E*TRADE Cash Balance Program Vs. Sweep
Finding ways to put your money to work can often be a good idea when you have uninvested cash sitting in your brokerage accounts.
Whether you have an individual margin account or an IRA, E*TRADE makes it easy to earn interest on funds that are not actively tied to active positions.
Please keep 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 distinct cash management options to its customers. Each comes with its own features, so it is good to review the details of each option before deciding.
CBP - E*TRADE Cash Balance Program
E*TRADE pays interest on cash balances in customer accounts, even without the funds being ‘swept’ 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 annual interest rate is dependent on the size of the Cash Balance.
CBP is available to E*TRADE customers, regardless of their account type. You can take advantage of the cash balance program if you have an individual margin (brokerage), retirement (IRA), or any of the available personalized investment options.
ESDA - E*TRADE Extended Insurance Sweep Deposit Account
The Extended Insurance Sweep option can also be called the ‘Cash Sweep’ program. It is the primary option for brokerage account holders looking to have their money swept into E*TRADE’s partner banks.
Customers get the same interest rates with the cash sweep program as they do with the (non-sweep) cash balance program. However, funds sitting in partner banks are FDIC insured for up to half a million dollars (joint accounts enjoy coverage for up to one million dollars)
ESDA is only available 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 it is only used with retirement accounts.
RSDA comes with the same interest rates as the other cash management options, and FDIC insures it for up to $500,000.
OGVXX - JPMorgan US Government Money Market Fund
If you are looking for a higher return on your cash, E*TRADE’s ‘Capital Class’ money market fund (OGVXX) could be a good choice. Instead of returns being based on an annual percentage rate, income is 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
In addition to the cash sweep programs offered to U.S.-based clients, E*TRADE offers a cash sweep option to international customers.
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 are interested in, there are some regional requirements that 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. One thing to note, however, is that you will not see a rate increase until your cash balance reaches a minimum of at least $500K.
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Comparison
Majority of brokerage firms offer very low interest on investors' uninvested cash. TD Ameritrade's
cash sweep rates, for example, are 0.35%.
J.P. Morgan Chase offers the industry's highest rate of
4.4% APY
on free cash balances.
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How to Modify E*TRADE Cash Sweep Options
If you are interested in getting started with any of E*TRADE’s cash management options, you’ll be happy to know that it is straightforward (once you locate the option).
Site navigation is not one of E*TRADE’s claims to fame, but it is not difficult to find what you need if you know where to look.
To see (and change) the cash sweep program you are 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. You can also select ‘edit’ to change it.
Accessing Your Cash
No matter what type of Cash sweep program you sign up for, accessing your money is never complicated. The ‘sweep’ is automatic, and your funds are always available to you. 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 suitable for you, there are some other
options:
Savings Account
E*TRADE offers a premium savings account that pays an impressive interest rate of 2% APY. The account is FDIC insured for up to $500K, and there are 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 provides an interest rate of 0.05% APY and can be free to use if some basic criteria are met.
To avoid a monthly fee of $15, you can maintain an account balance of at least $5000, or you can make 30+ trades within each quarter.
Fixed-Income Investments
Fixed income investments are also a good option for investors looking to ‘park’ cash that is not being used.
E*TRADE offers many bonds and CDs. Investors like them for the wealth preservation qualities they provide. Scheduled interest payouts are also quite popular with investors looking for ways to generate income from their capital.
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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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