as even small yield improvements on large balances add up quickly.
Frequently asked questions
Are sweep accounts FDIC insured?
If funds are swept into a bank deposit account, they are FDIC insured up to $250,000. If swept into a money market fund through a brokerage, they are not FDIC insured but may be covered by SIPC. Check where your swept funds are held to understand your coverage.
Do sweep accounts have fees?
Many bank sweep accounts are free, especially for personal accounts. Some business sweep accounts charge a monthly fee or per-sweep fee. Brokerage sweep accounts are typically free but may offer lower yields compared to alternatives you could choose manually.