What is a cash management account?

Put simply, a cash management account is a transaction account used by investors to receive cash from investments such as dividends or proceeds of sales and to purchase new investments.

They serve a similar purpose to an everyday transaction or savings account, allowing investors to earn interest over time on their funds.

Who do cash management accounts benefit?

Cash management accounts are tailored to investors with diversified portfolios consisting of multiple investment streams. These can include:

• individual investors
• entities and businesses
• self-managed super funds (SMSFs)
• brokers/investment platforms
• those using financial advisory/investment services

Transactions generally facilitate asset trading, superannuation payments, and receiving dividends and returns on investments.

Comparing cash management accounts

Interest rate

Cash management accounts generally pay higher interest rates than basic everyday transaction accounts but lower than some high-interest savings accounts.

See also: What's the difference between savings accounts and transaction accounts?

When you're choosing a cash management account, make sure you consider its interest rate structure. Some pay flat rates while others offer tiered rates tied to account balance brackets.

Ensure the interest rate is optimised for how much you expect to have in and out of the account on an ongoing basis.

Access to funds

Be sure to check withdrawal/access terms to be clear on whether you have instant access to your cash or need to provide notice.

Cash management accounts will generally allow you to access cash through the usual channels such ATMs, EFTPOS, internet banking, phone banking, branch banking, BPAY, etc. 

Fees and charges

Like many everyday transaction or savings accounts, cash management accounts are generally free from account or management fees. However, some institutions may charge fees on some transactions, such as international transfers or staff-assisted transactions.

1. Savings.com.au's two cents

Cash management accounts can provide investors with a seamless place to store cash inflows and outflows from all investments rather than having to juggle multiple accounts.

This increased visibility can allow investors to understand their current cash flow positions and implement further strategies to reach broader financial goals.

Before signing up to a cash management account, it's important to consider the interest rates on offer, as well as the features and requirements to open an account.

Cash management account eligibility

Cash management accounts can be opened online, subject to meeting appropriate identification requirements which include being:

• aged 18 years of age or over

• an Australian citizen or permanent resident

You may also be asked to supply a tax file number which is not legally required but generally recommended.

See also: What is withholding tax on a savings account?

Some banks will require a minimum opening balance. There may also be a minimum balance required to achieve an ongoing interest rate or to keep the account open.

Cash management accounts are often linked to share trading or other investing platforms. Some of these may prefer an in-house or partner-linked cash management product but it's worth doing your own research to choose an account that will best suit your needs.