A reader recently asked which low cost stock brokers pay the highest interest rates on cash. This question is particularly important if you plan to have a fair amount of cash in your brokerage account. And the interest rates paid by brokers on cash balances vary considerably. Some brokers don't pay any interest, while others offer rates comparable to interest rates on demand accounts like high yield savings accounts or short term CDs. So if you are looking for an online broker that pays interest on cash balances, here are some of your best options.
Zecco: With Zecco, you get two options to earn a return on your uninvested cash. First, Zecco will credit your account with an interest rate currently set at 0.025% per year for balances over $500. This interest is paid monthly. If you'll have cash in your investment account for just a few days, this is probably fine. If you plan to hold some cash for a longer period of time, Zecco offers another option.
Zecco offers one of three money market funds where you can stash your case. In what are called sweep accounts, you can move your money into one of these funds when it's not being invested. When you're ready to move the money into the market, you can transfer it back to your brokerage account for trading. The three funds are the CAT Tax Exempt Portfolio, the CAT MM Portfolio, and the ICT Treasury Portfolio. The interest rate on the CAT Tax Exempt Portfolio is currently 0.87%, but check with Zecco as rates do change.
Scottrade: For arguably the most full featured of all the online discount brokers, Scottrade offers a rising rate based on the amount of cash you have in your account. At the low end, Scottrade pays just 0.05% for balances under $5,000. The rate increases to a high of 1.00% for balances of $1 million or greater. Perhaps not the best rates unless you have a lot of cash in your brokerage account, but at least it pays some interest. You can get more details and check the current rates on the Scottrade website.
E*Trade: Of all the online brokers, E*Trade is perhaps best known for its cash management features. In addition to stock brokerage services, E*Trade also offers banking services as E*Trade bank. With an E*Trade brokerage account, you get access to an online savings account. Funds can be easily and quickly transferred between accounts. E*Trade also allows you to set up an automatic savings plan. Currently, E*Trade's online savings accounts pays 0.50% interest. The E*Trade bank also offers online checking and CDs. Because these rates change frequently, you can get current rates and details about E*Trade's brokerage services on the E*Trade website.
TradeKing: For cash held in your brokerage account, TradeKing does not currently pay any interest. However, they do offer a sweep account that is FDIC insured and pays interest. There are several options for a sweep account, including money market funds. Presently, the highest paying option is just 0.05%. For more details, check out the TradeKing website.
