How the two differ before any rate comparison
TreasuryDirect lists regular bill terms of 4, 6, 8, 13, 17, 26 and 52 weeks, sold at a discount or at par with face value paid at maturity, in $100 increments with a $100 minimum. [1] In TreasuryDirect you buy with a non-competitive bid, accepting the auction rate; competitive bids require a bank, broker or dealer. [2] The IRS says interest on Treasury bills is subject to federal income tax but exempt from all state and local income taxes. [4]
A savings account at an FDIC-insured bank is a deposit covered to at least $250,000 per depositor, per ownership category, per bank. The FDIC lists Treasury bills among products deposit insurance does not cover. [5]
| Question | Savings account | Treasury bill in TreasuryDirect |
|---|---|---|
| Access | Withdraw or transfer under the account terms | Paid at maturity; to sell early, hold 45 days, then transfer to a bank or broker [3] |
| 4-week term | Not applicable | Cannot be sold or transferred before maturity [3] |
| Protection | FDIC deposit insurance within limits [5] | U.S. Treasury obligation; not FDIC-insured [5] |
| Minimum and increments | Set by the bank | $100 minimum, $100 increments [1] |
| State and local income tax on interest | Generally taxable | Exempt [4] |
| Rate | Variable; the bank can change it | Set at auction for that bill and held to maturity |
Worked example: after-tax break-even
The rates and tax brackets are invented, not current market rates. A saver has $10,000 for a bill due in about six months. The savings account is modeled at 3.60% and a 26-week bill at 3.75%, both as simple annual rates for half a year. The saver's federal rate is 22% and state rate 5%. The model ignores compounding, the deductibility of state tax and the difference between a bill's discount yield and an APY.
Savings: $10,000 x 3.60% / 2 = $180 before tax; after both taxes, $180 x (1 - 0.22 - 0.05) = $131.40. Bill: $10,000 x 3.75% / 2 = $187.50; after federal tax only, $187.50 x 0.78 = $146.25. The bill keeps $14.85 more. The break-even savings rate is 3.75% x 0.78 / 0.73, about 4.01%; above that, the savings account wins in this model. In a state with no income tax, the comparison is simply 3.60% versus 3.75% before federal tax.
| Invented case | Pre-tax interest | After modeled taxes |
|---|---|---|
| Savings at 3.60% | $180.00 | $131.40 |
| 26-week bill at 3.75% | $187.50 | $146.25 |
| Savings rate needed to match the bill | About 4.01% | Equal |
When the bill does not fit
- Emergency money: you may need it before maturity, and early sale from TreasuryDirect takes a 45-day wait plus a transfer. [3]
- A bill with an uncertain date: a fixed maturity does not move when your bill does.
- Small balances: a gap of a fraction of a percent on a few thousand dollars may be worth less than the time spent managing auctions.
- Money you already hold in a savings account with a competitive rate: if the after-tax gap is small, keep your current account and skip the setup.
What buying in TreasuryDirect involves
Write the maturity date into your calendar and the worksheet on the day you buy, and decide in advance whether the proceeds go back to savings or into another bill.
- You place a non-competitive bid, which guarantees the bill and amount you request at the rate set at auction. [2]
- Bids run from a $100 minimum to a $10 million maximum, in $100 increments. [2]
- Payment is taken from the source of funds you specify in the account. [2]
- At maturity you can reinvest into a new bill; TreasuryDirect's 45-day hold also applies to reinvestments when new funds are added. [2][3]
- Competitive bids and Cash Management Bills require a bank, broker or dealer. [1][2]
Checks before the first purchase
Confirm today's savings APY on the bank's own page and the latest auction result for the bill term you want, and enter both with the date in the worksheet. Use your own marginal federal and state rates, or ask a tax professional. Decide in advance whether to reinvest at maturity; TreasuryDirect offers reinvestment into a new bill. [2] This guide is US consumer education, not investment or tax advice, and does not cover brokerage purchases, money market funds or CDs.
Questions before you decide
Are Treasury bills FDIC-insured?
No. The FDIC lists U.S. Treasury bills, bonds and notes among the products deposit insurance does not cover. They are obligations of the U.S. Treasury, a different kind of protection from a bank deposit.
Can I sell a Treasury bill in TreasuryDirect before it matures?
Not inside TreasuryDirect. You must hold it 45 days, then transfer it to a bank, broker or dealer to sell. A 4-week bill matures before the 45-day hold ends, so it cannot be sold or transferred early.
Is Treasury bill interest tax-free?
No. The IRS says interest on Treasury bills, notes and bonds is subject to federal income tax but exempt from all state and local income taxes.
Follow the sources
- TreasuryDirect: Treasury bills Checked Oct 13, 2026
- TreasuryDirect: Buying a Treasury marketable security Checked Oct 13, 2026
- TreasuryDirect: Selling a Treasury marketable security Checked Oct 13, 2026
- IRS: Topic no. 403, Interest received Checked Oct 13, 2026
- FDIC: Understanding deposit insurance Checked Oct 13, 2026
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