merrill lynch money market rates

Merrill Edge Money Market Fund Rates and Cash Sweep Interest


2022 Merrill Edge cash sweep account rates (FDIC bank, CMA, CMATF). Merrill Edge money market fund interest.


Cash Sweep at Merrill Edge


If you have a brokerage account with Merrill Edge, you have several options for uninvested cash. Here’s everything you need to know:


Default Option


By default, all accounts with Merrill Edge are signed up for the Merrill Lynch Bank Deposit Program. This is the company’s FDIC-sweep program. The way it works is really simple: cash that isn’t invested is moved to the broker’s parent company, Bank of America, where it is protected by the FDIC up to program limits. Currently, that’s $250,000 per customer, per bank (with a few ways to increase the limit).

Because Merrill Edge uses just one program bank, it’s not possible to double or triple the amount by using multiple banks. It is possible to double or triple the limit by having accounts with different ownership capacities (trusts, joint accounts, etc.).

While getting the FDIC insurance is nice, the downside is a low APY. Currently, the interest rate is just 0.01%. This is extremely low given the current interest rate environment. Accounts with more than a million dollars in idle cash earn 0.05%, which is still very low. The highest rate is 0.55% with a $10 million cash balance (not $10 million in account value).

These rates are valid for self-directed retail taxable, tax-deferred, and business accounts. There are two esoteric accounts with higher rates. The Insured Savings Account (ISA®) earns 1.17% currently, while the Preferred Deposit® account gets a very impressive 2.69%.

Merrill Guided Investing accounts earn 0.55% across all balance levels on uninvested cash.


Next Is SIPC Insurance


An account’s core position for idle cash can also be set not to sweep into Bank of America for FDIC insurance. If this option is chosen, the available cash will remain in the Merrill Edge brokerage account and will be covered by SIPC, not the FDIC. SIPC guarantees cash up to $250,000. Currently, SIPC coverage earns no interest, which seems to be the biggest downside.


Merrill Edge Money Market Mutual Funds


An account’s cash balance could also be invested in a money market mutual fund. Doing so will take the available cash out of the core position and put it into the money market fund. The fund will be an actual security, so it’s handled a little differently. First, it isn’t automatic. You have to make an actual purchase of a fund. Second, the fund receives up to $500,000 of protection from the SIPC (not $250,000) because it’s considered a security and not cash.

To find the available money market funds at Merrill, log into the website and hover over the Research tab. In the drop-down window, select the link for mutual funds. On the next page, you’ll get an overview of mutual fund resources. Near the top of the page, look for the Cash Management Solutions tab. Clicking on this tab will generate a page with the available money market funds.


Merrill Edge Cash Sweep


There are about 20 funds on this page. Every one of them has a $1,000 minimum initial purchase amount and $0 subsequent purchase amount. They do have different cutoff times, and it’s important to be aware of the cutoff time of the fund you’re purchasing. These range from 1:45 pm, EST, to 4:00 pm. Some of the funds on the list are eligible to serve as a cash equivalent for covered puts, while others are not.

One fund that is eligible is the BlackRock Liquidity Funds Federal Trust Fund. Trading with ticker symbol TFFXX, it has an expense ratio of 0.23% and a 7-day yield of 2.67%. Total assets are over $5 billion. The yields on the other money market funds range from 2.07% on the low side to 3.05% on the high side.

Cash distributions from a money market fund can be reinvested or paid in cash. If they are paid in cash, they will go into the account’s core position, covered by either SIPC or the FDIC.


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Selecting a Merrill Edge Cash Position


As already mentioned, the FDIC program is an account’s default cash management system, so there’s nothing the account holder needs to do to turn it on. To switch to SIPC protection, you have to call the brokerage firm. There is no online tool to make the change. We were on hold for 54 minutes, so good luck.

Putting money into a money market mutual fund requires the submission of a trade, just as with a regular mutual fund.


Linked Bank of America Account


One final idea for a free cash balance at Merrill Edge is to move it into a linked deposit account with Bank of America. This option is a little different from the FDIC-sweep program, which doesn’t create a discrete bank account.

Bank of America offers several types of checking and savings accounts, and these can be used to receive a transfer of cash from a Merrill Edge account. Because both account types (bank and brokerage) are automatically linked on both websites (Merrill and Bank of America), it’s really easy to transfer funds from one to another.

The downside of this option is that interest rates are very low. During our research, we found rates ranging from 0.04% to 0.00%, depending on the bank account. Some of the accounts also have monthly fees and/or minimum deposit requirements.

Both Merrill Edge and Bank of America accounts come with lots of cash management tools, like mobile check deposit, debit cards, checkwriting, Zelle transfers (for deposit accounts), and more.


Comparison


Majority of brokerage firms offer very low interest on investors' uninvested cash. TD Ameritrade's cash sweep rates, for example, are 0.01%.

Ally Invest offers the highest in the industry rate of 2.1% APY on its online savings account that could easily be linked to its brokerage account.

M1 Finance offers a checking account that comes with 1.7% APY. However, that checking is part of the broker's M1 Plus program, which costs $125 a year.


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Updated on 10/4/2022.


About the Author
Chad Morris is a financial writer with more than 20 years experience as both an English teacher and an avid trader. When he isn’t writing expert content for Brokerage-Review.com, Chad can usually be found managing his portfolio or building a new home computer.