How Low Interest Rates on Your Brokerage Cash Balances Could Be Costing You Thousands

Several brokers are under scrutiny for how they handle and make money on idle cash in customer accounts.

Brokers could be making significant returns on your idle cash in brokerage accounts and keeping the majority.

Brokers and banks are facing mounting scrutiny over their cash sweep programs. The U.S. Securities and Exchange Commission (SEC) is investigating them, and customers have filed class action lawsuits.

How are brokers making money on idle cash, and what can you do to earn better returns on your deposits?

Key Takeaways

• Brokerage firms often sweep uninvested cash in their customers’ brokerage accounts into bank accounts.
• The banks typically keep the majority of the returns on that cash.
• Some brokers could be making up to 10 times more than you receive on your idle cash.
• Investors can consider proactively investing their cash balances in high-yield savings accounts or CDs to net better returns.

What Do Brokerage Firms Pay on Average for Cash on Deposit?

Brokerage firms can transfer their customers’ uninvested cash from their brokerage accounts to higher-interest accounts. While it stands to reason customers would benefit from the higher interest, there is mounting concern that brokers keep most of the returns for themselves.

In 2025, the SEC fined Wells Fargo Advisors and Merrill Lynch $60 million for failing to consider their client’s best interests when choosing cash sweep program options.

According to a Bloomberg Law analysis, other brokerage firms are facing class action lawsuits alleging that customers were underpaid billions of dollars due to the low interest rates that banks and investment firms paid.

How Much Do Brokerages Earn on Those Deposits?

Cash sweep programs are lucrative for brokerage firms. They can move billions of dollars of customers’ money into sweep accounts and pay customers a fraction of the interest being earned.

Brokerage firms may seek to sweep cash into affiliated banks, often paying low interest rates. According to some reports, brokers could make 10 times more than their customers do on their cash.

What Can You Do to Earn Better Returns on Your Brokerage Deposits?

You do not have to accept the default cash management programs brokerage firms offer. You can consider placing that uninvested money in a high-yield savings account, offering interest rates close to 5%.

You can explore putting it in a CD if you do not need immediate access to that cash. As of January 2025, CD rates are as high as 5.50%.

The Bottom Line

Brokers commonly employ cash sweep programs, although this practice has attracted SEC scrutiny and class action lawsuits.

As an investor, you want the highest returns possible on your money. You can explore alternatives to the default sweep accounts that your broker uses. Take a look at the cash management options your broker offers. You can also explore options like moving that money to a high-yield savings account or a CD.