Cash often has a job before it has an investment objective. It may be next month's expenses, collateral for a position, or money waiting for a future purchase. Those jobs require different levels of immediate access.
A higher quoted yield is useful only if the money remains available when needed and the extra return exceeds the cost of moving it.
Different claims labeled cash
A bank deposit, a money market fund, a Treasury bill, and uninvested brokerage cash are different claims. A product called “cash” can be a convenient interface over any of them.
For U.S. bank deposits, FDIC coverage generally applies up to $250,000 per depositor, per insured bank, per ownership category. Multiple accounts at the same bank do not automatically multiply coverage. See the FDIC's deposit-insurance FAQ.
A money market fund owns a portfolio of short-term instruments; it is not an FDIC-insured bank deposit. A brokerage sweep may send money to a bank or to a fund, with different yields and access arrangements. The SEC's cash-sweep bulletin explains those differences.
SIPC protection addresses missing customer assets when a member brokerage fails, subject to its terms and limits. It does not insure an investment against market losses. SIPC's own explanation distinguishes its custody protection from deposit insurance.
A Treasury bill has a dated cash flow
A bill typically pays its face value at maturity and is purchased at a discount. Suppose a 91-day bill costs $9,900 and pays $10,000. The $100 gain is 1.0101% of the purchase price over 91 days.
Multiplying that holding-period return by 365 / 91 gives a simple annualized investment return of about 4.05%. That is an illustration, not a current yield quotation or a promise that the same rate will be available next quarter.
Quote conventions matter. A bank-discount rate uses face value as its denominator and a 360-day year. TreasuryDirect's bill-pricing guide explains the convention. Compare cash flows on a consistent basis instead of assuming every displayed percentage measures the same thing.
Maturity and access
If the bill matures before a known payment, its dated proceeds can be useful. If you must sell early, the sale price depends on prevailing rates and the available market. A short maturity reduces rate sensitivity but does not turn an early sale into a guaranteed face-value withdrawal.
A ladder spreads maturities across several dates. For example, dividing money among bills maturing in successive months can create regular opportunities to spend or reinvest without selling every holding. It also leaves uncertainty about the rate available when each portion matures.
For trading collateral, check another constraint: whether the venue accepts the bill or fund as collateral at all, and what haircut applies. An asset can be liquid in its own market and still be unavailable for an urgent margin payment in another account.
The value of a higher rate
An extra 0.25 percentage points on $20,000 is about $50 a year before tax, assuming constant rates and balances. Over two months it is about $8.33. A $20 transfer or transaction cost takes roughly 4.8 months to recover at that yield advantage.
This does not mean small rate differences never matter. It means the comparison should use the expected holding period, the full cost, and a realistic balance. A promotional rate applying only briefly or only to part of the account can look better than it is.
For money needed in two months, the extra $8.33 in our example does not cover the $20 cost of switching. For money held longer, it may. The spending date and the route back to usable cash determine whether the higher rate is an improvement.