Broker Cash Interest Explained

Cash interest follows the legal holder of the money

The label shown in an app does not determine who owes the money or what protection applies. A broker-dealer may pay interest on a free credit balance, a bank may pay deposit interest after a sweep, and a money market fund may distribute investment income. Those arrangements can look similar in an account balance while creating different claims, risks and tax records.

Start with the custody structure rather than the headline percentage. Read this guide with Investor Protection Explained, Multi-Currency Brokerage Accounts and Broker Tax Reports Explained.

Identify the legal entity account and currency first

One brand can operate through several legal entities. Eligibility, protection, supported currencies and cash programs may change with residence, client classification, account type and the entity named in the agreement. A taxable account, retirement account, joint account and managed account can have different defaults even at the same firm.

Record the legal entity, account type, base currency and currency of each cash balance. Then confirm whether participation is automatic or optional, whether consent is required, and where the statement says the money is held. A global marketing page is not proof that the same program applies to every customer.

Four structures can sit behind cash interest

Structures used for uninvested brokerage cash

Structure	Who or what holds the value	How income normally arises	Main check
Free credit balance	The balance remains at the broker or broker-dealer	The firm may pay interest under its account terms	Broker status, eligible cash definition and customer-protection scope
Bank sweep	One or more participating banks hold deposits for customers	The participating bank pays variable deposit interest and the program may retain a fee	Bank list, beneficial ownership, aggregation and pass-through conditions
Money market fund sweep	The account holds shares of one or more money market funds	The fund pays distributions reflecting its portfolio after expenses	Fund type, NAV, fees, liquidity and lack of deposit insurance
Separately selected cash product	A fund, Treasury instrument, term deposit or other product is purchased outside the default sweep	Income follows the selected instrument	Trading, maturity, settlement, price and reinvestment rules

A promotional rate is not a fifth custody structure. It is a temporary pricing condition layered onto one of the structures above. Likewise, stock lending income and margin borrowing are separate features and should not be presented as requirements for ordinary cash interest without explicit program terms.

Eligible cash is not the same as displayed cash

An account can display cash that has not settled, cannot be withdrawn, is reserved for an order, secures an option position or is offset by a margin debit. Programs often calculate interest from settled positive cash under their own end-of-day rules. Pending deposits, sale proceeds before settlement, short-sale proceeds and collateral may be excluded or treated separately.

Compare four figures in the platform and statement: total cash, settled cash, cash available to trade and cash available to withdraw. Ask which one feeds the interest calculation and at what daily cutoff. A balance being visible is not evidence that it earns income.

Turn the headline rate into effective yield

From advertised rate to net cash return

Input	Question	Effect on the result	Evidence to retain
Eligible balance	Which settled balances qualify?	Excluded cash earns nothing even when it appears in the account	Program terms and dated statement
Thresholds and tiers	Does an initial band earn zero or a different rate?	The blended return can be below the headline rate	Tier table and broker calculator inputs
Caps and promotions	Is the rate limited by balance or time?	The normal rate applies outside the stated condition	Offer dates and standard terms
Subscription and program fees	Is a recurring payment required?	A fee can materially reduce or eliminate net income on a small balance	Fee schedule and billing record
Accrual and compounding	Is the quote nominal interest, APY or AER?	Different conventions are not directly comparable	Calculation method and payment schedule
Tax and currency costs	Are withholding or FX conversion involved?	After-tax home-currency return can differ from account yield	Tax report, FX rate and conversion fee

A practical comparison uses net annual cash income divided by the average total cash balance committed to the account. Include any subscription fee and do not apply the top tier to money that sits in a zero-rate band. Use the broker calculator only after reproducing its assumptions.

Accrual compounding and payment timing

Daily accrual does not necessarily mean daily payment or daily compounding. A program can calculate from an end-of-day balance and post the result monthly; another can pay daily and round small amounts forward. APY and AER generally incorporate a compounding convention, while a nominal annual rate may not.

Check the day-count basis, cutoff time, treatment of weekends and holidays, rounding, posting date and what happens when the rate changes during a period. Keep statements because a current app rate does not reconstruct the rate used for every earlier day.

Default sweeps can create conflicts of interest

A default option is convenient but is not necessarily the highest-yield choice. The investment firm may receive compensation from participating banks or retain part of the interest generated by swept deposits. An affiliated bank or fund can create another commercial relationship that should be disclosed.

Review the account agreement, sweep disclosure and statement for the default, available alternatives, program fee and method for changing the selection. In the United States, current SEC investor guidance also says a broker-dealer must provide written notice before specified changes to sweep terms or products. A notice does not prove that the replacement is best for the customer.

Protection follows the structure not the marketing label

Protection questions for common cash structures

Structure	Possible US framework	What it may address	What it does not guarantee
Free credit balance at a SIPC member	SIPC customer protection	Missing customer cash if a member firm fails and a valid customer claim exists	Interest rate, investment performance or every type of cash activity
Eligible deposit in a bank sweep	FDIC deposit insurance	Failure of an insured participating bank within ownership and coverage rules	Broker failure, balances above aggregated limits or failed pass-through records
Money market fund shares at a SIPC member	SIPC treats qualifying fund shares as securities	Missing securities in a member liquidation within applicable limits	Decline in NAV, fund losses or FDIC deposit insurance
Non-US cash arrangement	Local deposit, client-money or investor-compensation rules	Only the failure and claim defined by the applicable scheme	Automatic equivalence to FDIC or SIPC

Never infer protection from the words cash, savings or high yield. Match the balance to the legal holder and the precise scheme. Compensation and deposit-guarantee rules address defined firm or bank failures; they do not guarantee a rate or reimburse ordinary market losses.

US bank sweeps and FDIC pass-through coverage

Eligible deposits at an FDIC-insured program bank can receive deposit insurance under the applicable ownership category. In a pass-through arrangement, coverage is based on the actual owner only when ownership, disclosure and recordkeeping requirements are satisfied. Pass-through is not a separate ownership category.

Deposits placed through the broker are aggregated with the same customer's other deposits in the same ownership category at the same bank. Using several program banks can increase available capacity, but only if allocation, records and eligibility support it. Monitor the program bank list and any banks excluded by the customer.

US brokerage cash money market funds and SIPC

At a SIPC member, qualifying cash held for securities activity can be protected in a member liquidation within an overall customer limit that includes a lower sublimit for cash claims. Money market fund shares are securities for SIPC purposes and are not subject to the cash sublimit, but SIPC returns or replaces missing property rather than insuring its market value.

Cash already swept to a program bank is generally outside the broker and follows bank-deposit rules instead. Confirm where the balance was located on the relevant date. Do not add SIPC and FDIC labels together unless the program disclosure explains which portion sits under each structure.

Money market funds can lose value

A money market fund is a mutual fund, not a bank deposit. Stable-NAV funds seek to maintain a stable share price, while some institutional funds use a floating NAV. A fund can lose value, and a stable-NAV fund can reprice if losses become large enough.

Money market funds are not FDIC insured. Fund expenses reduce yield, and liquidity fees can apply in circumstances defined by current rules and fund documents. In severe stress a fund may permanently suspend redemptions and liquidate. Read the prospectus and identify the exact fund rather than relying on the broker's generic cash label.

Access settlement and withdrawal timing

Cash shown as available for trading may not be immediately withdrawable, and a separately purchased cash product may need to be sold before money can leave the account. Bank sweeps can normally be recalled for account activity, but cutoffs, weekends, transfer holds and operational incidents still matter.

Before treating a balance as a liquidity reserve, test the ordinary withdrawal route and document its fee, daily limit and expected settlement. Keep enough money outside the brokerage relationship for obligations that cannot wait for a sale, redemption, bank transfer or account review.

Currency and FX can outweigh the yield

Cash rates and eligible thresholds can differ by currency. Converting money only to pursue a higher displayed rate creates exchange-rate exposure, conversion costs and possibly a second conversion when the money is spent or invested. A small interest advantage can be overwhelmed by one adverse currency move.

Compare return in the currency of the future liability. Record the broker's FX spread or commission, whether conversion is automatic, and whether a negative balance in another currency creates debit interest. Long and short currency balances should not be casually netted unless the program terms say they are.

Tax and reporting depend on the product and country

Deposit interest, broker-paid interest and money market fund distributions may have different tax classifications. In the United States, reportable interest can appear on Form 1099-INT, while money market fund dividends can appear on Form 1099-DIV. Those forms are US examples and are not templates for other jurisdictions.

Tax residence, account wrapper, payer location, withholding and currency-conversion rules can change the result. Export statements that identify payer, product, currency, gross income, withholding and payment date. A broker report is evidence, not a personal tax return or tax advice.

Broker examples to compare

Current programs illustrate why one headline cannot describe the market. Interactive Brokers bases eligible interest on positive settled cash and uses balance, NAV, currency and account-segment conditions; its insured bank sweep is a separate optional structure for eligible clients. Trading 212 requires consent for its interest feature and can use qualifying money market funds, banks and deposit products. Saxo publishes entity-specific currency, tier and threshold rules.

XTB describes variable interest on uninvested funds with daily calculation and periodic payment for the relevant entity. DEGIRO currently states on its UK help page that it does not pay interest on uninvested Cash Account money, which is a useful zero-rate comparison. Robinhood links its US eligible-cash program to subscription, account and settled-balance conditions and uses both broker-held cash and bank sweep structures.

These examples were checked on July 14, 2026. They are due-diligence examples, not promises of availability or a quoted rate. Open the official page for the exact entity immediately before making a decision.

Cash-interest decision checklist

1. Identify the legal entity, account type and currency.
2. Name the legal holder of each cash balance and the default program.
3. Confirm whether enrollment is automatic, optional or subscription-based.
4. Separate settled, tradeable, withdrawable and collateral cash.
5. Calculate the blended return after thresholds, tiers, caps and recurring fees.
6. Verify accrual, compounding, posting and rate-change rules.
7. Map each structure to the applicable protection scheme and aggregation rules.
8. Check withdrawal timing, FX cost, tax records and available alternatives.

Failure modes and red flags

• The rate is displayed without the legal entity, eligible currency or balance definition.
• The program calls a money market fund guaranteed cash or implies deposit insurance.
• A zero-rate threshold is hidden behind a top-tier headline.
• A subscription fee is excluded from the yield comparison.
• The broker cannot identify the program banks, fund or compensation arrangement.
• Displayed cash is treated as settled and withdrawable without checking the statement.
• SIPC, FDIC or another scheme is presented as protection against market loss.
• The program is described as requiring stock lending or margin without exact terms.
• A temporary rate is used to justify choosing a weaker broker for long-term needs.

FAQ

Is broker cash interest guaranteed?

No. The rate can change, eligibility can change and some structures invest in a fund whose value can move. Deposit or customer-protection schemes cover defined failures and claims, not a promised future yield.

Is bank sweep interest FDIC insured?

The eligible deposit principal and accrued interest at an FDIC-insured participating bank may be covered within applicable limits if pass-through, ownership and recordkeeping requirements are satisfied. Deposits at the same bank and ownership category aggregate, including deposits held outside the sweep.

Is a money market fund the same as a bank deposit?

No. A money market fund is an investment company and its shares can lose value. It is not FDIC insured. At a SIPC-member broker, qualifying fund shares can be customer securities for a member liquidation, but SIPC does not protect their market value.

Should I pick a broker mainly for cash interest?

Usually no. Cash return can be a useful comparison factor, but regulation, legal entity, custody, product access, total fees, records, transfers and service quality normally matter more for a long-term brokerage relationship.

Sources and methodology

Last checked and update policy

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