E*TRADE Cash Balance Program Vs. Sweep
When you have uninvested cash sitting in your brokerage accounts, finding ways to make it work for you can be a smart move.
Whether you have an individual margin account or an IRA, E*TRADE provides options to earn interest on funds that are not currently invested.
Continue reading to learn more about E*TRADE’s cash balance program, cash sweep, and money market fund sweep options.
E*TRADE’s Available Cash Management Options
E*TRADE offers four different cash management options. Each has its own features, so it’s important to review the details before deciding.
CBP - E*TRADE Cash Balance Program
E*TRADE pays interest on cash balances in customer accounts without needing to ‘sweep’ the funds into a bank account.
Up to $250K of your E*TRADE Cash Balance is protected by SIPC, and you can earn between 0.01% and 0.15% APY in interest. The interest rate depends on the size of the Cash Balance.
CBP is available to all E*TRADE customers, regardless of their account type. Whether you have an individual margin (brokerage) account, a retirement (IRA) account, or any personalized investment option, you can take advantage of the cash balance program.
ESDA - E*TRADE Extended Insurance Sweep Deposit Account
The Extended Insurance Sweep option, also known as the ‘Cash Sweep’ program, is the main option for brokerage account holders who want their money swept into E*TRADE’s partner banks.
The cash sweep program offers the same interest rates as the non-sweep cash balance program. However, funds in partner banks are FDIC insured for up to $500,000, with joint accounts enjoying coverage for up to $1 million.
ESDA is available only to customers with standard brokerage accounts.
RSDA – E*TRADE Retirement Sweep Deposit Account
E*TRADE’s Retirement Sweep program is similar to the regular cash sweep program (ESDA) but is specifically for retirement accounts.
RSDA has the same interest rates as the other cash management options and is FDIC insured for up to $500,000.
OGVXX - JPMorgan US Government Money Market Fund
If you’re looking for higher returns on your cash, E*TRADE’s ‘Capital Class’ money market fund (OGVXX) could be a good option. Instead of being based on an annual percentage rate, returns are calculated using the 7-day current yield.
The Capital Class US Government Money Market Fund cash sweep option is only available for Personalized Investment accounts.
ISDA - E*TRADE International Sweep Deposit Account
E*TRADE also offers a cash sweep option for international customers in addition to the programs available to U.S.-based clients.
The International Sweep Deposit Account (ISDA) provides the same interest rates as the ESDA and RSDA programs (0.01-0.15%) and is available for brokerage and retirement accounts. Funds swept into Morgan Stanley accounts are FDIC insured for up to $250,000.
Regional Requirements for E*TRADE’s Cash Management Accounts
Depending on the cash sweep option you choose, there are regional requirements you should be aware of.
For CBP, ESDA, RSDA, and OGVXX, you must be a U.S. citizen or a legal permanent resident of the U.S. (with a tax identification number). International clients cannot apply for these programs.
For ISDA, the opposite is true. You cannot participate in this option if you have an SSN, ITIN, or a U.S. address.
E*TRADE Cash Sweep Rates
No matter which of E*TRADE’s cash management programs you choose, the interest rates for uninvested cash are the same.
Rates are determined by the size of the Cash Balance and are raised on a tiered basis. However, you will not see a rate increase until your cash balance reaches at least $500K.
Comparison
Majority of brokerage firms offer very low interest on investors' uninvested cash. E*Trade's
cash sweep rate, for example, is 0.01%.
Webull, a $0-commission brokerage firm, offers the industry's highest rate of
5% APY
on free cash balances.
It is fully liquid and completely free, easy to use, and has no conditions or restrictions.
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How to Modify E*TRADE Cash Sweep Options
If you want to get started with any of E*TRADE’s cash management options, you’ll be pleased to know that it’s straightforward (once you find the option).
While E*TRADE’s site navigation may not be the easiest, it’s not difficult to find what you need if you know where to look.
To see (and change) the cash sweep program you’re enrolled in, navigate to ‘My Profile.’ Select ‘Account Preferences’ and scroll down to the ‘Tax Preferences’ section.
Under ‘Tax Preferences,’ there is an entry for ‘Uninvested Cash Option.’ You can see which program you are enrolled in and select ‘edit’ to change it if needed.
Accessing Your Cash
No matter which Cash sweep program you choose, accessing your money is easy. The ‘sweep’ is automatic, and your funds are always available. Withdrawing from cash sweep programs is the same as taking money out of your savings account.
Are there other ways to earn money on uninvested cash?
If you feel that E*TRADE’s cash management solutions are not right for you, there are other options to consider:
Savings Account
E*TRADE offers a premium savings account that pays a competitive interest rate of 4.25% APY. The account is FDIC insured for up to $500K, with no account minimums or fees to worry about.
Max-Rate Checking Account
E*TRADE’s Max Rate Checking Account is another good option. The account offers an interest rate of
0.05% APY and can be free to use if some basic criteria are met.
To avoid a $15 monthly fee, you can maintain an account balance of at least $5,000 or make 30+ trades each quarter.
Fixed-Income Investments
Fixed-income investments are also a good option for investors looking to ‘park’ cash that isn’t being used.
E*TRADE offers a variety of bonds and CDs. Investors like them for their wealth preservation qualities and scheduled interest payouts, which are popular among those seeking income from their capital.
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Updated on 8/29/2024.
Ben Wright is an investor, a trader, an educator, and something of an explorer. He spends his days in the markets when he is not teaching or spending time with his family. Ben writes about stockbrokers, markets, investment vehicles, promotional offers, and tools that help investors make the most of their time in the markets.
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