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Betterment aims to help its customers manage their cash and investments more effectively by analyzing external accounts and making smart suggestions about how they could potentially be earning more or saving on fees. In this methodology, we’ll describe how Two-Way Sweep helps make everyday cash management easier to handle.

Here’s how it works:

  • Our recurring analysis determines whether your checking account holds enough cash to meet expected cash expenses for the next 21 to 35 days.
  • If extra cash is found, Two-Way Sweep will automatically transfer money from your checking account to Betterment Everyday™ Cash Reserve.
  • If your checking account balance falls below the balance we predict you’ll need in the next 21 days, we will automatically move money back into your checking account.

A Recurring Analysis

The goal of Two-Way Sweep is to seamlessly move your extra cash from your linked checking account to our high-yield cash account—and back when you need it. Two-Way Sweep combines a daily recurrent cash analysis with an automated cash transfer.

We believe that a checking account must have enough cash reserves at all times to meet expected future cash expenses, yet this cash amount should not be excessive. Ideally, excess cash should be put to work to earn a yield that’s safe, yet higher than what’s typical in an average savings account. Two-Way Sweep monitors your linked checking account daily and aims to keep the account balance between the lower and upper bounds.

How are these bounds defined? The lower bound is computed as an aggregate of 21 days of projected cash expense and recurring account transfers, while the upper bound is computed as an aggregate of 35 days of expense and recurring account transfers. You may also add additional padding to these bounds, which we discuss later in more detail. The range of 21 and 35 days is chosen to minimize the amount of extra cash in your checking account while also providing enough cash to meet expected cash expenses in the near future. You may also set your own target balance range for your checking account if you wish to do so.

Each day, Two-Way Sweep will estimate the lower and upper bounds. By balancing what we predict you’ll need in your checking account in the next 35 days with the objective of not holding too much extra cash, Two-Way Sweep helps you earn more on your extra cash by shifting it to our high-yield cash account. No cash transfer takes place if your checking account balance already falls between the lower and upper bounds.

Sweeping Into Betterment

Two-Way Sweep’s movement of cash into Betterment is essentially automating our cash analysis and using Betterment Everyday™ Cash Reserve, our high-yield cash account, as the default destination for your extra cash. As we’ve articulated in this comparison, there may be other products you might also consider for earning a high yield on extra cash, but our cash account’s advantages in terms of yield and liquidity make it an ideal spot for your extra cash within Betterment.

Betterment uses cash analysis to repeatedly analyze how much extra cash you may have in your checking account. The decision to sweep money into Betterment Everyday™ Cash Reserve is based on whether your linked checking account balance is greater than the upper bound, calculated as the amount of cash needed for the next 35 days of cash expenses. When Two-Way Sweep is activated and extra cash is found, we will move your extra cash, up to $5,000 per sweep, into Betterment Everyday™ Cash Reserve. After the sweep is complete, another sweep in will not occur again for at least seven days, as a rule. If you initiate a manual withdrawal from your cash account to your checking account, Two-Way Sweep will be automatically paused for two weeks, with the assumption that you plan to use the funds and don’t want them to be swept back to Cash Reserve right away.

We will notify you via email before a sweep takes place. You have until 12 PM EST the following day to cancel the sweep, either through the link in the email, or in your account.

Sweeping Out of Betterment

Although our automated sweep to put your extra cash to work in your cash account is innovative, the true innovation of Two-Way Sweep is its ability to also sweep cash back into your checking account when you need your extra cash.

Identifying When You May Have Too Little Cash

If, on any given day, your linked checking account balance falls below the cash amount we estimate you‘ll need in the next 21 days (the lower bound), Two-Way Sweep will transfer cash back to your checking account.

The sweep will transfer back enough cash to restore your checking account balance to the midpoint between your lower and upper bounds (as calculated on the day of the transfer). The maximum that we will transfer to your checking account is the total balance in your cash account. If your savings are less than the amount needed to bring your checking account balance back to the midpoint between your lower and upper bounds, we will transfer your full Cash Reserve balance back to your checking account. However, after the transfer, your checking account balance will still be below the midpoint.

Moving Cash to Your Checking Account

If our daily cash analysis finds that you have less than 21 days of expected cash expenses in your checking account, Two-Way Sweep will start the process of automatically moving cash into your checking account from Betterment Everyday™ Cash Reserve. If, during the transfer period, our cash analysis finds that your checking account balance is now sufficient (or if extra cash is now detected), the transaction will still continue to process. While a transfer is in progress, we will not initiate any additional sweeps, either to or from your cash account.

If, on the day after a sweep into your checking account completes, our cash analysis again shows that your balance is low, Two-Way Sweep will initiate another sweep from your Cash Reserve account to your checking account.

We will notify you via email before a sweep takes place. You have until 12 PM EST the following day to cancel the sweep, either through the link in the email, or in your account.

Setting a Custom Target Balance Range

If your bank requires you to hold a minimum balance, or you are aware of expenses that are not accounted for in our prediction of your lower and upper bounds, you can set your own target balance range for your checking account. This gives you additional control and flexibility to set a range that works for you and that you are comfortable with.

Note that Two-Way sweep does not guarantee that your checking account balance will not drop below the lower bound.

An Automated Solution for Extra Cash

Two-Way Sweep is an automated solution for reducing cash drag in your checking account. It monitors your checking account and estimates future cash expenses on a daily basis with the goal of maintaining a checking account balance that’s within an optimal range while also putting any excess cash to work. Two-Way Sweep takes advantage of Betterment Everyday™ Cash Reserve to earn a yield that’s above the usual rate offered by an average savings account.


Betterment Everyday Cash Reserve

Betterment Everyday Cash Reserve (“Cash Reserve”) is offered by Betterment LLC. Clients of Betterment LLC may participate in Cash Reserve through their brokerage account held at Betterment Securities. Neither Betterment LLC nor any of its affiliates is a bank. Through Cash Reserve, clients’ funds are deposited into one or more banks (“Program Banks“) where the funds earn a variable interest rate and are eligible for FDIC insurance.  Cash Reserve provides Betterment clients with the opportunity to earn interest on cash intended to purchase securities with through Betterment LLC and Betterment Securities.  Cash Reserve should not be viewed as a long-term investment option. 

Funds held in your brokerage account are not FDIC-insured but are protected by SIPC. Funds in transit to or from Program Banks are generally not FDIC-insured but are protected by SIPC, except when those funds are held in a sweep account following a deposit or prior to a withdrawal, at which time funds are eligible for FDIC insurance but are not protected by SIPC. See Betterment Client Agreements for further details.  Funds deposited into Cash Reserve are eligible for up to $1,000,000.00 of FDIC insurance once the funds reach one or more Program Banks (up to $250,000 each at  up to four Program Banks). Even if there are more than four Program Banks, Clients will not necessarily have deposits allocated in a manner that will provide FDIC insurance above $1,000,000. The FDIC calculates the insurance limits based on all accounts held in the same insurable capacity at a bank, not just cash in Cash Reserve. If clients elect to exclude one or more Program Banks from receiving deposits the amount of FDIC insurance available through Cash Reserve may be lower. Clients are responsible for monitoring their total assets at each Program Bank, including existing deposits held at Program Banks outside of Cash Reserve, to ensure FDIC insurance limits are not exceeded, which could result in some funds being uninsured.  For more information on FDIC insurance please visit www.FDIC.gov. Deposits held in Program Banks are not protected by SIPC. For more information see the full terms and conditions and Betterment LLC’s Form ADV Part II.

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