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

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 recent CD and T-bill rates side by side. The CD rates were the best I found after reviewing dozens of high-yield CD options. T-bill rates are from auctions within the last two weeks at the time of writing (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’s not much difference between shorter CD and T-bill rates right now. But if you want a 1-year term, then you’re better off with a CD.

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.

Here’s how CD rates currently compare to T-note rates. The T-note rates are from notes issued between Jan. 16 and Jan. 31, 2024.

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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.

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

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.

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.

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.

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