A sweep accounts is a special bank or brokerage account that moves any extra money above a specific amount into a higher-interest investment option automatically at the end of each business day. Usually, this extra cash is transferred to a money market fund, which can earn a higher interest rate than a regular checking or savings account.
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Sweep Accounts Key Takeaways
- A sweep account automatically transfers cash funds into a safe but higher interest-earning investment option at the close of each business day, e.g., into a money market fund.
- Sweep accounts try to minimize cash drag by capitalizing on the immediate availability of higher-interest accounts.
- A sweep account service may not always be free and you might have to pay fees to your broker that might make the sweep less attractive on a net basis.
What Are Sweep Accounts?
Using a sweep fund or sweep account makes it easier for customers to earn more interest without having to actively manage their money. At the end of each day, any extra cash is automatically transferred into a higher-interest account, like a money market deposit account, with little effort required from the customer.
Brokerage accounts may also have similar features that help investors earn some extra return on their unused cash. Sweep accounts are straightforward tools that move money above a specific level in a checking account to a better investment option. These accounts were created in the past because government regulations didn’t allow checking accounts to earn interest.

Sweep accounts are beneficial for both businesses and individuals because they prevent money from sitting in low-interest accounts. Instead, the money is moved to better investment options that offer higher interest rates and still allow for easy access to the funds. These investment vehicles may include money market mutual funds, high-interest savings accounts, or short-term certificates.
However, it’s essential to be aware of the costs associated with sweep accounts. While they can provide higher returns, some institutions charge fees for using the service. These fees can be a flat rate or a percentage of the interest earned, and they should be considered when evaluating the overall benefit of using a sweep account.
Personal Sweeps vs. Business Sweeps
Sweep accounts are commonly used by brokerages to temporarily hold money from dividends, cash deposits, or sell orders before reinvesting it. These funds are moved into high-interest accounts, like money market funds until investors decide on their next investments or until standing orders are executed within their portfolio.
For businesses, sweep accounts are helpful to manage daily cash flow while earning the most interest on their reserves. They set a minimum balance for their main checking account, and any excess funds are swept into a higher-interest investment. If the balance falls below the threshold, the funds are moved back into the checking account.
The sweeping process usually happens daily from the checking account, but there may be delays when returning funds. Some banks also offer high-interest rates on checking accounts above certain balances, depending on the regulations.
How Do Sweep Accounts Work?
A sweep account is a special bank or brokerage account connected to an investment account. It automatically moves money when the balance goes above or below a specific minimum amount. When there’s extra cash, it’s transferred to a money market fund, earning higher interest than a regular bank account. Conversely, if the balance falls below a certain level, funds can be moved from the investment account back to the checking account. This helps optimize the use of funds and ensures they earn the most interest possible.
What Is the Difference Between Personal and Business Sweeps?
Individual sweep accounts are employed by brokerages to hold client funds temporarily until the owner decides on investments. The excess cash can be moved to a money market fund, providing higher returns than a regular checking account.
On the other hand, business sweep accounts are commonly used by small companies with substantial cash flows. These accounts allow businesses to earn interest on extra cash reserves while ensuring they have sufficient funds to cover their expenses. It’s a convenient way for businesses to optimize their cash management and maximize their earnings.
Why Are Sweep Accounts Useful?
Sweep accounts are a convenient method for both businesses and individuals to make sure their money is working for them and not just sitting idle in a low-interest bank account. Some institutions even provide an auto-sweep feature, which automatically links the sweep account to the primary account. This enables automatic transfers between the two accounts whenever the predefined thresholds (upper and lower limits) are reached. This way, excess funds are efficiently invested in higher-earning options, and when needed, the funds are readily available for use. It’s a hassle-free way to optimize the use of cash and maximize returns.
The Bottom Line
Sweep accounts are special bank or brokerage accounts that shift extra money between a client’s regular account and an investment account. When there’s more money than needed in the regular account, it automatically moves into the higher-interest investment account. This way, the client’s money can earn interest even when it’s not being actively used.