A Sweep Account is an automated money management program for small businesses, organizations, or qualified 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.