Sweep program (brokerage cash).

In plain English

A cash sweep is a standing arrangement in which uninvested cash in your brokerage account moves daily into a destination that pays interest. That destination is usually deposit accounts at partner banks or a money market fund. The broker discloses the available options and the rate paid on each, and the default option is often the lowest-paying one. The broker keeps the difference between what the destination earns and what it credits to you, which for many firms is a significant revenue line. Bank sweep balances carry deposit insurance at the partner banks, while money fund balances do not, though brokerage account protections apply to the position.

01Why it matters

Cash parked in a low-paying default sweep instead of a higher-paying option is a quiet cost that compounds for as long as you leave it, and switching is usually a settings change rather than a new account.

02The math, step by step

Say you hold 50,000 dollars in cash. A default sweep crediting 0.3 percent pays 150 dollars a year while an alternative crediting 4 percent pays 2,000 dollars. That 1,850 dollar annual gap, left alone for 20 years and compounding at 4 percent, adds up to more than 55,000 dollars of forgone growth.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

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