Treasury Bills vs CDs: Which is best for you?

When choosing a fixed-income investment that has relatively low risk, should you choose Treasury bills or certificates of deposit? We’ve laid out all the intricacies for each type of account, so you can understand the differences between the two assets and choose which path works best for you.

Table of Contents

  1. What are Treasury bills?
  2. What are certificates of deposit?
  3. Treasury bills vs. CDs
  4. The bottom line

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What are Treasury bills?

Treasury bills (T-bills) are U.S. government debt securities that hold short-term maturity dates of up to one year.

How treasury bills work

T-bills are a low-risk investment solution that you can purchase through TreasuryDirect or on a brokerage like the investing app. Investors select how much money they want to invest (in $100 multiples) and how long they want to hold the investment (aka the maturity length). Investors get the face value plus interest income at maturity.


  • Khalil decides to invest in Treasury bills using her Public account. He sets up his Treasury account on the app and purchases $4,000 worth of T-bills. The T-bills have a maturity length of 26 weeks with a 5% fixed interest rate, so the purchase price is $3,900. At the end of the 26 weeks, Khalil gets $4000 back.


What are certificates of deposit?

Certificates of deposit (CDs) let you earn interest on a lump sum of money when you hold to maturity.

How CDs work

Most credit union and bank accounts offer CD products. CDs may also be available through a brokerage (these are called brokered CDs). Investors can shop around and find a CD with terms that work for them. Maturity lengths can be anywhere from a few months to 5+ years.


  • Brooklin decides he wants to purchase a six-month CD with an annual percentage yield (APY) of 5.0%. He chooses a bank and product, makes the required deposit of $4000 (this deposit requirement varies depending on the product and financial institution), and waits. After six-months years, his CD is matured and he gets the principal back plus an additional 5.0%, or a total of $4098.

Treasury bills vs. CDs

Short-term, fixed-income investments have the benefit of higher liquidity when compared to many stock market counterparts. Liquidity refers to an investment’s ability to be easily converted into cash.

Treasury billsCertificates of deposit
LiquidityIf you purchase T-bills using, you have to hold the asset to maturity unless you transfer it to a broker on the secondary market. Fun fact: Use a Public Treasury account, which provides you the ability to transfer funds in and out of your account on a 24/7 basis.CDs offer liquidity before maturity with penalties. The period of time the maturity length lasts depends on the CD you select. Penalty fees can apply for early withdrawal. This fact is a key differentiator between bank CDs and regular savings accounts.
Interest ratesEarn a 5.0%* yield on T-bills with a Public Treasury account (with a 26-week T-bill, when held to maturity).5% APY as of April 2023. CD interest rates vary depending on the product you choose (including maturity length and selected institution)
Tax supportT-bill interest income is exempt from state and local taxes. Gains are subject to OID (original issuer discount) rules. According to the Internal Revenue Service (IRS), “You can treat OID as zero if the total OID on a debt instrument is less than one-fourth of 1% (0.0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity.” This is called the de minimis rule.Interest payments from CDs are fully taxable at the rate of your ordinary income taxes.
Risks and safetyTreasury government securities are backed by the full faith of the U.S. government. Public Treasury accounts also protect up to $500,000 with the Securities Investor Protection Corporation (SIPC). There is a potential for loss if sold before maturityCDs are FDIC-insured up to $250,000. Despite the protection and guaranteed rate, you often can’t access your money prior to maturity without a penalty. Fees can be unclear, so be sure to review the terms of the product before investing.
Deposit and withdrawal termsThe minimum investment for T-bills on TreasuryDirect or a Public Treasury account is $100. While competitor brokerages have an upper limit of $1 million in investments, Public has no ceiling. There are no limitations on withdrawals.CD deposit minimums are typically between $500–$1,000. You often can’t withdraw from the CD until maturity without penalty.


The bottom line

Whatever you choose, keep your investment objectives in mind, and take time to know the differences between T-bills and certificates of deposit. Whether you buy T-bills on TreasuryDirect or via a Public Treasury account, or you decide to save in CDs, be aware of the implications so you can work to reach your financial goals without a headache.

Invest in Treasury bills on Public. It’s seriously easy.

Open a Treasury Account on Public and lock in your 5.4% yield today.

Get Started