Updated May 2024 with refreshed rates, new Preferred Deposit online initial deposit option, lower $1 minimum on money market funds. Merrill Edge is a self-directed brokerage arm of Bank of America and Merrill Lynch. They are a decent broker overall, but honestly the only reason I keep my account open with them is to qualify for their Preferred Rewards Platinum tier, which allows me an effective 2.6% flat cash back on “everything” credit card (offsets any travel purchase) as long as I maintain a Merrill Edge brokerage account with at least a $100,000 balance (even if just buy-and-hold Vanguard ETFs).
Unfortunately, the interest rate paid on their default cash sweep option is horrendous. They seem to have learned from Bank of America that lots of people don’t pay attention and they can earn a lot of easy profits paying 0.01% APY when you can earn 5%. Not very customer-friendly, but “net interest margin” is a huge source of profits. However, if you are motivated enough (as my readers tend to be), then you can stay at Merrill Edge and still do a lot better. Here is a summary of all the options available if you do want to keep your cash there.
Manually sweep your idle cash out. If you have a BofA checking account, you can perform instant transfers from your Merrill Edge cash balance into your BofA account. Then I simply initiate (“pull”) money out via a high interest savings account. This is a bit tedious, but most of my cash shows up during predictable periods (quarterly dividends).
Current rate sheet. You can always check current interest rates by scrolling to the bottom of any Merrill Edge page and clicking on the blue link “Deposit Account & Money Fund Rates”. Right now it links to this PDF.
Default cash sweep. Your default cash sweep interest rate is the one for “Merrill Lynch Bank Deposit Program – Tier 1 (<$250,000)". As of 5/15/24, it is a sad, sad 0.01% APY. This is a FDIC-insured cash sweep. The bad news is that you can’t change it to automatically sweep to anything else right now. The good news is that there are some other options available if you are willing to do a bit of work.
Preferred Deposit. The first page of the rate PDF only includes FDIC-insured options. You’ll note the highest rate is something called “Preferred Deposit”. As of 5/15/24, it is a much more competitive 4.71% APY. In order to use this option, you must open it with at least $100,000 in cash. However, once you establish that $100,000 position, you can then go below that amount while still maintaining future access (subsequent transactions have a $1,000 minimum). However, this is not a sweep (nothing goes in or out automatically). Here is a detailed product PDF.
To initiate this option, you can either call them up at 877.653.4732 or place an order online. To find this option the website, go to “Research” > “Mutual Funds”, and then “Cash Management Solutions” in the secondary menu. If you scroll all the way to the bottom, you should find the option to deposit. See screenshot below. Thanks to reader Bob for the tip.
This is a non-sweep product – an order must be entered for all transactions (deposits and withdrawals). Please contact your representative for additional information.
Treasury bills (auction and secondary). You can buy US Treasury bills and bonds directly through the fixed income desk. You can place either an auction order for a “new” T-Bill or buy them on the secondary market. Technically, there is no commission for online orders and a $29.95 fee per broker-assisted order. However, they don’t allow online orders for new auctions, so effectively it costs $29.95 per auction order. You can buy online on the secondary market with no commission, but there will be bid/ask spreads and possible quantity minimums based on the available inventory.
Money market mutual funds. If you scroll down to the second page of the rate PDF, you will find a list of money market mutual funds. These are not FDIC-insured, but they are still regulated by the SEC and required to hold very safe investments of a very short duration.
You can place trades on money market mutual funds online. You must select “Mutual Funds” from the “Trade” Tab drop down menu, and then enter the fund symbol you are interested in. Many of these are institutional class shares, but Merrill now allows access with a minimum investment of only $1.00 (used to be higher). Here are some examples.
- BlackRock Liquid Federal Trust Fund – Institutional Class (TFFXX*). SEC yield of 5.17% as of 5/15/24.
- BlackRock Liquidity Funds: TempCash Fund – Institutional Class (TMCXX). SEC yield of 5.32% as of 5/15/24.
- BlackRock Liquidity Funds: Treasury Trust – Institutional Class (TTTXX*). SEC yield of 5.18% as of 5/15/24.
* I chose these funds also because they hold a high percentage of US Treasury bonds, and interest on US government obligations is tax-exempt from state and local incomes taxes. The percentage varies, but in 2023 it was 98.65% for TFFXX and 94.07% exempt for TTTXX (source). This can increase your tax-effective yield significantly.
Again, these money market mutual funds can’t be set as an automatic sweep; you must manually move money in and out of the product. This also means that if you want to for example buy new shares of stock, you would need to first put in an order to sell your money market mutual fund shares into cash (in order to have the funds available to buy that stock). The system won’t be able to automatically sell your fund. You’ll have to coordinate settlement times if buying stocks and/or ETFs. Finally, note that these options are for taxable brokerage accounts. IRAs may have more limited options. There are also some additional federal and/or state tax-exempt municipal money market fund options available.
Buying an outside ETF. You can also use your free stock trades to buy an ETF that is close to cash (ultra-short duration, high-quality bonds). These will not be FDIC-insured and carry a bit of duration risk, but if your ETF holds T-Bills then those are also fully backed by the US government. Here are a few ideas (with rates as of 5/15/24):
- The iShares 0-3 Month Treasury Bond ETF (SGOV) has a 5.27% SEC yield and effective duration of 0.17 years. SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) has a 5.20% SEC yield and effective duration of 0.07 years.
Bottom line. Merrill Edge has a default cash sweep option with a very low interest rate. If you have significant assets with them, you might want to call your rep and tell them your opinion and try to spark a change. Otherwise, I detail your available options if you want to keep your cash at Merrill Edge and earn a much higher interest rate.
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I was recently went through all my financial accounts and make sure that I am earning decent money on my cash. I transferred out all my cash on my taxable accounts to ally bank. However, I invested all my cash in my merrill edge ira account in a brokered cd. I am earning about 2% in a one year cd and it is fdic insured.
With both Schwab and Fidelity offering easily purchased money funds at 2.3%+ why would anyone want to bother with Merrill Edge?
If you buy individual stocks or select ETFs, Merrill Edge will give you 30 or 100 free trades every month. Schwab and Fidelity won’t do that if they aren’t included in their free ETF marketplace, and that cost difference may be more than any interest rate difference.
There are a couple of Treasury funds offered at Merrill yielding fewer than 10 basis points less than FZDXX. The advantage of the Treasury funds is that in high income tax states, because of the tax savings (Treasuries are state-tax-exempt) their after tax yields are around 10 basis points higher than FZDXX’s.
If you do anything besides auto-sweep, especially in non-marginable account like IRA, will you be able to close that position and open a stock position same day? My understanding funds will not be available at least for 1 day. That’s primarily the reason I’m not looking outside of auto-sweep.
I complained to my Merrill Edge (ME) representative when ME changed the sweep option and discontinued the sweep to a money market fund. I have tried the options you have discussed in your article and don’t like them. I have decided the best thing to do is have ME automatically sweep my dividends and interest to my credit union.
One of the reasons I no longer have an account with Schwab is that they did the same thing with their sweep account.
I think that Vanguard offers the best sweep feature because of the interest rate on VMFXX. However, I usually manually move money to VMMXX for high interest, but if you wanted cash to trade you will need to enter sell transaction.
While Fidelity has lower money market rates than Vanguard, they pay a reasonable rate on SPAXX and you can move funds manually to either SPRXX or FZDXX. I understand that when you trade or do a money transaction that Fidelity looks at your overall money market total, so there is not a need to enter a sell order. I have added a Fidelity account as a “pay from” account in my Bank of America bill pay and use it to pay my bills. This way I have increased the interest rate significantly over what I received using my credit union account.
Just discovered I can’t sell a cash covered put because the default sweep is “not considered as cash equivalents for this purpose.” Never had this issue with a broker before, I have the cash to cover the collateral but ME doesn’t consider their own sweep as cash. I’ll call them to see what’s up, but if anyone has any input let me know.
Exact same situation for me. I messaged them about it and below is the reply I received… I’m now trying to see if I can change my ME accounts to “no auto-sweep”. I didn’t even know that was possible. I thought a sweep account was required?
—-
Thank you for contacting Merrill Edge.
Upon review of your account ending in XXXX, I see that the cash balance in the account is currently in the Bank of America, NA RASP money account. There are certain money accounts, including the ML Direct Deposit Program and Bank of America, NA RASP, that are not recognized as a cash equivalent through our system. In other words, the online system does not recognize that the account has a cash balance to cover the put trade, giving you the error message you received. You may contact us at the phone number below and one of our Investment Specialists will assist you with placing this trade at your online rate.
Please note that within a self-directed Merrill Edge account, clients have several options available to allow for online cash put trading, including purchasing different money funds that the system will recognize as actual cash.
Our system recognizes the BlackRock Liquidity Fund T – Fund (symbol BPTXX) as a cash equivalent to allow for online cash put trading. BPTXX currently has a $5,000.00 initial minimum investment. The BlackRock Liquidity Fund T – Fund Institutional (symbol TSTXX) has a $100,000.00 initial minimum investment. BPTXX and TSTXX are the same Money Market fund, each in a different share class, with different interest rates & expense ratios.
Clients have the ability to enter purchase and sale trades online for Money Market funds on the Trades > Mutual Funds page. If a purchase is placed online to buy into a money market fund to cover a cash-secured put, it will require an overnight batch cycle to be recognized as a cash equivalent.
Other available cash equivalents include:
-The values of CDs & US Treasuries maturing in less than 12 months.
-A client may request to change the account to no-auto sweep into a money account by contacting the Investment Center at 1.877.653.4732.
Jonathan,
Great article. Do you know if something similar – Preferred Deposit – options aviable with other borkers esp TDAmeritrade. Would greatly appreciate if oyu can build up on this post and cover TDAmeritrade. They offer terrible CD selction and thier yeild on cash is the worse.
Thanks for this blog and your posts.
Are all these options available for an IRA or Roth IRA? (I’m considering rolling over my 401k from a former employer into an IRA at Merrell Edge.)
etrade has decent autosweep and neverva problem accessing it for trading
ICSH has a better expense ratio than NEAR and very similar performance
All, I have been with Merrill Edge for over 5 years. I have a great rep in Jacksonville because I am considered Premier because I maintain 3 accounts (CMA, Roth IRA and IRA) and my balances are over $1million.
I moved to Merrill Edge from Fidelity in 2009 because of the 100 free trades, which I found out are not free because I am not sure I am receiving the best execution price plus my cash earns almost zero percent.
Now that Schwab and Fidelity are also offering FREE trades with no minimum balance and both firms offer a 1.75% money market fund, Merrill will have to do something to retain customers. BTW, I did put my money in their recommended Blackfund fund but moved it when I saw there was a .65 fee to have the money market.
where is Schwab offering 1.75 %
Attempted to move my cash holdings in my Roth IRA to “Preferred Deposit” and I was told that only CMAs were eligible for “Preferred Deposit.” Anyone else encounter this issue? Seems like an artificial restriction as the rep tried to sell me a CD instead. This is the first time I have been disappointed by Merrill Edge.
Just tried to trade MM on my ME account and it seems only one MM is allowed “TSTXX” with $1k minimum, and all others have a red warning (“BPTXX” may be ok but with $5k minimum).
Are you in a regular taxable brokerage account or an IRA? I believe that IRAs have more limited options.
Taxable. Just realized the “red warning” may be different for each fund. Even I just put an order for TSTXX, I got the warning for “no fund info available” instead of ” not tradable” warning like for VMFXX. So I might have mistaken for other Blackrock MM listed with “red warning” as not tradable.
Merrill periodically changes which MMFs can be traded. I believe that BPTXX used to be available, but it now shows as closed. Don’t do a search on the ticker (which returns “no fund info available); instead input the ticker on the trade page. You’ll see a ‘C’ in an orange box, which means that the fund is closed to Merrill.
Here’s the list of MMFs currently available on Merrill:
https://olui2.fs.ml.com/Publish/Content/application/pdf/GWMOL/ICCRateSheet.pdf
I just opened a Joint brokerage account with Merrill Edge today. I will update later with the available money market funds that can be traded after my account has been officially opened. The funds listed on the rate sheet do not necessarily reflect the funds that you can invest in, even if it appears that your account should qualify. The company may be playing a game where they will determine what you can invest in based on which funds will provide them the best “payback”.
1. Forget MMFs in Merrill, I get a response back that they are not purchasable through Edge. 2. After the first asset gathering bonus from transferred securities in, which was paid rapidly. I have later gotten authorization for repeated bonus from transferred in securities, for me, by name, from account reps. Both later times it has taken almost a year and threatening to take ML to its regulators to get the bonuses. I no longer bother. 3. Yes keep sweep cash of any amount not immediately needed in short term ETF, which, coupled with margin, means earning despite any outstanding limit buy orders for when market capitulation happens.
“….However, they don’t allow online orders for new auctions, so effectively it costs $30 per auction order.”
Not sure why you said that.
when new auctions came out like 4 and 8 weeks T-Bills today, I ordered online after 12 noon in the afternoon. I don’t see $30 charge.
please clarify.
Thanks
Did you place a bid at the auction online ahead of time? Or did you buy them after they were issued, on the secondary market?
No. buy only after they were issued.
what’s so good to place bid ahead of time?
thanks
Some people like to buy at auction to avoid the bid/ask spreads. If you do want to buy at auction, you will have to pay $30 at Merrill. Merrill makes money off the bid/ask spreads, which is why buying on the secondary market is usually commission-free.
Every Broker wants make money, right?
Say you place T-Bill order before auction at Fidelity or Schwab and you get auction price on auction day.
if you can find one at ME and get price actually lower than what you got at Fido/Schwab for the same T-Bill, do you care ME makes money off bid/ask spreads?
I personally buy on the secondary market myself, I’m just offering some possible reasons since you asked.
Great post Jonathan! Just FYI that even Merrill Edge agents wanted to charge $30 per broker assisted trade for treasury auctions, the charge never showed up in my account. I did this a few times. So probably their system doesn’t really put that charge through. Also sometimes you can get a better price at treasury auctions than trading via secondary market, especially often times Merrill Edge shows bid/ask spread worst than other brokerages.
Your article has a section titled “Manually sweep your idle cash out” where you state most of your cash shows up during quarterly dividends. If you want to move income out of your account, Merrill has a feature where they automatically transfer income received into your account to your specified outside financial institution. This feature is initiated using “Merrill Funds Transfer Service Enrollment Form” and you can elect to have the transfers done daily. You might find this feature useful.
Thanks, I’ll look into it.
Good synopses. I have used Merrill for years just enough to get preferred rewards. I too find their .01% sweep option dismal. There is good access to a number of very attrictive Blackrock money market mutual funds. My quandry is short-term redemption fees. TD my main broker is the same dismal sweep options but they specify they mave money market mutual funds that are no-transaction-fee “NTF” and no short-term redemption fees. I think not assessing short-term redemption fees on money market mutual funds is pretty standard. I view it as the idea of money market funds, you have access to the cash when you need the cash.
So I said Merrill must do the same thing so I set out to find out. I selected Blackrock Liquid Federal Funds, TFFXX, as my target. I read the prospectus and Blackrock says they do no assess short-term redemption fees on stable dollar money market funds. Merrill’s site only says all NTF bear a $39 short-term redemption fee if shares are held less than 90 days. I can find no written exemption for money market NTF funds. So I called the CMA Edge customer service number suggested and asked. Much to my surprise, I was told by the individual agent that Merrill does charge a short-term redemption fee on money market NTF funds. Perhaps I got an unknowledgeable agent but that was I was told.
The Merrill Edge site explanation about money market funds has them listed under “mutual funds” while under “Fixed Income”, there is a statement that money markets are also considered a form of fixed income investment. For the most part, money market funds are not treated the same as other classes of mutual funds with regards to the short-term redemption charges. I did not find any disclaimer that exempts money market funds from the short-term redemption charges on their site. Fund management does not restrict or penalize withdrawals from money market accounts for any time duration as a general rule. However, the brokerage, as agent, can impose whatever they want to on their customers. I will ask the same question to them when my account has been officially opened.
I did come across a comment posted on bogleheads forum site that someone had invested in one of the no transaction fee money market funds on Merrill and then transferred the balance to another fund in less than 90 days and was not charged a short term withdrawal fee. So maybe the Merrill CSR are not familiar with their trading policy.
I had a strange experience trying to open a Merrill Edge brokerage account last year. I had already opened brokerage accounts at Scottrade which became TD Ameritrade which became Schwab now along with Fidelity and E*Trade. I was already a Bank of America banking customer. I tried to open a joint brokerage account and the application process requested for the other joint co-owner to contact customer service. The other person called the provided number and spoke to representative (apparently to verify some information on the application). Upon finishing the call, the representative said the account should be opened soon. Then I received further emails to contact customer service again for the other joint owner on the account. After 30 days of the original application submission, the application was then cancelled. I contacted customer service asking what the matter with the application was and why was it cancelled. I said that the other joint applicant called and spoke to a representative who said the account would be opened shortly. The person that I spoke to had to review the application information to see what the matter was. The person then told me that the person who spoke to the joint applicant indicated that there was a concern that the joint applicant would not be able to access the account. I did not understand how they concluded that to be a problem for the inability to access the account. Since the application was automatically cancelled, I ended the phone call and told the representative that I would take my business elsewhere and would never try to reapply again in the future.
It is really a shame that ML / BOA does not offer a good rate for their money market funds. Fidelity offers 4.9%. Robinhood gold offers 5% at the time of writing. ML offers 0.01%.really. I am moving my cash to Fidelity because of this although I might lose preferred status and additional cashback. With good chunk of cash I am carrying now, I feel like I am losing being a ML customer.
When we select the Money Market Mutual Fund option, can’t we use “exchange” option instead of the “Buy” or “Sell” option to effect the swap? That way, we don’t need to sell it first into cash and then buy, or vice versa. The limit I see would be, this can only be done within the mutual fund category only.
That should work, but only being able to buy another mutual fund is a pretty significant restriction.
Thank you “reader Bob” & Jonathan, for the tip on moving over to the Preferred rate on cash in the account for ME.
Just learned from your comment about Preferred Deposit and re-read the article to understand the details. Since it is not automatic sweep, how is it better than buying a short-term government ETF like SGOV?