A checking account provides easy access to your cash for spending and paying bills, while your savings account earns interest. But there’s another account type — called a cash management account — that combines characteristics of savings and checking accounts into one.

Cash management accounts, or CMAs, are convenient for those who have a lot of cash sitting around and want to streamline their finances. But they’re not for everyone. Continue reading to learn how cash management accounts work and the pros and cons of using one.

What is a cash management account?

A cash management account combines certain features of both checking accounts and savings accounts into a single account. CMAs are available at brokerages and investment firms rather than banks or credit unions.

Depending on your financial situation and preferences, a cash management account can stand in for both a checking and savings account. CMAs can earn competitive interest, like a savings account. They can also provide ATM access, check writing abilities, and bill pay — like a checking account.

In addition to streamlining your finances, cash management accounts are a secure place for large balances. They often provide FDIC coverage beyond the typical $250,000 limit so you can keep higher volumes of cash safe and insured.

How does a cash management account work?

Cash management accounts are typically held at brokerages or investment firms — not banks or credit unions. And rather than heading into your local branch to transact, you’ll do most (if not all) of your CMA banking online.

Brokerages or firms offering cash management accounts don’t insure your money themselves. Instead, they sweep your balance into one or more FDIC-insured partner banks. This often allows cash management accounts to offer more than the typical $250,000 worth of FDIC insurance to each customer. For example, if you fund your CMA with $750,000, your balance may be swept into three different banks — each offering $250,000 worth of FDIC insurance.

Like savings and checking accounts, features vary between CMAs. But many cash management accounts include the following:

• Competitive interest: While cash management account interest rates may not exceed those offered by the best high-yield savings accounts, they typically offer competitive interest that surpasses traditional savings account rates.

• Low fees: Many of the best cash management accounts offer low or no fees, which can help you maximize your earnings.

• Generous FDIC insurance: Partnering with insured banks allows cash management accounts to offer higher FDIC insurance limits.

• Debit card: Debit cards let you use your cash management account like a checking account. Some accounts even offer a fee-free ATM network.

• Bill pay, check-writing, peer-to-peer transfers: The best cash management accounts have plenty of accessibility and convenience — including bill pay features, checking-writing abilities, integration with payment apps, and unlimited transfers.

Cash management account vs. checking account

Cash management accounts and checking accounts have certain features in common, but they differ in several ways.

Cash management accounts are offered by brokerage and investment firms, and they combine features of checking and savings accounts. On top of common checking features like bill pay, a debit card, and unlimited transfers, cash management accounts also offer competitive interest. They’re also more likely to offer higher FDIC insurance limits.

You can find checking accounts, on the other hand, at banks and credit unions. Many checking accounts don’t earn interest, but they do tend to have a wide array of features. In addition to those offered by cash management accounts, checking accounts may come with budgeting tools, direct deposit, sign-up bonuses, and more.

Pros and cons of cash management accounts

If you’re considering using a cash management account to streamline your finances, weigh the following pros and cons first:

Pros

• Higher FDIC insurance limits: Having a network of partner banks allows many brokerages to offer more than $250,000 in FDIC insurance per customer. This makes CMAs attractive to customers with lots of cash.

• Simplification of money management: A cash management account is a single account serving multiple purposes, which can help simplify your banking.

• Accessibility and convenience: A cash management account streamlines money movement between savings, checking, and investments. A CMA’s checking features also make it convenient to spend money, pay bills, and make transfers.

Cons

• Limited — if any — in-person banking: Many brokerages offering cash management accounts operate mostly or completely online. Those who prefer in-person banking may have a hard time finding a cash management account with branch access.

• Better rates found elsewhere: Online savings or other account types may offer higher rates than cash management accounts. If you want to maximize interest earnings on your savings, don’t limit your search to cash management accounts.

• Limited features: Cash management accounts may not have all the same features and tools — like budgeting tools or direct deposit — that many checking accounts offer.

Is a cash management account right for you?

A cash management account may be a good idea if you want to streamline your banking experience by combining your checking and savings accounts. But most CMAs are only ideal for those who are comfortable banking online. Because of their high FDIC insurance coverage limits, CMAs are a good fit for those with a lot of cash they need to insure. And they’re also convenient for active investors who want to keep their savings, checking, and investments under one roof.

On the other hand, if you prefer in-person banking, have a good relationship with your local bank or credit union, or want to prioritize finding the highest savings interest rate, a cash management account likely isn’t for you.