Schwab Cash Sweep Yields 0.01% Versus 4.3% Money Market Options
SCHW•Uninvested cash at Schwab currently earns just 0.01% through its FDIC sweep program, while alternatives like Vanguard and Fidelity money market funds yield over 4.3%. This yield gap threatens outflows of $200 billion in idle balances and could shave tens of millions off Schwab’s annual net interest income.
1. Schwab’s cash sweep yield falls behind
Schwab’s FDIC-insured cash sweep program currently pays 0.01% on uninvested client balances, trailing Vanguard Treasury money market fund yield of 4.39% and Fidelity Government Money Market fund yield of 4.45%.
2. Money market funds draw client deposits
High-yield money market and savings options offering rates above 4% have emerged as attractive alternatives for clients seeking better returns on idle cash held at traditional brokers.
3. Scale of Schwab’s idle cash balances
As of quarter end, Schwab held roughly $200 billion in uninvested sweep deposits, representing a significant portion of client assets that could be redirected to higher-yield vehicles.
4. Implications for net interest revenue
Even a 10% shift of sweep balances into competing products could reduce Schwab’s annual net interest income by more than $20 million, pressuring interest revenue in upcoming quarters.
