T-Bill vs CD

From the investor’s point of view, the main difference is that a CD is taxable by your state as well as the Fed, while treasuries are not.

So if you live in a State with high-tax, T-bills are likely to be the better choice when compared to the highest yielding CD’s of the same maturity. However, if you live in a no-tax state like Florida, the CD is likely to be better. Jonathan made a great calculator for this comparison here:

Other key differences:

1. Minimum to invest for CD’s varies by bank. For T-bills, it’s $1000, or technically slightly less than that because the bills are actually sold at a discount to yield the $1000 at maturity.

2. The Treasury Direct website requires you purchase T-bills in multiples of $1000. Although this may vary by bank, CD’s can generally be any amount above the minimum.

3. This usually isn’t an issue with such short maturities, but if you later realize you need some of the invested money before maturity, you can opt to sell the T-bill on the secondary market. Treasury Direct charges $45 for this service. With a CD, the bank charges a penalty of a specified number of months of interest for early withdrawl – typically, this would be 3 months interest on a 6 month CD or 6 months interest on a longer-term CD.


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