COLORADO SPRINGS — Most of us put our money in a checking or savings account, but what about a cash management account?
Our partner at Carlson Financial explained what this is and how it could make your money go farther.
Carl Carlson, CEO of Carlson Financial, said CMA's or cash management accounts are growing in popularity.
Carlson said, "Cash management accounts are accounts that are a little bit like a savings account, maybe even a checking account, but it's typically with an investment firm."
It can also be with an online bank where you can manage cash and make payments.
Carlson said the really big appeal is that "interest rates are higher, so right now on a CMA you might be earning 2% or a little over 2% percent whereas if that money's in a checking account you're earning nothing."
With a savings account he said you might be earning only .5% or .75%.
"It's a better rate of return."
Another reason people get a CMA is the accessibility.
"If you're investing and you want to move some money over into cash for awhile or you want to take some out of cash and move it over to investments it's very simple to do it."
So should people still have a physical bank to go to? Carlson said it depends.
"Cash, generally you still need to go at least to an ATM to get some cash or if you're depositing cash you pretty much have to go to a bank to deposit the cash."
He said a bank will also come in handy if you want to get a loan on a house, car, or business. Ultimately, it comes down to your personal financial needs.
If you're wondering how investment firms or online banks are able to offer a higher interest rate Carlson said it's because they don't have the extra brick and mortar costs.
Most investment firms don't charge anything to open or maintain an account. If there are fees they're usually for online trades which can be around $6.95.
As far as risks with a CMA Carlson said they're FDIC insured just like a bank so the risk is similar.
Carlson Financial is a sponsor of Financial Focus.