Finance
Sweep Account
A bank arrangement that automatically moves cash above a target balance out of your low-yield checking account into a higher-yielding investment vehicle every night.
Left alone, cash in a business checking account earns almost nothing. A sweep account solves that with a standing instruction: at the end of each business day, transfer everything above (say) $100,000 into a money-market fund, a treasury fund, or an FDIC-insured deposit network. The next morning, the funds are still available for outgoing payments.
For an owner-led business or a high-net-worth individual sitting on $500,000 to several million in cash, a sweep is usually the easiest 4% to 5% pickup available. On $2 million of idle cash at 4.5%, that is $90,000 a year for essentially no operational change.
Most business banks offer proprietary sweeps. Fintech operating accounts like Mercury Treasury and Brex Cash sweep into government money-market funds by default. Your CPA and bookkeeper should classify sweep-generated interest correctly so it appears on your books as investment income, not miscellaneous revenue.
Common pitfalls
- Assuming your sweep is FDIC-insured when it actually sweeps into an SIPC-covered brokerage account — the protections and limits differ
- Setting the target balance too low and running into overdraft fees when a large payment clears before the morning sweep-in
- Ignoring sweep interest at tax time — the 1099-INT still generates ordinary income tax liability
- Choosing a bank sweep with hidden markup instead of a transparent government money-market fund — read the fine print on the yield you actually keep
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