How to Earn Interest on Cash in a Schwab Account

Have some cash sitting in your Charles Schwab account? Great! But instead of letting it just sit there and gather dust, you can actually put it to work. Yes, that cash can earn interest — sweet, passive income!

TLDR: You can earn interest on cash at Schwab by moving it into higher-yield options like a money market fund or Treasury bills. Don’t let your cash sit in a low-interest sweep account. Consider automatic investing tools to help grow your idle money. Always read the fine print and compare your choices before committing.

Start by Understanding Where Your Cash Goes

When you deposit money into a Schwab brokerage account, it usually lands in something called a “sweep account.” It sounds fancy, but it’s basically like a digital envelope that holds your uninvested cash.

There are two main types of sweep accounts:

• Bank Sweep – Schwab transfers your money to their affiliate banks. They usually pay low interest (think 0.45% or even less).
• Money Market Fund Sweep – In some accounts, Schwab lets your cash go into a money market fund automatically. Better interest, but not always the best available.

So what should you do? Stop using the default sweep option and explore better ways to put that idle money to work.

Options to Earn More Interest

Here’s where the real fun begins. Let’s look at some smarter places to park that cash within Schwab.

1. Schwab Money Market Funds

These are mutual fund-like accounts that hold super short-term, low-risk debt securities. They’re designed to be safe and liquid.

Why people love them:

• Higher yields (as of 2024, between 4.5% and 5%)
• Almost no fluctuation in value
• Easy to buy and sell with zero fees

Popular choices:

• SWVXX – Schwab Value Advantage Money Fund
• SWSXX – Schwab U.S. Treasury Money Fund

Just log into your Schwab account, go to “Trade,” and buy one of these funds just like you’d buy a stock.

2. Treasury Bills (T-Bills)

If you don’t need your cash for a few months, short-term government Treasuries are an excellent option. They’re safe (backed by the U.S. government!) and currently offer attractive yields.

Here’s how they work:

• You buy a T-bill for less than its face value
• At maturity (like 3 months or 6 months), you get paid the full amount
• The difference is your interest — boom, free money!

Example: Buy a $1,000 T-bill for $980 → Get $1,000 when it matures → You earn $20.

At Schwab, you can buy T-bills through the “Bonds” section or even during Treasury auctions.

3. Schwab CD Options (Certificates of Deposit)

Want something safe and predictable? CDs are your friend. Schwab offers CDs from various banks — you just pick the term.

Why they’re cool:

• Fixed rate, guaranteed income
• FDIC-insured up to $250,000 per institution
• Great if you don’t need your cash short-term

But remember: Once your money’s in a CD, you probably won’t want to pull it out early, or it’ll cost you.

How to Actually Switch Your Cash

Moving your cash is easy! Here’s a quick step-by-step:

1. Log in to your Schwab account
2. Click “Trade”
3. Choose “Mutual Funds” or “Fixed Income” depending on your choice
4. Enter the ticker (like SWVXX) or browse treasury auctions
5. Review and place your trade

You can also call Schwab support — they’re very friendly and helpful. Seriously.

Let Schwab Do It for You: Automatic Investing

Don’t want to think too hard about where to park your cash? Schwab offers automation tools that can help.

• Schwab Intelligent Portfolios® – Think “robo-advisor.” It invests your money based on your goals.
• Automatic Investment Plans (AIPs) – Set recurring buys into funds or ETFs. You choose the amount and frequency.

This is perfect if you just want to say, “Here, take my money and grow it, please!”

Other Creative Ideas to Grow Your Cash

Feeling adventurous? Try these nuggets:

• Short-term bond ETFs – Slightly more risk, slightly more return
• Dividend-paying ETFs – Generate cash flow while staying invested
• High-yield savings accounts (outside Schwab) – Sometimes offer better rates if you’re okay moving money

Always do your research. Higher returns often come with higher risks.

Watch Out for These Traps

Here’s what to avoid when trying to earn interest on cash:

• Leaving cash in bank sweep – Super low yield, like watching plants grow in the dark
• Forgetting to reinvest matured T-bills or CDs – You’ll miss out on new interest opportunities
• Ignoring tax consequences – Some interest is taxable, so keep Uncle Sam in the loop

Final Tips for Smooth Cash Management

The goal is to keep your money safe, available, and working. Here’s how to do that:

• Check rates regularly – what’s best today might not be next month
• Spread cash across options for flexibility
• Use Schwab’s research tools and chat support if you’re unsure

Remember: Even small interest earnings add up over time. Passive income FTW!

Conclusion

Leaving your cash to chill in a sweep account is like parking a Ferrari in the garage and never driving it. With just a little effort, you can earn way more income from the money you already have. Whether it’s money market funds, T-bills, or CDs, there’s something for every cash holder at Schwab.

So take charge of your cash. Future-you will definitely thank you.