Sweep accounts: the idle cash your brokerage is quietly holding

Open a brokerage account, sell a stock, or deposit money you haven't invested yet, and that cash has to live somewhere. It doesn't just sit as inert dollars — the brokerage automatically 'sweeps' it into a holding vehicle called a sweep account. Most people never think about this, which is exactly the problem: the default sweep at many brokerages pays a rock-bottom interest rate, quietly costing you real money on any cash balance you hold. Understanding your sweep, and knowing you can often change it, is one of the higher-value five-minute tasks in personal finance.

What a sweep account is

A sweep account automatically moves ('sweeps') your uninvested brokerage cash into an interest-earning place — typically either a bank deposit program (your cash is parked at partner banks, FDIC-insured) or a money market fund. It happens without you doing anything, and the money is still available to invest instantly. The catch is what rate that default sweep pays. Brokerages profit from the spread on cash held in low-yielding bank sweeps, so the default is frequently a fraction of a percent — sometimes near zero — even when money market funds at the same brokerage pay far more.

Bank sweep vs. money market fund

Neither option is 'wrong' — a bank sweep's FDIC insurance is genuinely valuable, and a government money market fund is about as safe as non-bank cash gets. The issue is purely the rate. Many brokerages set the low-yield bank sweep as the default and make you opt into a higher-yielding money market fund. Some brokerages have a competitive default; others don't. The only way to know is to look.

How to check and fix yours

1. 1
   Find your current sweep and its rate

   In your brokerage account, look for 'cash sweep,' 'sweep program,' or your settlement fund. Note the current yield it's paying on uninvested cash.

2. 2
   Compare it to the brokerage's money market funds

   Check the yield on the firm's government or Treasury money market fund. If it's meaningfully higher than your sweep, you're leaving money behind.

3. 3
   Redirect the cash

   Depending on the brokerage, either change your default sweep option or simply buy the money market fund with your idle cash — often a single trade.

4. 4
   Consider taxes for high earners

   A Treasury money market fund's interest is exempt from state tax, an extra edge in high-tax states. A tax professional can confirm what fits your situation.

When the default is fine

This matters in proportion to how much cash you keep at the brokerage. If you're fully invested and rarely hold more than a small settlement balance, the sweep rate is close to irrelevant — a few dollars either way. It becomes worth acting on when you park meaningful cash there: money between investments, a large recent deposit, dividends accumulating, or a chunk of your emergency or opportunity fund held at the brokerage. The bigger and more persistent the cash balance, the more the sweep choice is worth.

The bottom line

Every dollar of uninvested cash in a brokerage sits in a sweep account, and the default sweep is often chosen for the brokerage's benefit, not yours — paying a fraction of what the firm's own money market funds pay. On meaningful cash balances, that gap can be hundreds of dollars a year for zero added risk. Check what your sweep pays, compare it to a government money market fund at the same firm, and redirect if there's a real gap. It's disclosed, it's legal, and it's one of the easiest yield upgrades available — but only if you actually look.