Insured Cash Sweep (ICS) accounts leverage a network of banks to provide extra Federal Deposit Insurance Corp. coverage for your deposits. Rather than the standard $250,000 per depositor, per institution offered by the FDIC, ICS accounts can protect millions of dollars.
If your business has a large operating budget or cash reserves, a sweep account can offer peace of mind and convenience. Instead of opening and managing multiple business bank accounts — at multiple financial institutions — to ensure your funds are fully protected, you can unlock up to $150 million in FDIC coverage with an ICS account while still dealing with one primary bank (though many financial institutions cap ICS coverage to between $2 and $10 million).
Even if you use a sweep account, NerdWallet still recommends using separate banks for your main operating account, payroll account and emergency fund. This minimizes potential disruption to your business if your account is frozen or closed, or if one of your primary banks fails.
Sweep accounts can have a few potential drawbacks, though, including additional fees and delayed access to funds. Compare Insured Cash Sweep accounts across multiple business banks to find the best option for your small business.
How Insured Cash Sweep accounts work
1. Find a participating institution. Sweep accounts are typically only available at banks that are part of the IntraFi network, which includes nearly 3,000 local, regional and national FDIC-insured banks. Several online banks, including Axos, Grasshopper and Live Oak, are also members of the IntraFi network. And some neobanks — financial technology companies that offer banking services — partner with FDIC-insured banks that are part of the network.
2. Opt in to sweep services. You usually have to opt in to a sweep account, though Bluevine Business Checking and some other accounts offer ICS accounts as the default option. Either way, you’ll sign an agreement when you open your ICS account that allows the bank to move your money to other partner banks. Keep in mind that sweep accounts may have additional fees.
3. Choose your sweep preferences. You can typically select between two sweep options: demand or savings. Demand accounts allow for unlimited withdrawals, whereas savings sweep accounts place funds in money market accounts that cap withdrawals (often at six per month) but often offer a better interest rate. Demand accounts are best for operational funds that you need to draw on regularly, while savings sweep accounts are better suited for emergency savings and cash reserves.
Some banks also offer a third sweep option — Certificate of Deposit Account Registry Service or CDARS — which places funds into business certificates of deposit. These accounts typically have a higher, fixed interest rate, but you’ll pay a penalty if you withdraw funds before the CD term matures. Your sweep account options may vary from one financial institution to the next.
4. Let the account do its work. Your Insured Cash Sweep account will distribute your funds across a network of partner banks behind the scenes per your preferences. No bank account will have more than $250,000 within it — the maximum covered by FDIC insurance at one financial institution.
5. Access funds as usual. Despite having funds spread across potentially dozens of banks, you’ll still only deal with one financial provider and be able to see and access all of your funds through that primary bank. Large withdrawals could be delayed a day or two depending on the amount needed, with CDARS funds likely locked up even longer in line with the CD’s term.
Benefits of an Insured Cash Sweep account
Unlock millions in FDIC insurance. The FDIC insures up to $250,000 per depositor, per institution and per ownership category, which is likely sufficient for many small businesses. But companies with larger operating budgets may be exposed if their bank fails. Insured Cash Sweep accounts offer a solution by placing your deposits, in $250,000 increments, across a network of FDIC-insured banks. Combined, those partner banks can provide several million dollars in FDIC coverage.
Manage funds through one account. Business owners may want multiple business bank accounts to protect themselves from unexpected interruptions like an account freeze. But if you’re manually spreading opening and managing accounts across dozens of financial institutions just to ensure FDIC coverage, Insured Cash Sweep accounts simplify the process. Account holders open an account through one primary bank that acts as a custodian and automatically moves money to partner banks so that you don’t exceed $250,000 (principal and interest) at any one bank.
Drawbacks of an Insured Cash Sweep account
Additional fees apply to some sweep accounts. Sweep accounts require some additional overhead for financial institutions, and that cost may be passed down to account holders. Some ICS accounts charge a monthly fee, while others simply take a portion of the interest earned on your sweep account.
You may not earn interest on your full deposit (or at all). If your business has millions of dollars in deposits, ideally you’re putting it to work in a high-yield account. While most ICS accounts earn interest, some pay lower rates or cap what you can earn.
Bluevine Business Checking, for example, offers up to $3 million in FDIC insurance coverage through its sweep account. But you only earn interest (2.00% APY) on balances up to and including $250,000. And Mercury’s Business Bank Account, which is eligible for up to $5 million in FDIC insurance coverage, does not earn any interest.
Business bank accounts with sweep options
Looking for a business bank that offers Insured Cash Sweep accounts? Here are a few options:
You can also explore other banks that are part of the IntraFi network on its website.