A Sweep Account is an automated money management program for small businesses, organizations, or individuals. South Central Bank has been offering Sweep Accounts for more than three decades.
Sweep Account Benefits
- Diversification of your cash assets: With significant cash assets, it may be prudent for depositors to have cash in more than one place. Sweep Accounts can be the easiest way to diversify.
- Earn more interest on your cash assets: Whatever current rates are for overnight funds, it is often feasible to increase earnings by transferring funds with a Sweep Account.
- Liquidity: You want cash assets always available. Sweep Accounts are one-day transactions. Your excess cash returns to your operating account every day.
- FDIC insurance limitations: Federal Deposit Insurance is limited to $250,000 for many account holders in insured financial institutions. Using a Sweep Account can protect funds above the FDIC insurance limits.
Choices of Sweep Accounts
|Sweep Type||FDIC||Funds at SCB||Specific Collateral|
|Insured Cash Sweep||Yes||No||No|
|Goldman Sachs Treasury Fund||No||No||U.S. Treasury Obligations|
1. Repurchase Agreement: Collateralized transactions within South Central Bank where your overnight transaction is secured by a specific U.S. Federal Agency bond, guaranteed by the U.S. government, held in safekeeping for South Central Bank.
2. Insured Cash Sweep: ICS Insured Cash Sweep is a product managed by Promontory Financial, providing multi-million dollar FDIC protection through a network of over 3,000 select FDIC Insured U.S. banks. Your deposit at any bank in the network is always under the $250,000 FDIC limit.
3. Goldman Sachs Financial Square Treasury Investments Fund: The Fund pursues its investment objective by investing only in U.S. Treasury Obligations. The Fund intends to be a "government money market fund," as such term is defined in or interpreted under Rule 2a-7 under the Investment Company Act of 1940.
How does the sweep account work?
- Target Balance: The bank establishes a TARGET BALANCE for the Sweep Account, an amount necessary to cover estimated monthly costs of the Operating Bank Account.
- Each Day: The Collected Operating Account balance amount over the TARGET BALANCE is transferred to the chosen Sweep Account for one day.
- Next Day: All funds in the Sweep Account are returned to the Operating Bank Account.
- Next Day: The Collected Operating Account balance over the TARGET BALANCE is transferred to the chosen Sweep Account for one day.
Establishing a Target Balance
- Excess Funds: Excess funds are deposits above account activity costs of processing transactions: as deposits, deposit items, checks written, ACH transactions, coin and currency used, account maintenance. Sweep Accounts allow business account holders to earn interest on collected overnight excess funds.
- Funds Above FDIC Insurance Limits: To allow account holders, where requested, to transfer each night the collected account balance above FDIC Insurance limits safely out of the account.
- The Target Balance: After covering expected activity charges during the month, the bank or bank customer adjust the target balance to an amount adequate to eliminate/reduce a monthly service charge. Account activity/charges and the earnings credit vary monthly for any account, so this may require additional adjustment over time.
How do you apply for a sweep account?
When applying for a sweep account, you will be asked to sign an agreement authorizing South Central Bank to transfer funds between your checking account and the sweep account.