CD Rates vs. 1-Year Treasury Bills: Which Pays More for Short-Term Savers in 2026?

The Short-Term Saver’s Dilemma

If you have a chunk of money you won’t need for a year or less, you’re probably wondering where to park it. Two of the most popular options are Certificates of Deposit (CDs) and short-term U.S. Treasury securities — specifically Treasury bills. Both are low-risk, both pay a fixed return, and both are widely available to everyday Americans. But they’re not identical, and the difference in your after-tax return can be real.

Here’s a plain-English breakdown so you can make the right call for your situation.

What Is a CD?

A Certificate of Deposit is a fixed-term deposit offered by banks and credit unions (source). You agree to leave your money on deposit for a set period — anything from a few months to several years — and in return the bank pays you a guaranteed interest rate. When the term ends, you get your principal back plus the interest earned.

Key features of CDs (source):

FDIC insured up to $250,000 per depositor, per bank, per ownership category (source)
Fixed interest rate for the full term
Early-withdrawal penalties typically apply if you need the money before maturity
Interest is taxed at the federal level and may also be taxed at the state and local level

The FDIC insurance limit is currently $250,000 (source) — meaning if your balance stays at or below that threshold at any single bank, your principal is fully protected even if the bank fails.

What Is a Treasury Bill?

Treasury bills — often called T-bills — are short-term debt securities issued by the U.S. government (source). When you buy a T-bill, you’re essentially lending money to the federal government for a short period in exchange for a fixed return. T-bills are backed by the full faith and credit of the United States (source).

Key features of T-bills (source):

Backed by the U.S. government with no dollar cap on the guarantee
Fixed return paid at maturity (T-bills are typically sold at a discount and mature at face value)
Can be sold on the secondary market before maturity, though the price may be above or below what you paid depending on how rates have moved (source)
Interest is subject to federal income tax but is exempt from state and local income taxes (source)

That state-tax exemption is one of the most underappreciated advantages of T-bills — more on that below.

What Do the Rates Look Like Right Now?

Here’s where the rubber meets the road. As of the most recent data available:

The 1-Year Treasury Constant Maturity Rate is 3.80% (source) (as of 2026-05-28). This benchmark yield reflects the market rate for 1-year Treasury securities and gives you a solid reference point for what short-term government debt is paying right now.
The 3-Month Treasury Bill Rate is 3.69% (source) (as of 2026-05-28).
The weighted-average yield on outstanding U.S. Treasury bills is 3.696% (source) (as of 2026-04-30), reflecting the blended cost across all outstanding T-bill maturities.

Short-term Treasuries are currently yielding in the high 3% range for the shortest maturities, stepping up to 3.80% at the 1-year mark.

On the CD side, rates vary widely by bank and term. Promotional rates at online banks can run higher than the Treasury benchmark, while big traditional banks often pay far less. In the current environment, the two options are genuinely competitive — and the difference in your pocket usually comes down to taxes and flexibility, not just the headline rate.

The Tax Angle: Why T-Bills Often Win After Tax

This is the part most people miss. CD interest is taxed at both the federal level and, in most states, the state and local level as well (source). T-bill interest, on the other hand, is exempt from state and local income taxes (source).

Here’s why that matters. Say a 1-year CD offers a slightly higher nominal rate than a comparable T-bill. If you live in a state with a meaningful income tax rate, the after-tax yield on the CD can actually end up lower than the T-bill’s after-tax yield — even though the CD’s headline number looked better.

The higher your state income tax rate, the more the T-bill’s exemption is worth to you (source). If you live in a state with no income tax, this advantage disappears and the nominal rate comparison becomes the deciding factor.

The practical upshot: always compare after-tax yields, not just headline rates, especially if you’re in a higher state-tax bracket.

Safety: Are They Both Truly Safe?

Both options rank among the safest places to put money in the United States, but the protection works differently.

CDs are covered by FDIC insurance up to $250,000 per depositor, per bank, per ownership category (source). That limit covers the vast majority of individual savers. If you have more than $250,000 to place, you can spread it across multiple banks or ownership categories to stay within insured limits (source).

T-bills are backed by the full faith and credit of the U.S. government (source), with no dollar cap on that guarantee. Whether you have $1,000 or $1 million in T-bills, the full amount is covered (source). That makes T-bills particularly attractive for savers who have more than $250,000 to invest at once.

For most everyday Americans with balances under $250,000, both options are effectively equally safe. The difference only becomes meaningful at larger balances.

Liquidity: What Happens If You Need the Money Early?

This is where the two options diverge most sharply.

Breaking a CD Early

If you need your money before a CD matures, you’ll almost certainly face an early-withdrawal penalty (source). Penalties typically run several months’ worth of interest — sometimes enough to wipe out everything you’ve earned if you exit early in the term (source). Some CDs are structured as no-penalty CDs, but those usually come with lower rates.

Selling a T-Bill Early

Marketable Treasury securities can be sold on the secondary market before maturity through a brokerage account (source). There’s no fixed penalty, but the price you receive will reflect current market rates — if rates have risen since you bought, you may get slightly less than face value. If rates have fallen, you could get more. Either way, the flexibility is greater than with a CD.

The Bottom Line on Liquidity

If there’s any chance you’ll need the money before the term ends, T-bills give you more options. If you’re confident you can lock the money away for the full term, both work equally well from a liquidity standpoint.

How to Buy Each One

Buying a CD

CDs are available directly from banks and credit unions — both in person and online. Online banks and credit unions tend to offer the most competitive rates. The process is straightforward: open an account, choose your term and deposit amount, and you’re done. Just confirm the FDIC insurance status of the institution before depositing.

Buying a T-Bill

T-bills are available through two main channels (source):

TreasuryDirect.gov — the U.S. Treasury’s official platform, where you can purchase T-bills directly.
A brokerage account — most standard brokerage accounts let you buy T-bills on the secondary market or participate in Treasury auctions.

The brokerage route is often preferred by investors who want the flexibility to sell before maturity, since marketable Treasuries can be sold through a brokerage on the secondary market (source).

Head-to-Head Comparison

Here’s a quick summary of how the two options stack up:

Feature	CD	Treasury Bill
Issuer	Bank or credit union	U.S. government
Safety	FDIC insured up to $250,000	Full faith and credit, no cap
Current benchmark yield	Varies by bank	3.69%–3.80% (3-mo to 1-yr)
State/local tax	Yes, in most states	Exempt
Early exit	Penalty typically applies	Sell on secondary market
Best for	Savers who want simplicity	Savers in high-tax states or needing flexibility

Who Should Choose a CD?

A CD is likely the better fit if:

You found a promotional rate at an online bank that meaningfully beats the Treasury benchmark
You live in a state with no income tax, so the T-bill’s tax exemption doesn’t help you
You prefer the simplicity of dealing directly with your bank
You’re certain you won’t need the money before maturity
Your balance is comfortably under $250,000 (source)

CDs are also a solid choice for savers who just want to set it and forget it without opening a brokerage account or navigating Treasury auctions.

Who Should Choose a T-Bill?

A T-bill is likely the better fit if:

You live in a state with a meaningful income tax rate — the exemption can make a real after-tax difference (source)
You have more than $250,000 to invest and want a single instrument that covers the full amount (source)
You want the option to exit early without a fixed penalty
You already have a brokerage account and are comfortable with the process
You want to build a simple ladder across multiple short-term maturities

The current 1-Year Treasury Constant Maturity Rate of 3.80% (source) and 3-Month Treasury Bill Rate of 3.69% (source) make T-bills a genuinely competitive option right now — not a consolation prize.

A Word on the Personal Savings Rate

The U.S. personal savings rate stands at just 2.6% (source) (as of 2026-04-01), meaning the average American household is saving a very small fraction of their income. If you’re actively comparing CD rates and T-bill yields, you’re already ahead of most people. The best savings vehicle is the one you actually use consistently — so don’t let the perfect be the enemy of the good.

Quick Checklist Before You Decide

Before you commit, run through these questions:

What state do you live in? If your state taxes income, T-bills have a built-in after-tax advantage.
How much are you investing? Over $250,000? T-bills remove the FDIC cap concern entirely.
How confident are you about the timeline? If there’s any chance you’ll need the money early, T-bills are more forgiving.
What rate is your bank offering? If a CD’s rate is meaningfully higher than the Treasury benchmark even after adjusting for state taxes, the CD wins.
Do you already have a brokerage account? If not, a CD may be simpler to set up quickly.

The Bottom Line

Right now, 1-year Treasury securities are yielding 3.80% (source) and 3-month T-bills are at 3.69% (source). Competitive CD rates from online banks can match or slightly beat those numbers on a gross basis. But once you factor in state income taxes, T-bills often come out ahead for savers in higher-tax states.

Neither option is universally better. The right answer depends on your tax situation, the specific CD rate you can actually get, how much you’re investing, and whether you might need the money before maturity. Run the after-tax math for your own situation, and the answer will be clear.

This article was researched using official U.S. data sources cited inline and reviewed for accuracy before publishing. It is general information, not personalized financial advice. For decisions specific to your situation, consult a licensed professional.

Data refreshed: 2026-05-31. Editorial accuracy verified for cited sources only.