(MONEY Magazine) – You may not put much thought into how you invest your cash. Let's face it, money-market funds all look the same, so why devote much time to picking one? Here's why. The Federal Reserve's six rate hikes have driven money fund yields to their highest point since 1991. The average is 6.08% vs. 4.5% a year ago. The yield at the top fund has jumped from 5.25% to 6.76%. Yet not every investor is getting the full advantage of high rates. The spread between the highest- and lowest-yielding money funds stands at two percentage points; the difference between the highest-yielding fund and the average is three-quarters of a point.

That gap between average and best may seem paltry, but over time it adds up. Take $25,000 invested in the top-yielding Strong Investors Money Fund, which pays 6.76%, vs. the most widely held fund, the Smith Barney Cash Portfolio/Class A Fund, which yields 6.12%, or just above average. In 10 years, you'd earn an extra $3,000 in the Strong fund.

Now that the Fed may be nearly done with rate hikes, money-market yields may be peaking for the short term, making picking the best one more important than ever. Here's what to look for.

Favor low expenses above all. With all money funds investing in the same pool of short-term government and corporate securities, low management fees are one of the few sure ways to stand out. Virtually every top-yielding fund has expenses well below the current 0.5% average or waives them. Three top-yielding funds with consistently low expenses are Strong Investors Money Fund, TIAA-CREF Money Market Fund and Vanguard Prime Money Market Fund, which charge 0.14%, 0.29% and 0.33%, respectively. (For yields, minimums and phone numbers for these top-yielding funds, see By the Numbers on page 178.) Expenses are also the reason you'll likely earn average yields at best in your brokerage cash account. The expense ratio for the Smith Barney Cash Portfolio is 0.59%, for example; the Schwab Money Market Fund's is 0.75%.

Don't get blinded by tax perks. The difference between the yields on taxable money funds and tax-exempt ones is so wide today that most investors are better off accepting a tax bill. If you're in the 31% federal tax bracket, the taxable equivalent yield for the top tax-free fund, Strong Municipal Money Market, is 6.03%, well shy of the 6.76% top taxable yield. Only those in the 39.6% bracket (taxable income over $288,350 for both singles and marrieds filing jointly) earn more with a tax-free fund--a taxable equivalent yield of 6.89%. "I'm stunned by how many investors will leave their investments in a tax-free fund purely to spite Uncle Sam," says iMoneyNet analyst Peter Crane. "They're really missing out." Top earners in high-tax states like California or New York may come out ahead in a single-state tax-free money fund. To figure out the taxable equivalent yield using your state and federal tax brackets, go to www.investinginbonds.com.

Put risk worries aside. Another mistake is to accept the lower yield of a Treasury-only fund--5.6% on average--solely out of safety fears. Although you can theoretically lose money in a money fund, no retail investor ever has. In those rare cases when bond defaults might have let the share price drop below $1--as was the case after the 1994 Orange County bankruptcy--fund families have kept savers whole.

Don't sacrifice the service you need. Most money funds deliver the same core services: unlimited check writing, telephone transfers into other funds and 24-hour customer service. But there are a few notable exceptions. The top-yielding Strong fund limits you to three checks for as long as you own the fund (but allows unlimited phone and Internet transfers). If you want to use your money fund as your bank account, you'll want one with a debit card.

Lock in a rate when you can. One of the great advantages of money funds is that you can withdraw money anytime, penalty-free. But many savers leave cash untouched for months if not years. If that's the case, shift some into a certificate of deposit so that you can lock in today's 7%-plus yields. For the highest-yielding CDs in the nation, see By the Numbers on page 178.

--CAROLYN WHELAN