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If you’ve reached a stage where a simple transaction or savings account is no longer the best way to manage your money, or if you’re looking for a way to simplify managing your savings and investments, it could be time to consider opening a cash management account. Most prominent financial institutions in Australia offer cash management accounts, but features can vary across institutions.
Compare cash management accounts below
How does a cash management account work?
A cash management account is essentially a savings account, although some financial institutions classify them as investment accounts. Such an account tends to offer higher interest than other savings accounts offered by any given financial institution.
As an account holder you can expect easy access to funds in your account. Some such accounts come linked to online trading platforms so you don’t have to waste precious time when managing your investments.
Some financial institutions allow customers to open cash management accounts using Self Managed Super Funds (SMSFs), and trusts can open such accounts as well. You may need to meet certain requirements in order to open an account, such as a minimum opening balance and ongoing balance requirements.
How do I compare cash management accounts?
While some of the features are essentially the same, some others are not, so pay attention to the following if you plan to open a cash management account.
- Interest rate. Some cash management accounts offer the same interest rate no matter how much your account balance is, while others offer tiered interest rates. In case of the latter, higher balances benefit through better rates. With accounts that follow tiered interest rates, balances in excess of $500,000 tend to earn highest rates.
- Access to funds. This aspect requires your attention if you wish to access funds in your account from time to time. Depending on the account you choose, you can access money in your account through ATMs, EFTPOS, Internet banking, phone banking, cheque books, branch banking, and even BPAY.
- Online trading. If you trade online, or if you plan to in the future, you can consider opening a cash management account that you can link to an online trading account. In such a scenario, you can look forward to a seamless integration of the two, which would give you the ability to manage your equity trading needs with ease.
- Fees and charges. Cash management accounts tend not to charge any ongoing account keeping or management fees. Some might not charge any transaction fees, and some others might offer a limited number of free transactions per month. You might also have to pay fees for using cheques and for staff assisted transactions. Online and phone transactions are generally free.
What can a cash management account do for you?
How it can help
- High interest rate. When compared to conventional savings accounts you can expect a cash management account to offer a better interest rate. With high balances, even a slight difference in percentage can make a noticeable difference in dollar value.
- Easy access to funds. A cash management account tends to give you easier access to funds when compared to a conventional savings account. While a typical savings account might limit access to funds through online and phone banking, with your cash management account you can access funds at ATMs and you can also use your money to pay bills via BPAY.
- Ideal for SMSFs. A cash management account gives you easy means to simplify your tax returns, super fund accounting, and long term record keeping, given that all related transactions appear on a single statement. With some such accounts, you can download statements from the preceding 10 years on your own.
Here are the risks
- Opening and ongoing balance requirements. Cash management accounts normally have minimum account opening balance requirements, which can be in between $5,000 and $10,000. While some have ongoing minimum balance requirements as well, some others don’t.
What are some common pitfalls and traps?
Start by finding out if the Australian Government guarantee that offers protection to aggregated deposits up to $250,000 applies to the financial institution you wish to deal with, because if it does not you might have to fend for yourself in the case of any eventuality.
If your account comes with a linked debit card you might be able to use it overseas. In such a scenario make sure you find out about overseas ATM fees and currency conversion fees at the onset, because these can be rather high. Your financial institution might impose a fee if your balance falls below the ongoing minimum balance requirement, so this aspect requires your attention as well.
Potential interest earned on selected cash management accounts
The following table shows how much interest is earned with an initial deposit of $5000 and monthly deposits of $1000 over a 12-month period.
|Account||Maximum variable rate p.a.||Interest earned over 12 months|
|AMP Cash Manager||0.5% p.a.||$158.36|
|Macquarie Bank Cash Management Account||0.05% p.a.||$147.75|
|Bank of Queensland Cash Management Account||0.15% p.a.||$153.06|
|NAB Cash Manager||0.05% p.a.||$105.38|
|St.George Investment Cash Account||0.01% p.a. Ongoing, conditions apply||$26.27|
Find the answer to frequently asked questions below
Q. What eligibility criteria do I have to meet to apply for a cash management account?
You should meet the account’s minimum age requirement, which can be 16 years or 18 years. You should also be a resident of Australia.
Q. Can I apply for such an account online?
Yes, many financial institutions give you the ability to apply online. As a new customer, you would have to go through a legally required identity verification process.
Q. Can I use a cash management account for direct debits and credits?
This depends on the account you choose, but know that this is possible. You can also use some such accounts to set up recurring payments.
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