Got cash on temporary hold? Careful where you stash it

Some holding accounts pay (a little) better than others

Q: Where’s a good place to store cash in your portfolio if you’re not ready to invest yet?

A: Investors afraid to jump into stocks probably have cash sitting on the sidelines. But idle cash can be put to better use than sitting in a brokerage account.

Nearly all brokerages are happy to let you park your uninvested cash in your account. Most brokerages offer “sweep” services in which they’ll move uninvested cash into a connected cash account or money market fund.

Sweep accounts are convenient, but they pay low interest rates. Several online brokers routinely pay 0.05% or less on cash deposited with them. Some pay nothing. Investors can do better. Some top online banks pay 0.8% or so on cash.

It might not sound like much, but such a big spread can add up. An investor with $10,000 in cash waiting to be invested can get $80 a year by shifting the money to an online savings account instead of leaving it in a brokerage account paying nothing.

There are downsides. Online banks require two to three days to transfer money in or out of another account. This might be a deal-killer for investors who need to have more ready access to their cash.