Merrill Edge Money Market Fund Rates and Options in 2024

Larry, Managing Editor

merrill edge merrill lynch money market fund rates options income

Merrill Edge offers different options to earn returns on your cash through investments like brokered CDs, Treasury bills, and ultra short-term Treasury ETFs. One of the most popular investments to park cash on the platform is through money market fund options. Merrill doesn’t manage and offer its own money market funds. Instead, Merrill offers popular money market funds from major fund managers like BlackRock, Federated Hermes, and Fidelity.

Merrill Edge Cash Options

If you don’t do anything with your cash, Merrill’s default cash sweep product is the Merrill Lynch Bank Deposit Program. Any uninvested cash is automatically swept into this program. Unfortunately for you, any account with a balance under $1,000,000 gets paid a measly interest rate of 0.01%.

Merrill does offer a Preferred Deposit program that pays an annual yield of 4.92%. While this must be opened with a deposit of at least $100,000 in cash, you can go below the $100,000 balance in the future and still maintain access. Despite the high deposit requirement, the Preferred Deposit program is not a sweep.

So we cannot rely on Merrill to automatically help us earn a higher cash yield. Luckily, we can purchase investments with higher cash yield than Merrill’s default Preferred Deposit. Money market funds are one of the most popular choices.

What Are Merrill Edge Money Market Funds?

Money market funds invest in high-quality, short-term investments, most commonly Treasury bills. Merrill splits its money market funds across three categories: government, prime, and municipal.

  • Government money market funds invest in short-term, low-risk securities issued by the U.S. government, such as Treasury bills, and other extremely high-quality debt that’s backed by U.S. government securities.
  • Prime money market funds are slightly more risky. In addition to U.S. government debt, prime money market funds hold short-term debt issued by companies and banks. In exchange for the increase in risk, prime money market funds historically offer higher yields than government money market funds.
  • Municipal money market funds aim to generate interest income that’s exempt from federal income tax by investing at least 80% of its assets in municipal securities.

Merrill offers a variety of money market funds offered by investment firms such as BlackRock, Federated Hermes, and Fidelity.

Main Reasons to Consider Merrill Edge Money Market Funds

Money market funds offer three major benefits: liquidity, high yields, and stability. A traditional savings account might offer yields and stability, but no liquidity. If you invest in stocks, you might get higher returns and similar liquidity, but no stability.

Money market funds aim to deliver a balance of all three:

  1. Liquidity: Money market funds on Merrill settle in one day (T+1). Money market funds are generally much more liquid than brokered CDs. There are also no silly early withdrawal penalties or holding restrictions like with bank CDs and savings accounts.
  2. Higher Yields: Money market funds almost always offer the potential for higher yields than the products from your bank. Bank of America provides a 0.01% bank savings rate, the same as their default Merrill Lynch cash sweep. Merrill Edge money market fund rates adjust in real-time, so you’ll always get the most competitive rates, which the bank isn’t incentivized to provide.
  3. Stability & safety: Merrill money market funds only invest in short-term, low-risk investments. They’re much less prone to market fluctuations than other investments.

Let’s walk through each of these benefits in more detail.

Merrill Money Market Fund Liquidity

Money market funds are very liquid investments and can be easily bought and sold. The money market funds offered on Merrill’s platform are from global investment firms BlackRock and Federated Hermes and are thus part of a very liquid market.

Merrill does not have an automatic cash sweep program like Fidelity (which treats all its money market funds as cash with sweep in-and-out features). But if you also have a Bank of America checking account, you can initiate instant transfers from your Merrill Edge cash balance. The instant transfer allows any Bank of America customer to use Merrill to buy money market funds.

Merrill Edge Funds Pay Higher Yields

Money market fund rates are currently paying much higher than bank savings rates, most bank CD rates, and Merrill’s default cash sweep program. It’s worth comparing Merrill CD rates as they pay competitively compared to Merrill funds.

Merrill offers many institutional-class money market funds for a $1 minimum initial investment. For comparison, Merrill CDs have a minimum $1,000 investment. Typically, institutional-class versions of money market funds charge lower expense fees in return for a very high initial investment, such as $1,000,000. Investors earn more yield in the institutional version of a money market fund than in the retail version.

For example, BlackRock offers various classes of its BlackRock Liquidity Funds: Treasury Trust. Ordinarily, the investment requirements are as follows:

  • TSLXX (BLF Treasury Trust Fund – Select): $0 minimum investment, 1.00% expense ratio, 4.38% yield
  • TTDXX (BLF Treasury Trust Fund – Dollar): $5,000 minimum investment, 0.42% expense ratio, 4.97% yield
  • TTTXX (BLF Treasury Trust Fund – Institutional): $3,000,000 minimum investment, 0.17% expense ratio, 5.21% yield

On Merrill Edge, we can buy TTTXX with a minimum investment of $1 and earn its institutional class yield of 5.21%. That’s a significantly higher yield than TTDXX for no increase in risk or investment on our part.

Stability and Safety

Money market funds are generally very safe. Because federal regulations require money market funds to hold short-term, low-risk, highly liquid investments, these funds are very stable investments.

Money market funds primarily invest in instruments such as U.S. treasuries. U.S. treasuries are backed by the U.S. government, which means the U.S. government guarantees they’ll pay interest payments and your original investment at maturity. Treasury-only money market funds, which only hold U.S. Treasury bills, are virtually risk-free investments.

It’s important to note that Merrill money market funds are investment products, so they are not FDIC-insured. Merrill brokerage accounts are instead covered by the Securities Investor Protection Corporation (SIPC). The SIPC will cover up to $500,000 in securities including money market funds, with a $250,000 limit for cash held in a brokerage account.

Tax Advantages of Some Money Market Funds

While all income from money market funds is taxed at the federal level, certain Merrill money market funds have state tax benefits (shown in the table below). The amount of state tax benefit depends on the proportion of U.S. Treasury bills held by that money market fund. As a reminder, all U.S. Treasuries are always state-tax exempt and can be bought standalone on Merrill.

Are Merrill Money Market Funds Easy To Buy and Use?

Buying and using Merrill money market funds is straightforward.

To purchase a Merrill money market fund, navigate to the ‘Trade’ section on Merrill Edge. From there, select the account in which you want to buy the fund and click ‘Buy a mutual fund.’

Enter the money market fund symbol and the dollar amount you wish to invest. After reviewing your order details, click ‘Place Order’ to complete the transaction.

For more research, click Mutual Funds under the “Research” tab. Then, click the “Cash Management Solutions” tab.

Merrill Money Market Fund Rates and the Different Options

Below is a table that compares Merrill government and prime money market fund rates and options. This list excludes funds only available in a Trust Management Account, Retirement Cash Management Account, or eligible accounts enrolled in an investment advisory program.

In other words, the money market funds listed below are available to all Merrill clients. For easy comparison, we’ve also collected the returns for each fund from last year, and any relevant state tax exemptions.

Are Merrill Money Market Funds the Best Place For My Cash?

We like that Merrill offers institutional-class funds for no minimum investment. Any investment that passes on more yield to the investor is good. In addition, the instant cash transfers between Bank of America and Merrill Edge are helpful for instant liquidity.

However, we think a big detraction of Merrill’s platform is the lack of a competitive sweep program. Fidelity offers auto-sweeping through SPAXX, which pays around 5.00% with no minimum investment. On the other hand, cash in the Merrill Lynch bank deposit program gets a default measly 0.01%.

Merrill also makes no effort to educate investors that there are better rates through money market funds or other investments. It’s no surprise, since the money market funds on Merrill’s platform are from other investment firms.

All in all, Merrill requires research and the execution of trades to park cash in an interest-earning cash investment. We recommend Bank of America customers move cash to Merrill to take advantage of money market fund rates and other cash options.