If you are looking to earn high interest in the short term, then definitely consider opening a cash management account or high-yield savings accounts. It is important to understand how these two compare before you decide to open one up.

Fortunately, choosing between Cash Management Accounts and High-Yield Savings Account doesn’t have to be a difficult decision because we have all of the information ready to help you figure out Which Is the Better Option for you.

What’s the Difference Between Cash Management Accounts and High-Yield Savings Accounts?

A cash management account is a cash account offered by a nonbank financial service provider. These accounts usually have higher interest rates than traditional brick-and-mortar bank accounts. 

Cash management accounts are fairly new to the market and you should consider two things before signing up for one:

• There might be restrictions on how easily you can deposit or withdraw your cash. Some cash management accounts only allow electronic transfers to take money in and out of your account.
• The Federal Deposit Insurance Corp. coverage on your money doesn’t come from the cash management account provider. Instead, the provider places customer funds into FDIC-insured partner banks that provide coverage.

As mentioned before, both cash management accounts offer you high interest rates when it comes to your cash, so it is important to consider the following when choosing which account is best for you.

What kind of access will you have to your fund

Savings accounts and cash management accounts can have different ways of depositing and withdrawing money. Cash management accounts can make this process trickier than savings accounts. 

Some cash management accounts have ATM access be available through a large network and some will not allow to withdraw cash from an ATM at all. You’ll also find that some cash management accounts prevent customers from depositing and withdrawing cash through electronic transfer to outside accounts. In addition, some cash management accounts don’t allow check deposits.

Savings accounts have withdrawal limits

Bank savings account have a limit of six transactions per month on transfers and withdrawals, placed by The Federal Reserve Board. Cash management accounts aren’t bank accounts, so customers don’t have the same restrictions on how many transactions they can make per month. If you’re planning to open a new account that you want to use for regular daily purchases, you may want to look at a CMA that offers a debit card. If you would rather park your money for a while and not touch it, a high-yield savings account might be a better bet.

What kind of extra features you want with your account

When it comes to cash management accounts, debit cards and check-writing aren’t always standard management. They are however, very common options for bank checking accounts, which are typically available to link to savings accounts.

Different accounts offer different perks. You’ll want to do research on an account to see if their perks will better benefit you. For example,  Aspiration’s Spend & Save account gives back cash for spending money at more socially conscious business. 

Will you want to link other accounts

With a high-yield savings account, you’ll be able to open a checking account with the same bank which makes it quicker and easier for you to make transfers. You might also find that some banks allow customers to create sub-accounts. Sub-accounts allows you to have different savings accounts for different goals.

On the other hand, cash management accounts providers are more likely to allow you to link brokerage or investment accounts at the same firm. This can make it easier for you to transfer your funds back and forth.