Cash sweep
Also known as: Brokerage cash sweep, Sweep account
A cash sweep is the automatic mechanism that moves uninvested cash in a brokerage account into an interest-bearing position — either a bank deposit (FDIC-insured) or a money market fund (SIPC-covered) — at the end of each business day.
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The cash sweep is the default policy at every major US brokerage that determines where idle cash sits between trades. When a dividend is paid, a security is sold, or a new deposit arrives and is not immediately invested, the sweep mechanism moves that cash into a designated position that earns some form of interest or yield. The sweep runs automatically — the account holder does not need to initiate a transfer — and runs in reverse when cash is needed for a trade or withdrawal.
The two structural types of cash sweep are bank sweeps and money market fund sweeps. Bank sweeps move cash into one or more FDIC-insured bank accounts affiliated with or partnered with the brokerage. The yield is set by the bank and is typically far below prevailing money market rates — Schwab Bank Sweep, for example, has paid approximately 0.45% APY while money market funds at the same brokerage yield near the policy rate — about 3.6% with the federal funds target range at 3.50–3.75% (July 2026). The bank captures the spread as revenue. Money market fund sweeps invest idle cash in a SEC-registered money market mutual fund holding short-term Treasuries, commercial paper, or repurchase agreements. The yield closely tracks the federal funds rate and is typically competitive with high-yield savings accounts.
The choice of sweep destination is often a default that the account holder can change. At Schwab, the default is bank sweep; the account holder can manually purchase money market fund shares to earn a competitive yield. At Fidelity, the default for non-retirement accounts is the SPAXX government money market fund, which pays near the prevailing rate. At Vanguard, cash sits in the VMFXX federal money market fund as the settlement position. The yield difference between the lowest-paying default (bank sweep at ~0.45%) and the highest-paying alternative (government MMF at ~3.6%) is approximately $3,150 per year on $100,000 of idle cash — a silent cost that many account holders absorb without realizing.
Cash sweep positions carry different insurance structures. Bank sweep deposits are FDIC-insured up to $250,000 per depositor per bank; multi-bank sweep programs can extend effective coverage by distributing cash across multiple partner banks. Money market fund positions are covered by SIPC (up to $500,000 total) as securities, not as cash deposits. SIPC does not protect against MMF principal loss, but government money market funds that invest exclusively in Treasuries and repurchase agreements have never broken the buck.
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- APY (Annual Percentage Yield) The actual annualized return on a deposit account, taking compounding into account. Distinguishes meaningfully from "interest rate" only on accounts with intra-year compounding — which is virtually all US deposit accounts.
- FDIC insurance The Federal Deposit Insurance Corporation insures US bank deposits up to $250,000 per depositor, per insured bank, per ownership category. The structural guarantee that makes savings, checking, money market, and CD accounts at insured banks effectively risk-free up to the limit.
- Money market account (MMA) A federally insured deposit account at a US bank that pays a competitive APY similar to a HYSA but may include limited check-writing or debit-card privileges. Distinct from a money market fund, which is a brokerage product and is not FDIC-insured.
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