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If you have a significant amount of uninvested cash sitting in your Schwab account, there's a good chance it's earning far less than it could be.
Schwab's default bank sweep — the rate you earn automatically on uninvested cash in most brokerage accounts — is currently paying approximately 0.01% APY. While the Federal Reserve has held short-term interest rates at 3.50%–3.75% since late 2025, Schwab's default cash sweep continues to pay a fraction of what you could earn by simply moving to a better option. On a $200,000 cash balance, the difference between 0.01% and 3.50% is roughly $7,000 in annual income. That's meaningful money.
The good news: investing cash is simple, takes only a few minutes, and doesn't require moving your money anywhere. Here's a practical guide to your best options.
Why are you holding cash? Cash held as an emergency reserve, near-term spending, or a specific planned purchase deserves a different treatment than cash sitting idle because you haven't gotten around to investing it.
Do you have more cash than you actually need? If you're holding $500,000 in cash but your actual liquidity needs are $100,000, the answer may not be 'find the best money market fund' — it may be 'invest the excess toward your long-term plan.' A higher yield on an inappropriately large cash balance is still suboptimal compared to having the right allocation in the first place.
If you've answered both questions and you have a good reason to hold the cash at its current level, here are your best options at Schwab as of May 2026.
Note: Rates referenced below are current as of May 7, 2026 and are subject to change. Please verify current yields before investing.
Current yield: approximately 3.65%–3.71% (3-month to 6-month)
Short-term U.S. Treasury bills — T-bills — are one of the most attractive cash alternatives available right now. The yield on the 6-month U.S. Treasury bill is currently approximately 3.71% as of early May 2026.
T-bills are backed by the full faith and credit of the U.S. government and are widely considered one of the safest instruments available. They can be purchased directly through your Schwab brokerage account.
What to know before buying:
While T-bills are extremely high quality, they are not the same as cash. Their market value will fluctuate slightly until maturity — if interest rates rise after you buy, the value of your T-bill will temporarily decrease. If you need access to funds before maturity, you may receive slightly less than you paid. For most short-term holders who can wait until maturity, this is a non-issue.
The key tax advantage: Interest on U.S. Treasury securities is generally exempt from state taxes. If you live in a high-income-tax state like California — where our top marginal rate is 13.3% — this exemption can meaningfully improve your after-tax return relative to options that generate fully taxable income.
Current yield: approximately 3.75%–3.85% (3-month to 6-month)
Through Schwab CD OneSource, you can open CDs issued by multiple banks with rates currently as high as 3.85% APY depending on the term. Brokered CDs generally offer FDIC insurance up to $250,000 per bank per depositor — a meaningful protection that money market funds do not provide. They can be purchased through your Schwab brokerage account with a $1,000 minimum.
What to know before buying:
Unlike traditional bank CDs, brokered CDs don't typically carry early withdrawal penalties. Instead, if you need to exit before maturity, Schwab will attempt to sell your CD on the secondary market — which may result in a gain or a loss depending on where interest rates have moved. Be mindful of callable CDs, which give the issuing bank the right to redeem the CD early.
Brokered CD interest is generally taxable at both the federal and state level — no exemptions like T-bills.
Money market mutual funds offer daily liquidity, competitive yields, and the convenience of staying within your Schwab account. They're an excellent option for truly short-term cash you may need to access quickly. Unlike T-bills and brokered CDs, there's no minimum holding period.
Here are the three attractive options at Schwab in May 2026:
Schwab Value Advantage Money Fund — Investor Shares (SWVXX)
Current 7-day SEC yield: approximately 3.50%
SWVXX is a prime money market fund that can hold Treasury bills, repurchase agreements, and corporate debt instruments. It currently pays a 3.5% seven-day SEC yield. Investors with $1 million or more can access the institutional SNAXX share class at a slightly higher yield.
Tax treatment: Dividends are fully taxable at both federal and state levels.
Schwab U.S. Treasury Money Fund — Investor Shares (SNSXX)
Current 7-day SEC yield: approximately 3.40%
SNSXX invests exclusively in U.S. Treasury securities with no exposure to repurchase agreements, making it technically one of the safest money market options available. It delivers a 3.4% seven-day SEC yield.
Tax treatment: dividends are fully taxable at the federal level but, because the fund invests almost exclusively in U.S. Treasuries, they are generally exempt from state taxes.
Schwab Municipal Money Fund — Investor Shares (SWTXX)
Current 7-day SEC yield: approximately 2.48%
SWTXX invests in short-term municipal money market securities and currently pays a 2.48% seven-day SEC yield. While modest at first glance, it is federally tax-exempt. The state-level tax treatment depends on where you live — income from your home state's municipal bonds may also be exempt from state income tax. The math needs to work in your favor before choosing this option. Investors with $1 million or more can access the SWOXX share class.
What you actually keep depends on your federal and state tax brackets. If you're in a high federal bracket and live in a state with meaningful income taxes, the state tax exemption on T-bills and SNSXX can be meaningful.
Key numbers for California residents: Due to our 13.3% top income tax rate, SNSXX — despite its lower pre-tax yield — generally delivers a higher after-tax return than SWVXX for very high earners with large amounts of cash. T-bills are generally a good option for those high earners as well.
One important note: These after-tax calculations do not apply inside retirement accounts — IRAs, Roth IRAs, and 401(k)s. Within those accounts, all income is either tax-deferred or tax-free regardless of source, so optimizing for state tax exemption is irrelevant. In retirement accounts, simply choose the highest pre-tax yield that fits your liquidity needs.
The default bank sweep at Schwab pays approximately 0.01% — a fraction of what you could earn with minimal effort. In the current interest rate environment where safe, liquid options are yielding 3.40%–3.85%, leaving significant cash in the default sweep may not be in your best interest...
Disclosure: Rates referenced in this article are current as of May 7, 2026 and are subject to change. This article is for informational purposes only and does not constitute personalized investment or tax advice. All investing involves risk. Money market funds are not FDIC insured and may lose value, though this is unlikely. Please consult a qualified financial advisor for guidance specific to your situation. Arcadia Private Wealth LLC is a Registered Investment Adviser in the state of California. Advisory services are only offered to clients or prospective clients where we are properly registered or exempt from registration.
Grant Webster, CFP®, TPCP®
Founder, Wealth Advisor