Treasury bills — also called T-bills — are short-term debt securities issued by the U.S. federal government. They are considered one of the safest investments in the world because they are backed by the full faith and credit of the United States government.
T-bills have become especially popular in recent years as a way to earn competitive returns on cash without taking on significant risk.
How T-Bills Work
T-bills are sold at a discount to their face value. You buy them for less than their face value and receive the full face value when they mature. The difference is your return.
Example: You buy a $10,000 T-bill for $9,750. When it matures 26 weeks later, you receive $10,000. Your return is $250.
T-Bill Maturities
- 4 weeks (approximately 1 month)
- 8 weeks (approximately 2 months)
- 13 weeks (approximately 3 months)
- 17 weeks (approximately 4 months)
- 26 weeks (approximately 6 months)
- 52 weeks (approximately 1 year)
How T-Bills Are Taxed
- Subject to federal income tax in the year the bill matures
- Exempt from state and local income taxes — a major advantage for investors in high-tax states like California or New York
How to Buy T-Bills
Option 1: TreasuryDirect.gov
The U.S. Treasury’s direct platform lets you buy T-bills with no fees. Minimum purchase is $100. Auctions happen weekly. The interface is dated, and selling before maturity is complicated — best if you plan to hold to maturity.
Option 2: Through a Brokerage
Most major brokerages (Fidelity, Schwab, Vanguard, Interactive Brokers) offer T-bills in the secondary market. This gives you more flexibility to sell before maturity. Look in the “Fixed Income” or “Bonds” section of your brokerage.
T-Bills vs. High-Yield Savings Accounts vs. CDs
| T-Bills | High-Yield Savings Account | CD | |
|---|---|---|---|
| State tax exempt? | Yes | No | No |
| Federal insured? | Government-backed | FDIC up to $250K | FDIC up to $250K |
| Minimum | $100 | Usually $0 | Varies |
| Liquidity | Fixed term (can sell early via broker) | Instant | Fixed term, penalty to break |
Who Should Buy T-Bills?
- Investors in high-tax states who want the state tax exemption
- Anyone parking cash for a known future expense due within a year
- Conservative investors who want maximum safety
Bottom Line
T-bills are a simple, safe way to earn a return on cash you do not need right away. The state tax exemption and government backing make them a strong alternative to high-yield savings accounts, particularly for investors in high-income-tax states.