Cash Sweep Rates by Broker: The 0.01% Idle Cash Trap

A cash sweep is where your broker parks uninvested cash overnight, and the default rate depends on the broker. As of October 27, 2026, bank sweeps at Schwab, E*TRADE and Merrill pay 0.01% on small balances and Wells Fargo pays 0.02%, while Vanguard's VMFXX money fund yields 3.85%. Schwab and Merrill sell money funds yielding 3.73% to 3.85% that you can buy with the same idle cash.

Fidelity and Vanguard already default to a money fund, so their customers earn the fund rate on idle cash without changing anything. At a bank-owned broker or a wirehouse, compare the default rate with the money fund the same broker sells. If the broker offers no comparable fund, use an outside savings account.

Cash sweep rates by broker: default vs better options

Rates are for a small balance (under $10,000 or €10,000) and come from each broker's own page unless marked otherwise; a better option is a sweep choice or fund you can switch to or buy without leaving the broker.

All rates were checked on 2026-10-27. Fund yields are 7-day yields after fees, bank sweeps are APYs.

Data: Schwab, Merrill, ETRADE, Wells Fargo, Chase, Robinhood, Fidelity and Vanguard rate pages, checked Oct 27, 2026; J.P. Morgan sweep rate via NerdWallet.*

The low tiers at Schwab, Merrill, ETRADE and Wells Fargo run from 0.01% to 0.02%, and the top tiers published by ETRADE, Merrill and Wells Fargo only reach 0.15% to 0.20%, at balances of $1 million to $20 million. Interactive Brokers has no sweep: it pays no interest on the first $10,000, then a rate tied to the benchmark.

What a cash sweep vehicle is

Each night your broker runs a sweep of uninvested cash, whether it came from a deposit, a dividend or a sale. The cash lands in a sweep vehicle the broker picked, which your statement usually labels "cash & sweep vehicle" and which is one of three things:

• A bank deposit program. Cash goes to one or more partner banks, often owned by the broker, at a rate the broker sets. Cash left in a 0.01% bank program while the same broker sells a money fund near 3.7% is what people call a cash trap.
• A money market fund. Cash buys shares of a fund that tracks short-term rates, like SPAXX at Fidelity or VMFXX at Vanguard.
• A free credit balance. Cash stays at the broker, which pays interest on it directly or pays nothing.

Protection differs by vehicle: bank sweep cash is FDIC-insured to at least $250,000 per program bank, and spreading it across several banks raises the ceiling; Vanguard Cash Deposit, for example, is eligible for coverage up to $1.25 million on an individual account. Money market funds are not FDIC-insured. They count as securities under SIPC, which covers up to $500,000 including $250,000 in cash if the broker fails, and does nothing if the fund itself loses value.

Why default cash sweep rates are so low

The broker sets the sweep rate and keeps the spread between what your cash earns at the bank and what it pays you. At Schwab that spread is close to half the business: net interest revenue was $3,476 million of $7,171 million in total net revenue in Q3 2026, or 48.5%. The same release puts client transactional sweep cash at $492.8 billion at the end of September, a figure that also counts broker-dealer cash, so it overstates bank sweep alone.

Regulators and courts have gone after sweep pricing since January 2025:

• In January 2025 the SEC fined two Wells Fargo entities and Merrill Lynch $60 million in total, saying their policies weren't designed to weigh clients' best interests when picking sweep options; the firms settled without admitting or denying the findings.
• In February 2026 a federal judge let breach-of-contract claims against J.P. Morgan proceed and dismissed the fiduciary claims. Plaintiffs allege sweep rates of 0.01% to 0.03% since 2018.
• In April 2026 Oppenheimer announced a $70 million settlement of its sweep class action, without admitting wrongdoing.
• In October 2026 Merrill agreed to a proposed $39 million class settlement covering Merrill Edge retirement accounts that earned 0.05% to 0.14% between 2016 and 2020; the deal still needs court approval.

Plaintiffs have lost rounds too: a suit against U.S. Bank was dismissed with prejudice in February 2026, and the same report listed suits against Morgan Stanley and Schwab as still pending.

The cost of 0.01% vs 3.85% on a $30,000 buffer

At E*TRADE's and Merrill's published 0.01% tier, $10,000 earns $1 a year.

A $30,000 emergency buffer in the sweep earns $3 in the first year; in a fund yielding 3.85% it earns $1,155. Depending on which pairing you pick, from Ally's 3.20% savings rate against Wells Fargo's 0.02% up to VMFXX against a 0.01% sweep, the alternative pays roughly 160 to 385 times what the default does.

Over ten years at flat rates, the 0.01% sweep turns $30,000 into $30,030. The money fund turns it into about $43,771, a gap of $13,741. To rerun it with your balance and your broker's two rates, use the free compound interest calculator; how compound interest works explains the math.

Data: computed with annual compounding at flat rates; VMFXX 7-day SEC yield 3.85% (Vanguard, Oct 23, 2026).

Rates did not stay flat in 2026: the Fed raised its target range to 3.75%-4.00% on September 16, 2026, and that was still the range as of October 27, 2026, with the FOMC meeting on October 27-28. Money fund yields follow the policy rate, while the bank sweep tiers at Schwab, Merrill, E*TRADE and Wells Fargo stayed at 0.01% to 0.02% after the September hike. The J.P. Morgan suit alleges a sweep paying 0.01% to 0.03% through years when T-bills paid above 5%.

Sort your cash into buckets first

Spending money for this month lives in checking and doesn't need a rate. The emergency buffer is a few months of expenses, sized to how risky your income is; how many months of expenses you need covers the sizing. Sinking-fund cash for the next car or a roof needs to be reachable within weeks. Long-term money you won't touch for ten years or more loses purchasing power at 0.01% and earns only cash returns at 3.85%, so it belongs in investments.

The cash cascade: where excess cash should live

Excess cash goes to checking first, then the broker's money fund, then a savings account, then T-bills or CDs, in order of how soon you need it.

1. Checking for this month's spending.
2. A government money market fund at your broker for cash you want ready to invest. In October 2026, yields ran from 3.49% (SPAXX, October 8) to 3.85% (VMFXX and Merrill's TTTXX, October 23). Selling settles the next business day, so it won't fund a trade the instant you place it.
3. An FDIC-insured savings account for the emergency buffer, following the case for keeping the emergency buffer outside the brokerage. Ally paid 3.20% APY on October 26, 2026, against an FDIC national average of 0.38% for savings.
4. T-bills or a CD ladder for money you won't need for one to five years. On October 26, 2026, Treasury bills paid 4.22% for three months and 4.47% for one year, above most money funds, because markets are pricing further hikes. How to build a CD ladder covers the mechanics.

For European savers, IBKR Ireland pays interest on euro cash above €10,000 directly, and a money market UCITS ETF or a bank savings account covers the buffer. Trading 212 also pays interest on uninvested cash if you opt into its interest sharing programme; check the current rate in the app before relying on it.

Bank sweeps and savings accounts are FDIC-insured and a money fund isn't; in 2008 the Reserve Primary Fund "broke the buck" and fell below $1 a share. Government funds like VMFXX and SPAXX hold Treasuries and repo, which makes them far sturdier than that prime fund. The extra interest is also taxed as ordinary income, so on a $5,000 balance the switch is worth about $190 a year before tax.

The two-minute cash sweep audit

1. Find the rate. Log in and look for "cash features", "sweep" or "sweep rates", or check the cash line on your monthly statement. If the APY starts with 0.0, you're in a low-yield default.
2. Find the alternative at the same broker. Most brokers in the table offer a government money fund you can buy like any other fund. Note its 7-day yield.
3. Move it. Change the cash feature if your broker allows that, or buy the money fund with your idle cash. If the broker only offers a stingy bank sweep, move the buffer to an outside savings account.
4. Put a reminder in your calendar for every quarter. Sweep tiers and fund yields move independently, and the gap can reopen without any notice from the broker.

The SEC's own investor bulletin on cash sweep programs confirms you can move uninvested cash in search of a better rate even if your firm enrolled you automatically, so open your broker's cash page today and compare the two numbers.