Treasury bills typically pay more interest than savings accounts right now, but they lock your money away for a fixed period and require a minimum investment

A Treasury bill (or T-bill) is a short-term loan you make to the U.S. government. You buy it at a discount, hold it for a set time—4 weeks, 8 weeks, 13 weeks, 26 weeks, or 52 weeks—and get the full face value back when it matures. The difference between what you paid and what you get back is your interest.

A savings account lets you deposit and withdraw money whenever you want, and the bank pays you interest on your balance. The trade-off is simple: T-bills pay more, but your money is locked in. Savings accounts pay less, but you keep access.

Which one makes sense depends on whether you need the money soon and how much you have to invest. If you have cash sitting idle for at least a few weeks and can afford to leave it untouched, T-bills often win on rate. If you might need the money or want to keep adding to it, a savings account is the safer choice.

Key Takeaways

  • T-bills currently pay higher interest rates than most savings accounts, but rates change weekly and vary by the length of the bill you buy.
  • Your money is locked in for the full term of the T-bill—you cannot withdraw early without selling it on the secondary market, which may cost you.
  • T-bills require a minimum investment of $100 and are purchased through TreasuryDirect, a government website, or through a bank or broker.
  • Savings accounts offer flexibility and FDIC insurance up to $250,000, making them safer for money you might need on short notice.
  • The best choice depends on your timeline: T-bills for money you will not touch for weeks or months, savings accounts for emergency funds or frequent access.

How T-bill interest rates compare to savings account rates

T-bill rates are set by auction each week and reflect what the government is willing to pay. As of early 2024, 4-week and 8-week T-bills have paid between 4.5% and 5.3% annually, depending on the week. Longer-term bills—26-week and 52-week—have paid slightly higher rates, sometimes reaching 5.4% or more.

Savings account rates vary widely by bank. High-yield savings accounts at online banks currently pay between 4.0% and 5.3% annually, while traditional brick-and-mortar banks often pay 0.01% to 0.5%. The gap between a high-yield account and a T-bill can be small or nonexistent, depending on the week and the bank.

The key difference is that T-bill rates are public and set by auction—you can see exactly what you will earn before you buy. Savings account rates can change at any time, and banks often lower them without warning. If you lock money into a T-bill at 5.2% for 13 weeks, you know you will get that rate. A savings account paying 5.0% today might pay 4.5% next month.

The cost of accessing your money early

If you buy a T-bill and decide you need the money before it matures, you have two options, and neither is ideal. You can sell it on the secondary market—a system where investors trade existing T-bills before they mature. The price you get depends on interest rates at the time you sell. If rates have risen since you bought it, you will take a loss. If rates have fallen, you might make a small gain.

The second option is to hold it until maturity and accept that your money was locked away. With a savings account, you simply withdraw what you need, whenever you need it, with no penalty.

This inflexibility matters most if you are building an emergency fund. Emergency funds need to be accessible immediately. A T-bill is the wrong tool for that. But if you have money you know you will not need for at least a month, the higher rate often makes the lock-in worth it.

How to buy T-bills and what the minimum investment is

T-bills are bought through TreasuryDirect, a website run by the U.S. Department of the Treasury. You create an account, link a bank account, and place a bid in the weekly auction. The minimum purchase is $100, and you can buy in $100 increments up to $5 million per auction.

You can also buy T-bills through a bank or brokerage firm, though they may charge a fee (typically $25 to $50 per transaction). TreasuryDirect charges nothing, which is why it is the cheapest route if you are comfortable using the website.

When a T-bill matures, the full face value is deposited directly into your linked bank account. You can then buy another one, let the money sit, or move it elsewhere. There is no lock-in beyond the term you chose—once it matures, the money is yours to do with as you wish.

FDIC insurance and safety differences

Savings accounts held at banks are insured by the FDIC (Federal Deposit Insurance Corporation) up to $250,000 per account holder per bank. If the bank fails, you get your money back, up to that limit.

T-bills are backed by the full faith and credit of the U.S. government, which is considered safer than any bank. The government has never defaulted on Treasury debt. If you buy a T-bill, you are lending to the U.S. government, not to a bank, so FDIC insurance does not apply—but you do not need it. The risk of the U.S. government failing to repay is far lower than the risk of a bank failing.

In practical terms, both are very safe. The real difference is access: if you need your money and the bank is closed, you cannot get it from a savings account. If a T-bill has matured, the money is already in your bank account. If it has not matured yet, you are stuck waiting or selling at a loss.

When a savings account makes more sense than T-bills

Use a savings account if you are building an emergency fund, saving for a purchase you might make within the next few weeks, or adding money regularly. Savings accounts let you deposit and withdraw freely, and high-yield accounts now pay rates competitive with T-bills.

Savings accounts also make sense if you have less than $100 to invest. T-bills require a $100 minimum, so smaller amounts belong in a savings account.

If you are uncertain whether you will need the money, a savings account is the safer bet. The rate difference between a high-yield savings account and a T-bill is often small enough that the flexibility is worth more than the extra interest.

When T-bills make more sense than savings accounts

T-bills are the better choice if you have a lump sum of money—at least $100—that you know you will not need for a specific period of time. If you have a bonus coming in January and you know you will not spend it until April, a 13-week T-bill locks in a known rate for exactly that period.

T-bills also make sense if you want to avoid the temptation to spend money. The friction of selling on the secondary market or waiting for maturity can be a feature, not a bug. If you are trying to save for something and you know you will be tempted to raid the account, a T-bill forces you to stick to your plan.

T-bills are also useful if you are comparing rates across multiple banks and finding that none of them offer competitive rates. If the best savings account you can find pays 3.5% and a 13-week T-bill pays 5.2%, the T-bill wins—as long as you can afford to wait 13 weeks.

Frequently Asked Questions

Can I lose money on a T-bill?

You cannot lose money if you hold the T-bill until it matures—you will get the full face value back. You can only lose money if you sell it on the secondary market before maturity and interest rates have risen since you bought it. With a savings account, your principal is never at risk.

Do I have to pay taxes on T-bill interest?

Yes. T-bill interest is subject to federal income tax but not state or local income tax. Savings account interest is also subject to federal, state, and local taxes. Both are taxed the same way at the federal level.

What happens if I need my T-bill money before it matures?

You can sell it on the secondary market, but you may get less than you paid if interest rates have risen. You can also hold it until maturity and accept the wait. With a savings account, you simply withdraw the money with no penalty.

Are there any fees for buying T-bills through TreasuryDirect?

No. TreasuryDirect charges nothing to buy, hold, or sell T-bills. Banks and brokers may charge $25 to $50 per transaction, which is why TreasuryDirect is the cheapest option.

Can I buy T-bills for a child or as a gift?

You can buy T-bills in a child's name if you have a Social Security number for them, but you must be the account holder. You cannot gift a T-bill directly, but you can gift cash and help someone else buy one through their own TreasuryDirect account.