U.S. Treasury bills (T-bills)
are short-term government debt securities that are available in 4-, 13-, and 26-week terms. They're considered cash investments because of their short duration and their U.S. government backing. In fact, they're sometimes described as risk-free investments, and serve as the standard against which the risk posed by other investments is measured.
The
interest
you earn on a T-bill is the difference between the discounted price you pay to buy,
which is always less than the $1,000 face value, and the full face value, which is paid at maturity.
The U.S. Treasury sells T-bills directly to both institutional and individual investors. To buy as an individual, you open a Treasury Direct account and have the purchase amount debited from a bank account you designate. When the bill matures, you can renew it or have its value deposited directly into the designated account. You can also buy and sell T-bills through a broker, though that would mean paying a commission on each transaction.
Type
Access
Duration
Insured
Certificates of deposit (CDs)
Money available with early withdrawal penalty likely
3 months to 5 years
Bank CDs FDIC insured
U.S. Treasury bills
(T-bills)
Can be sold any time, though at a potential loss before maturity
