what is a sweep account 
a sweep account is a bank or brokerage account that automatically transfers amounts that exceed a certain level into a higher interest earning investment option at the close of each business day commonly the excess cash is swept into a money market fund 1understanding sweep accountsusing a sweep vehicle like a sweep fund works by providing the customer with the greatest amount of interest with the minimum amount of personal intervention by transferring money at the end of the day into a high interest account in a sweep program a bank s computers analyze customer use of checkable deposits and sweep funds into money market deposit accounts some brokerage accounts have similar features that enable investors to gain some additional return for unused cash sweep accounts are simple mechanisms that allow any money above or below a set threshold in a checking account to be swept into a better investment vehicle sweep accounts were needed historically because federal banking regulations prohibited interest on checking accounts 12sweep accounts were originally devised to get around a government regulation that limited banks from offering interest on commercial checking accounts 3sweep accounts whether for business or personal use provide a way to ensure money is not sitting idly in a low interest account when it could be earning higher interest rates in better liquid cash investment vehicles these investment vehicles that provide higher interest rates while still offering liquidity include money market mutual funds high interest investment or savings accounts and even short term certificates with 30 60 or 90 day maturities for known layovers in investments businesses and individuals need to keep an eye on the costs of sweep accounts as the benefit from higher returns from investment vehicles outside the checking account can be offset by the fees charged for the account many brokerages or banking institutions charge flat fees while others charge a percentage of the yield sweep accounts may not be free and broker fees may make the account less attractive on a net basis 1personal sweeps vs business sweepssweep accounts for individual investors are typically used by brokerages to park money waiting to be reinvested such as dividends incoming cash deposits and money from sell orders these funds are typically swept into high interest holding accounts or money market funds until an investor decides on future investments or until the broker can execute already standing orders within the portfolio sweep accounts are a typical business tool especially for small businesses that rely on daily cash flow but want to maximize earning potential on sitting cash reserves a business sets a minimum balance for its main checking account over which any funds are swept into a higher interest investment product the business might also use a credit sweep to move the excess funds over to pay down pending lines of credit if the balance ever dips below the threshold the funds are swept back into the checking account from the investment account depending on the institution and investment vehicle the sweep process is generally set daily from the checking account while the return of funds can experience delays with the changes in regulations on checking accounts some banking institutions also offer high interest rates on amounts over certain balances 