LPT: Consider a "cash management account" instead of a standard bank account

Submitted by Flaky-Illustrator-52 t3_11ytld6 in LifeProTips

In light of several recent issues and failures with some banks, diversifying where your cash is deposited might be a smart idea. "Cash management accounts" offered by several institutions sweep your cash into multiple accounts at different banks to increase the amount of FDIC insurance you are eligible for in what appears to be a single account (but is multiple bank accounts at different institutions under the hood).

The higher FDIC insurance limit is nice, but an interesting and unadvertised benefit is that if one of those banks fails because of a bank run, you don't temporarily lose access to all of your cash immediately and have to deal with the FDIC or whatever it is you need to do after your bank fails. You will only temporarily lose access to the amount of cash that the program(s) controlling the cash management account had chosen to deposit at that particular bank.

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heidismiles t1_jdcz9w3 wrote

So your tip is for actual millionaires?

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Flaky-Illustrator-52 OP t1_jddfdh3 wrote

You can have $5 and still make one of these

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heidismiles t1_jddfsh5 wrote

FDIC insurance covers $250,000.

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laplongejr t1_jdhzrvt wrote

Yeah, but what do you do in the meantime when the bank is out and FDIC is busy? The point is to avoid the practical issue of now way to access the money.

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Flaky-Illustrator-52 OP t1_jdpvmhp wrote

The same thing you'd do if you'd deposited your money in a bank that just caked its pants and the FDIC was busy - wait and cross your fingers

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Flaky-Illustrator-52 OP t1_jddgj3x wrote

$250,000*as many accounts as you have open. FDIC insurance isn't per depositor only. It is per depositor, per institution, for each account ownership category. That is how these "cash management accounts" are able to push the limit higher - they're actually multiple accounts at multiple institutions with an interface that appears to just be one account at the institution you made your "cash management account" at

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heidismiles t1_jddim83 wrote

That's my point. Your advice is only relevant for millionaires.

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Flaky-Illustrator-52 OP t1_jddkua8 wrote

No, it isn't only for millionaires - if you have less money it is still relevant because you're depositing in multiple institutions. You'd know that if you actually read my post

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keepthetips t1_jd9aqd8 wrote

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