What is the main difference between CDs and T-Bills?

CDs are bank-issued savings products with fixed interest rates, while T-Bills (Treasury Bills) are government-backed securities sold at a discount and mature at face value. CDs offer fixed returns, whereas T-Bills are considered safer due to government backing.

Which is better for short-term savings: CDs or T-Bills?

T-Bills are typically better for short-term savings since they mature in periods as short as 4 weeks to 1 year. CDs often require longer commitment periods, though short-term CDs are available.

Are CDs or T-Bills riskier investments?

Both are low-risk, but T-Bills are considered safer because they are backed by the U.S. government, while CDs, though insured by the FDIC, carry slightly more risk if the bank fails, though that risk is minimal for insured amounts.

CDs vs. T-Bills: What's the Better Investment Now?

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If you're looking for a safe investment, certificates of deposit (CDs) and Treasury bills are popular options. Most banks and credit unions offer CDs. These let you lock in a fixed interest rate and term, such as 5% for 12 months.

Treasury bills, also known as T-bills, are sold at auction. They work similarly to CDs, as you buy them with a fixed interest rate and a set term. Terms range from four to 52 weeks.

To decide which is the better investment, here are recent rates from top CDs and T-bill auctions, as well as their other key differences.

CD rates vs. T-bill rates

The table below compares CD and T-bill rates side by side as of February 2024. The CD rates were the best on offer at that time, and the T-bill rates are from auctions within issue dates ranging from Jan. 1 to Feb. 8, 2024.

Term	CD rate	T-bill rate
One month (CD)/Four weeks (T-bill)	5.40%	5.390%
Three months (CD)/13 weeks (T-bill)	5.35%	5.394%
Six months	5.28%	5.263%
One year	5.35%	4.814%

Data sources: Raisin, First Internet Bank, and TreasuryDirect.

As you can see, there wasn't much difference between shorter CD and T-bill rates when this data was compared. But, generally speaking, if you want a 1-year term, then you're better off with a CD.

Compare CD rates

Rates as of Dec. 18, 2024


Bank & CD Offer	APY	Term	Min. Deposit	Next Steps
Discover® Bank CD Member FDIC.	APY: 4.00%	Term: 1 Year	Min. Deposit: $0	Open Account for Discover® Bank CD On Discover Bank's Secure Website.
LendingClub CD Member FDIC.	APY: 4.25%	Term: 10 Months	Min. Deposit: $2,500	Open Account for On Secure Website.
Quontic CD Member FDIC.	APY: 4.25%	Term: 6 Months	Min. Deposit: $500	Open Account for On Secure Website.

CD rates vs. T-note rates

While T-bills have a maximum term of 52 weeks, there are also other types of Treasury-issued securities with longer terms available. Treasury notes have terms of two to 10 years. Treasury bonds have terms of 20 or 30 years. CD terms typically cap out at 10 years, so if you want a fixed-income investment for longer than that, you'll need to go with Treasury bonds.

The table below compares CD rates and T-note rates side by side as of February 2024. The CD rates were the best on offer at that time, and the T-bill rates are from auctions within issue dates ranging from Jan. 1 to Feb. 8, 2024.

Term	CD rate	T-note rate
Two years	5.00%	4.365%
Three years	5.05%	4.105%
Five years	5.10%	4.055%
10 years	4.00%	4.024%

Data sources: Vanguard, Apple Federal Credit Union, and TreasuryDirect.

Based on the above data, if you're looking for a term from two to five years, you can earn more from a CD. And it can be a sizable difference.

Differences between investing in CDs and T-bills

There are a few notable differences between CDs and T-bills.

Taxes

T-bills have a key advantage over CDs: They're exempt from state income taxes. The same is true with Treasury notes and Treasury bonds.

If you live in a state with income taxes, and rates are similar for CDs and T-bills, then it makes sense to go with a T-bill. The amount you save on taxes will likely result in a higher payout from a T-bill than a CD.

Liquidity

Another benefit of T-bills is their liquidity. You can buy and sell them on a secondary market. You can't do that with a CD purchased from a bank -- you'll need to break the CD and pay an early withdrawal penalty to get your money back.

There are brokered CDs issued by stock brokers, and these can be bought and sold on a secondary market. These may also be worth considering if you want a more flexible CD option.

Term length

Choosing between a CD and Treasuries depends on how long of a term you want. For terms of one to six months, as well as 10 years, rates are close enough that Treasuries are the better pick.

For terms of one to five years, CDs are currently paying more, and it's a large enough difference to give them the edge.

Ready to shop for a CD? Check out our list of the best cd rates today.

FAQs

CDs are bank-issued savings products with fixed interest rates, while T-Bills (Treasury Bills) are government-backed securities sold at a discount and mature at face value. CDs offer fixed returns, whereas T-Bills are considered safer due to government backing.
T-Bills are typically better for short-term savings since they mature in periods as short as 4 weeks to 1 year. CDs often require longer commitment periods, though short-term CDs are available.
Both are low-risk, but T-Bills are considered safer because they are backed by the U.S. government, while CDs, though insured by the FDIC, carry slightly more risk if the bank fails, though that risk is minimal for insured amounts.

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