We are on our second to the last episode on specific savings accounts. I hope you all are learning something new from these past few weeks! Today’s savings account we will look at is a Cash Management account, also known as a CMA.
What is a Cash Management Account?
A Cash management account, also known as a CMA, is a combo account mixing aspects of checking, savings, and investment account in one account. You can find a CMA at a non-bank (like Fidelity) and because they don’t have the overhead of a traditional bank they can cover higher interest rates and no fees for this account.
The biggest feature of a cash management account is that this is a one-stop-shop for your saving needs. You will have fewer accounts that you need to manage and will streamline your finances. This will give you the ability to make your transactions easier, earn interest, and even use this account!
You will also find that CMA’s have higher interest rates compared to a traditional savings account. CMA’s are with non-banks so they can offer a higher interest rate. The average interest rate for a CMA is 0.3% while the average interest rate for a traditional savings account is 0.01%.
Choosing a Cash Management Account
When choosing a CMA you want to pick an account with the highest interest rate, lowest fees, lowest minimum balance, and so on. This is just like all the other accounts we have talked about in the past.
Let’s compare two different banks that offer CMA’s.
The first is SoFi Money. SoFi’s cash management account comes with a debit card. You are able to use this account for direct deposits and if you do switch your direct deposit to this bank you’ll receive a $100 welcome bonus, which is pretty nice! SoFi’s interest rate is at .25% and they have no-fee overdraft coverage. There are no minimum balances required or any fees associated with this account. If you need to go to an ATM there are 55,000 ATMs that offer no fees with your SoFi debit card.
Aspirations also have a Cash Management account. This CMA also comes with a debit card and offers 1% interest. They provide a one-time monthly fee reimbursement if you use an out-of-network ATM or you can use one of 55,000 in-network ATMs for no fee. This CMA does have a maintenance fee of $7.99 a month.
Like all other accounts, you want an account with the highest interest, no fees, and the lowest minimum balance required.
Some reasons you might choose a CMA account is because they are a combo account, this allows you to manage fewer accounts than you might traditionally have had to. This could make managing your savings a lot easier if you have many accounts.
You’ll also find that you’ll have higher interest rates than traditional savings accounts. CMA’s are found at non-traditional banks, like Ally. These banks can offer higher interest rates since they don’t have the overhead of a physical location.
With a CMA you get the benefits of a traditional checking and savings account though. Many CMA’s offer debit cards. If you aren’t sure of the benefits of these two types of accounts, make sure you go back to my previous episodes on these two aspects – they are foundational accounts that you want to make sure you understand.
Some reasons why you might decide a CMA is not for you is because while these accounts are higher interest than traditional savings accounts, they might not be the highest interest option for you. You might be able to find a better option with similar features that will give you a higher interest rate. For example, you might find that a savings account with an online bank will give you a higher interest rate.
You also may not like that you can only have a CMA with an online bank. If you are someone who needs any in-person contact with your bank then this type of account is not for you since there are no in-person options. For the other savings accounts that I’ve mentioned, you’ll find that traditional and online banks have these accounts.
How to Use
You know I like to give examples of how I would use this account in different stages of my life.
I personally don’t have a Cash Management account, but I do see it as a beneficial account, similar to a money market account. Because this is a mix of a savings and checking account you get the benefit of both without having two different accounts. Money market accounts can be opened with online banks while cash management accounts can be opened with non-banks, like a brokerage firm. The type of bank doesn’t make one better or worse since they are both insured, but it’s just a personal decision. If you plan to start investing, this might be a good option for you, but more on investing later.
I would use this account if you want a traditional savings account with slightly higher interest rates as well as an option for a Debit Card. You won’t have access to your money like you would in a traditional savings account, but because you have a debit card you can easily go to the ATM and withdraw money.
Let me know, do you have a Cash Management Account? If you don’t have one, why not?
Thank you for listening to No Fear Finance, an Amalfi Media show. Make sure to check out the other Amalfi Media content because we have something for everyone! Thank you to everyone for the constant support!
Until then, have a great week and see you all on Monday.