Charles Schwab Cash Sweep Account Options
Charles Schwab brokerage customers have only one option for cash management. All free cash balances are automatically deposited with Schwab Bank, and these
funds are FDIC insured. The brokerage firm does not offer SIPC coverage for cash balances, nor does it provide an option to have funds swept into
a money market mutual fund. The company also does not provide an option to sweep funds into multiple FDIC-insured banks.
Charles Schwab Cash Sweep Interest Rates
Currently, the FDIC-insured core account at Schwab, which is provided by Schwab Bank, earns just 0.30% - 0.60%. This is lower than both Schwab’s checking
account, which pays 0.35% APY right now, and the bank’s savings account, which yields 0.45%.
The financial services corporation does not offer the ability to automatically move funds from a brokerage account to one of the firm’s bank accounts.
So if you want to earn one of the higher rates, you must first open a deposit account with Schwab, and then manually move cash to the bank account.
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Charles Schwab Money Market Fund Rates
Although cash balances will not be automatically moved to a money market mutual fund, the broker does offer several funds that can be purchased with a
cash balance. Doing so will increase the amount you earn from 5 basis points to 40 basis points or even higher. Here’s a selection of money market
funds available at Schwab, with their corresponding yields:
| Schwab Cash Reserves Fund | SWSXX | 1.26% |
| Schwab Government Money Fund | SWGXX | 2.07% |
| Schwab Treasury Obligations Money Fund | SNTXX | 1.57% |
| Schwab U.S. Treasury Money Fund | SWUXX | 1.06%
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The broker also provides a selection of tax-free money market funds, which have higher yields than its only available core position.
| Schwab PA Municipal Money Fund | SWEXX | 0.90% |
| Schwab AMT Tax-Free Money Fund | SWFXX | 1.11% |
| Schwab Municipal Money Fund | SWXXX | 0.95% |
| Schwab CA Municipal Money Fund | SWCXX | 1.26%
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Compared to several other brokers, Charles Schwab’s cash sweep service is rather limited. Other firms provide an SIPC-insured core position. TD Ameritrade is
one example, although this choice only pays 0.01% annually. Some brokerage houses allow clients to select a money market mutual fund as a core cash
position. Under this scheme, uninvested money is automatically moved into a money market fund.
Read detailed review of Charles Schwab account.
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Charles Schwab Cash Sweep Options Summary
Because Charles Schwab only uses one bank, all customers are limited to the FDIC’s maximum insurance of $250,000. Some brokerage firms, such as Fidelity, use
more than one program bank for its cash sweep program. Doing so increases the $250,000 coverage limit.
Schwab Bank, although not the brokerage, provides checks and a Visa debit card free of charge. A checking account is required to get the checks,
although a savings account can have a debit card. Brokerage and bank accounts are automatically linked by Schwab, so transferring funds between them
is quick and easy. Transfers can be made on the website or using Schwab’s mobile app.
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