Bank Accounts and Certificates of Deposit are often not the best way to safekeep your cash
Sanjib Saha
28 May 2026
I opened my first bank account in the US at a local credit union (CU) close to my workplace. The CU had several convenient offers for employees of our company. With minimal effort, I opened checking and savings accounts, got free checkbooks and a credit card despite having no credit history in the US.
I was so pleased with the convenience that I handled all my banking needs through this CU for many years. That included direct deposit of my salary, payments and withdrawals, a car loan, and Certificates of Deposits (CDs) as my savings grew. I still maintain my checking account here and occasionally enjoy special favors as a longtime loyal customer.
Eventually, I realized that I earned very little interest from the bank deposits. I shopped around, found other banks with better rates, opened several accounts here and there, and moved my money around.
I felt good about being proactive and getting a better return on my cash-reserve. But that feeling was short-lived as I started learning more about personal finance and investments. Tired of chasing yields in bank accounts, I eventually embraced US Treasurys – debt issued and backed by the US Government – as my alternative to savings accounts and CDs.
For those unfamiliar with US Treasurys, think of them as CDs with maturities ranging from 4 weeks to 30 years. They’re widely used as “safe investment” by individual, institutional and even sovereign investors around the world.
There are some key differences, though. Bank deposits are insured only up to $250,000. US Treasurys, on the other hand, are backed by the full faith and credit of the US Government. Therefore, there is virtually no default risk regardless of the investment amount.
Treasury interest rates, both short-term and long-term, are heavily influenced by monetary policy actions of the US Federal Reserve (Fed). Treasury interest rates directly affect many interest rates we encounter in everyday life: bank accounts, CDs, mortgage, car loans, personal and business loans, and so on.
Treasury interest rates are often higher than comparable bank products. Why? Because the intermediary financial institutions take their cut for operational costs and profits. Result? Suboptimal, or sometimes almost non-existent, interest on bank deposits.
But wait. What if I need my money back?
With bank deposits, I can walk in and withdraw cash from my account. If my money is locked in a CD, I may have to pay a penalty for early withdrawal, but I can still access it fairly quickly. What happens if I’m holding Treasurys? Do I need to wait until maturity?
That leads us to another important aspect of US Treasurys: their extremely high liquidity.
I can certainly buy newly issued Treasurys and wait until maturity, but I don’t have to wait for these events. Investors around the world buy and sell Treasurys in open market every day, making them one of the most liquid investments in existence.
Their liquidity, safety and meaningful return make Treasurys a compelling alternative for both short and long-term cash reserves.
Sounds interesting? That’s exactly how I felt after doing my own research. All I needed to figure out was the best way to invest in them.
Instead of buying Treasurys directly from the US Treasury department, I use my brokerage accounts and buy/sell individual Treasurys or Treasury ETFs in open market, just like stocks/funds. (Aside: I used to participate in Treasury auctions through the brokerage account to buy new issues and set my holdings to “auto-roll” upon maturity, but I eventually stopped doing that to keep things simple).
For annual expenses and short-term cash needs, I like short-term, highly liquid, Treasury ETFs with practically negligible expense ratio.
For money expected in 3-4 years, I favor short/intermediate term “Treasury Inflation Protected Security (TIPS)” ETFs. TIPS have lower interest rate compared to equivalent regular Treasurys, but their principal is adjusted with inflation, helping mitigate the risk of unexpected inflation.
For cash-reserves further into the future (5 years or more), my preference is a ladder of individual TIPS bonds, each maturing in a specific future year. Bond trading is slightly more involved than ETFs/stocks, so target-maturity TIPS ETFs can also be a reasonable alternative despite their slightly higher management fees.
Is there a catch compared to keeping money in conventional bank accounts?
I can’t think of any, but there are two noticeable differences worth understanding.
First, unlike money sitting in bank accounts, Treasury investments fluctuate in value because they constantly change hands in open markets. For short-term Treasurys, the fluctuations are usually tiny. For intermediate/long-term Treasurys, the swing can be more noticeable, especially when there’s a major change in the interest rate expectation. Thankfully, these fluctuations are usually modest, and over time Treasurys often come ahead compared to bank deposits.
The second difference deserves a bit more attention.
With a bank account, you can get hold of your money almost immediately. Treasury investments, however, may take a couple of business days to turn into spendable cash. You need to sell the ETF or bond during market hours. Once the transaction settles (usually the next business day), the proceeds then can be transferred out to the checking account for spending. In some cases, you may be able to carry on your spendings activities directly from the brokerage account.
Over time, I shifted most of my liquid savings to Treasurys because of the improved result. Yet I still see many people leaving large cash balance in bank products or chasing yields from one bank to another.
I suspect the main reason is simple: lack of familiarity with US Treasurys.