A bank sweep is a type of bank or brokerage account that automatically transfers funds when the balance is above or below a preset minimum. The excess cash is usually swept into a higher interest-earning investment option, such as a money market fund. Sweep accounts are a typical business tool, especially for small businesses that rely on daily cash flow but want to maximize earning potential on sitting cash reserves. A business sets a minimum balance for its main checking account, over which any funds are swept into a higher-interest investment product. If the balance ever dips below the threshold, the funds are swept back into the checking account from the investment account.

Sweep accounts can also work the other way around, moving funds from an investment account to a checking account when the owners balance falls below a set threshold. Sweep accounts are designed to maximize funds that may be sitting idly by transferring or “sweeping” them into a higher yield investment option automatically. Sweep accounts, whether they’re offered by banks or brokerages, can help you get more bang for your buck when you have money that’s just sitting idle.

Sweep accounts offer several benefits, including maximizing earning potential on sitting cash reserves, automatic transfers of funds, and the ability to earn interest on money that you’re not actively saving or investing. However, there are also some risks associated with sweep programs, largely tied to the risks of the underlying investments. When using a bank deposit account as a sweep vehicle investment, invested funds are generally covered by FDIC insurance up to the first $250,000 in balances per bank, for each bank in which the customer has funds deposited.