You should review your brokerage account agreement and statement to determine if you are participating in a bank sweep program for your cash. .
Your broker-dealer could choose not to limit or end a relationship with an affiliated bank that experiences financial difficulties, even if doing so would be in the best interests of broker-dealers customers.
First, most sweep accounts are fdic insured, which provides your cash with a level of protection. .Thus, it is important to know how much of your cash your broker-dealer has swept into each fdic-insured bank participating in your broker-dealers bank sweep program at any given time, because any cash in these accounts that exceeds the 250,000 limit will not be protected.The financial innovation of sweep accounts is particularly interesting because it was stimulated not only by the desire to avoid costly regulation, but also by a change in supply conditions in this case technology.You can check with your broker-dealer to determine if there are other cash management options available to you that may provide a higher rate of return for your cash. .Broker-dealers may offer you several options for managing your cash. .fdic insurance covers all deposit accounts, including checking and savings accounts, money market deposit accounts and certificates of deposit. .Most broker-dealers keep a portion of the interest paid by the bank(s) as a fee for providing bank sweep services.Other factors you may want to consider when assessing your broker-dealers bank sweep program include: The compensation arrangement between the bank and your broker-dealer.When you setup a new brokerage account, you usually have to assign what you do with your cash. .It has also become part of the arsenal of services offered by credit card companies.Consider moving your funds into a high yield savings account instead: Dangers of a Sweep Account.It can be both a benefit or a detriment depending on how you use it and what options you selected when you set.In these cases, the financial institutions would ask either for more funds to be put into the investment account, or recommend other forms of investments and liquidation.If the description of the bank sweep program is not clear to you, you may want to consider asking your broker-dealer to explain how its bank sweep program works. .Robert Farrington 16 Comments, this article contains references win cash instantly usa to products from one or more of our advertisers.If you have a retirement account, you need to look at how your cash is being handled in the account.What relationship does my broker-dealer have with the deposit bank(s)?Broker-dealers may choose banks based on the amount of money the banks will pay the brokerage firms for swept funds, the banks affiliation with the brokerage firms, or some other business relationship between the banks and the brokerage firms.It automatically keeps the checking account balance at a preset target level, by transferring funds to or from the investment account as needed.This investor alert focuses only on the first option: bank sweep programs.On the same front, if you have a high-yield savings account, this could be a great sweep account.
If the money just sat in your brokerage, chances are you would earn nothing. .
If you decide to change your cash sweep option, ask your broker-dealer how to do that. .