Your Brokerage Has Been Quietly Paying Your Cash a Terrible Rate

If you have a brokerage account at Fidelity, Schwab, or Vanguard, there’s a decent chance your uninvested cash is earning less than it should. Not because you made a bad decision. Because the brokerage made a default choice on your behalf, buried it in account settings, and never sent you a follow-up asking whether you’d like to reconsider.

This is called a cash sweep, and it’s one of the least-discussed ways that otherwise financially savvy people leave money on the table every year.

Here’s how it works: when cash lands in your brokerage account — from a sale, a dividend, a deposit — it doesn’t just sit there in some inert state. The brokerage automatically moves it into a holding vehicle. That vehicle determines what you earn on uninvested cash. And the default vehicle at several major brokerages is not the highest-yielding one available to you.

The Fidelity Situation

Fidelity’s core brokerage account (not the CMA) sweeps uninvested cash into SPAXX by default — the Fidelity Government Money Market Fund, currently yielding about 3.28% on a 7-day basis as of mid-June 2026, per Fidelity’s institutional pricing page.

That’s not bad. But here’s what’s available within the same Fidelity account if you actively select it: FDRXX (Fidelity Government Cash Reserves) at 3.36%, or FIGXX (Fidelity Investments Money Market Government Portfolio, Class I) at 3.52% — though the Class I fund has a higher minimum investment requirement.

The difference between SPAXX at 3.28% and a better-yielding alternative isn’t massive — we’re talking maybe 8-24 basis points. On $50,000 that’s $40-$120 a year. Not life-changing. Worth knowing, and easily fixed once you know to look.

More importantly at Fidelity: if you’re comfortable with Treasury-only funds, FDLXX (Fidelity Treasury Only Money Market Fund) yields around 3.29% currently and invests only in direct US Treasury obligations — meaning it has the cleanest possible credit profile among money market options, and the income may have favorable state tax treatment similar to T-bills. Check your state’s rules on Treasury-only money market funds, because many states exempt this interest the same way they exempt direct T-bill income.

The Schwab Problem (It’s More Serious)

Schwab’s situation is different and more concerning. Schwab sweeps cash into its own bank — Charles Schwab Bank — through a program called the Bank Sweep Feature. As of mid-2026, that sweep pays a rate in the 0.45-0.48% range. That’s not a typo.

The reason Schwab does this is that it earns revenue by deploying your cash through its banking subsidiary. This is how Schwab keeps commissions low — it monetizes your idle cash instead. The business model is defensible; the impact on your returns is not.

The fix at Schwab requires actively opting into a money market fund. Schwab Value Advantage Money Fund (SWVXX) is currently yielding around 4.40%, per Schwab’s fund information page. That’s the number you should be earning on idle cash at Schwab, not 0.48%. The process: log into Schwab → go to the account settings for your brokerage account → look for “Cash Features” or “Sweep” settings → switch to a money market fund. Or just buy SWVXX manually from the fixed income section whenever cash accumulates.

On $30,000 in idle cash, the difference between Schwab’s bank sweep at 0.48% and SWVXX at 4.40% is approximately $1,176 a year. That’s real money that Schwab has been quietly keeping.

Vanguard’s Approach

Vanguard’s default sweep for brokerage accounts is the Vanguard Federal Money Market Fund (VMFXX), currently yielding about 3.56%. This is actually among the better defaults in the industry — Vanguard isn’t burying your cash at 0.48% like Schwab has historically done.

Still, VMFXX isn’t the highest-yielding option in Vanguard’s lineup. Vanguard Treasury Money Market Fund (VUSXX) invests exclusively in US Treasury securities and repos backed by Treasuries, yielding similarly to VMFXX but with Treasury-only composition that may qualify for state tax exemption in more states. If you’re in a high-tax state, worth checking whether VUSXX is available to you and whether your state treats its income as exempt.

What to Do Right Now

This is the actual checklist.

At Fidelity: log in → go to Accounts → select your brokerage account → look for Core Position settings. Change from SPAXX to FDLXX if you want Treasury-only with potential state tax benefits, or to FDRXX if you want the slightly higher government fund yield. Both are available without minimum investment requirements in most standard brokerage accounts.

At Schwab: go to account settings, find Cash Features or Sweep, and change from Bank Sweep to Schwab Value Advantage Money Fund (SWVXX). Alternatively, just keep a standing order to buy SWVXX whenever you have idle cash above a threshold.

At Vanguard: your default VMFXX is already reasonable. If you’re in a high-tax state, investigate VUSXX. Otherwise, you’re probably fine where you are.

At other brokerages: look up “cash sweep” in your account settings or call customer service and ask what your idle cash is earning and what alternatives exist. This is a completely normal question.

The amount you get back from this exercise ranges from “minor but real” at Fidelity to “genuinely significant” at Schwab. It takes about 15 minutes. It’s the kind of boring financial maintenance that’s easy to ignore and compounds quietly in the background either way — the question is which direction you want it compounding. More on the broader cash optimization picture, including how brokerage cash fits into the HYSA and T-bill decision, in the full cash guide here. The T-bill alternative through your brokerage is the related fix that addresses a similar problem — your brokerage probably isn’t paying you what it should on the fixed income side either, and the full cash optimization picture covers where each piece fits.