How do Brex Cash accounts protect my funds?
Brex Cash accounts are a cash management account (and not a traditional bank account) designed to offer the features customers use banks for, such as money movement and storage, but with a unique structure that limits customer exposure to any individual bank. While many of the money movement features are similar to other banks, such as bill pay, checks, ACH, and wires, there are some key differences in money storage.
Banks take in deposits, hold a certain amount of capital or equity as required by regulators, and invest the rest of their funds in loans, bonds, and other assets to earn a return above what they pay customers for the deposits. Banks are designed to take calculated, regulated risk with customer deposits. The Federal Deposit Insurance Corporation (FDIC) insures customer deposits up to $250,000 per customer. Any customer depositing over $250,000 with any bank is therefore taking risk against that bank.
On the other hand, Brex Cash accounts leverage a broker dealer regulated by FINRA/SEC to sweep (i.e. move money before the end of the day) customer deposits into multiple FDIC-insured program banks, as well as a money market mutual fund. Brex Cash accounts have a FDIC-insured offering that stacks customer deposits across banks (each in $250,000 increments) for $6M of FDIC-insured coverage. Funds in Brex Cash accounts can also be swept into a money-market mutual fund administered by Bank of New York Mellon ($400B+ bank, AAA-Rated Fund). This fund [see prospectus here] has daily liquidity and is designed for preservation of capital and maintenance of liquidity, and it must hold at least 99.5% of its money in cash or securities backed with the full faith and credit of the U.S. Government. The liquidity and safety of the underlying assets is why many large companies choose to keep the majority of their funds in money-market funds like the one available in the Brex Business Account.
Though there are inherent risks within any financial system, Brex Cash accounts are designed to offer less exposure than an individual bank, while still maintaining the benefits of money movement and money storage.
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