Money guide · Savings accounts and emergency funds
Treasury bills vs. CDs: compare yield and access
Compare Treasury bills and bank CDs by payment structure, taxes, maturity dates, and what happens if you need money early.
How it works
Bills are sold at a discount or at face value and pay face value at maturity. Their interest is the difference between purchase price and maturity proceeds. An eligible bank CD uses deposit insurance rules and can pay or accrue interest under its agreement. A bill is a Treasury obligation, not an FDIC-insured bank deposit.
A worked example
Suppose a bill costs $9,800 and pays $10,000 at maturity. The $200 gain is about 2.04% of the purchase price for that holding period. It is not automatically a 2.04% annual yield; the term matters. Compare it with a CD’s proceeds over the same dates instead of equating a discount quote with APY.
What to compare
Check the maturity, purchase amount, fees, tax treatment, and process for accessing money early. Treasury bill interest is generally federally taxable but exempt from state and local income tax; that can affect an after-tax comparison. A sale before maturity can produce different proceeds, while a CD may impose a withdrawal penalty. The platform’s transfer and settlement rules also matter.
A common mistake to avoid
Do not assume a bill’s quoted yield and a CD’s APY use identical conventions. Avoid choosing solely on the higher percentage without checking actual cash flows and taxes. Neither product prevents inflation from eroding purchasing power, and an attractive reinvestment rate at maturity is not guaranteed.
Can I lose money selling a Treasury bill early?
Selling before maturity exposes you to the market price and transaction costs. Receiving face value at maturity is a different scenario from an early sale.
Sources and further reading
Connect this to inflation
Inflation changes the spending power of money over time. Read the related inflation explainer, or compare cd growth using your own assumptions.