New cash accounts yield high interest

The average interest rate for traditional savings accounts today hovers around 0.09% — but consumers can earn 10 to 20 times more interest on their money by giving high-yield options a shot with a cash management account.

CMAs typically offer high interest rates — quite a bit higher than those at brickand-mortar banks — and online-only customer service.

CMAs aren’t offered by banks, but by nonbank financial service providers, like brokerages or investment firms.

While retirement savings are better stored away in an investment account, money for an emergency fund or shortterm savings goals is well-suited to cash management accounts.

Cash management accounts can typically be linked to other accounts at the same brokerage, such as investment accounts.

CMA providers tend to be online-only, so their desktop and smartphone applications are usually well-designed and offer remote customer service options.

Most CMAs don’t charge a monthly fee for their services; many traditional checking accounts do.

Savings accounts at banks are federally restricted to allow only a maximum of six free transactions per month; CMAs don’t have that restriction.

There are some drawbacks with CMA accounts however.

Though it’s not unique to cash management accounts, it’s worth noting that CMA interest rates can change frequently and without warning. A CMA provider might advertise a flashy, high annual percentage yield only to slash it a few weeks later.

Some CMA providers allow only electronic transfers in and out of your account, which means it may take a day or longer to move your money into a linked bank account.

Retirement accounts, meant for long-term savings, have much higher interest rates than CMAs, although they’re less liquid and you’ll likely pay fees or penalties if you try to access them early. And some high-yield online savings accounts and certificates of deposit match or exceed the interest rates of CMAs.

Most cash accounts offer only remote assistance, via phone, email or social media direct message.

Cash management accounts sport some intriguing pros — but it’s also important to look at the cons. Do you prefer having access to in-person customer service? Do you want to stash money away for retirement and let it earn as much interest as possible? If so, a cash management account might not be for you. But if you’re attracted by higher interest than most brick-and-mortar savings accounts offer, have or intend to open an investment account and are happy with remote customer service, then a CMA may be a good place to park your shortto medium-term savings.