Buying Treasury Bills on Fidelity

You can buy Treasury bills directly through Fidelity's website or mobile app using your brokerage account. The process takes about five minutes once your account is set up. You search for the T-bill you want, enter the amount, and confirm the purchase — Fidelity handles the rest, including settlement and holding the bill until maturity.

T-bills are short-term government debt that mature in four weeks, eight weeks, thirteen weeks, or twenty-six weeks. You buy them at a discount to their face value and receive the full amount when they mature. The difference between what you pay and what you receive is your interest. Because they're backed by the U.S. government, they carry virtually no default risk.

Key Takeaways

  • T-bills are purchased through Fidelity's fixed income or Treasury section, and you can buy them in amounts as small as $100.
  • You pay a discounted price upfront and receive the full face value at maturity, with the difference serving as your return.
  • Fidelity holds your T-bills in your account and automatically deposits the proceeds when they mature.
  • The secondary market on Fidelity lets you sell a T-bill before maturity if you need the money earlier, though the price may be higher or lower than what you paid.

Setting Up Your Account to Buy T-Bills

You need an active Fidelity brokerage account with cash available to purchase. If you don't have one, you'll need to open an account first — this involves providing your Social Security number, address, and employment information. The account opening process typically takes a few minutes online.

Once your account is open, deposit money into it. You can transfer funds from a bank account, deposit a check, or wire money. The funds must be settled before you can buy T-bills, which usually takes one to three business days depending on your deposit method. Check your account's cash balance to confirm the money is available.

Finding and Purchasing T-Bills on Fidelity

Log into your Fidelity account and navigate to the Fixed Income or Treasuries section. You'll see a list of available T-bills organized by maturity date. Each listing shows the discount rate (the interest rate you'll earn), the maturity date, and the price you'll pay per $100 of face value.

Select the T-bill that matches your timeline and return preference. Enter the dollar amount you want to invest — Fidelity's minimum is typically $100, and you can buy in $100 increments. Review the details, including the exact purchase price and maturity date, then confirm the order. Fidelity will deduct the purchase price from your cash balance immediately.

Your T-bill purchase settles the next business day. Fidelity holds the bill in your account, and you'll see it listed under your holdings. You don't need to do anything else — when the T-bill matures, Fidelity automatically deposits the full face value into your cash balance.

Understanding T-Bill Pricing and Returns

T-bills are quoted as a discount from their $100 face value. If a thirteen-week T-bill is listed at 99.50, you pay $99.50 for every $100 of face value. When it matures in thirteen weeks, you receive $100 per $100 of face value. Your return is the $0.50 difference, which works out to roughly 0.20% for that thirteen-week period.

The discount rate shown on Fidelity's platform is annualized, meaning it's expressed as a yearly percentage even though the T-bill matures in weeks. A higher discount rate means a steeper discount from face value and a better return for you. Rates change daily based on market demand and Federal Reserve policy, so the rate you see today may be different tomorrow.

Your actual return depends on how long you hold the T-bill. A four-week T-bill earning 5% annualized returns roughly 0.38% over those four weeks. A twenty-six-week T-bill at the same rate returns roughly 2.50%. Longer maturities typically offer higher rates, but they also lock your money up longer.

Selling a T-Bill Before Maturity

If you need your money before the T-bill matures, you can sell it on Fidelity's secondary market. This means you're selling your T-bill to another investor rather than holding it until the government pays you back. The price you receive depends on current market rates and how much time remains until maturity.

If interest rates have fallen since you bought the T-bill, you'll likely sell it for more than you paid. If rates have risen, you'll likely sell it for less. The difference can be small or significant depending on how much rates have moved and how much time is left. Fidelity shows you the current bid and ask prices before you confirm a sale, so you know exactly what you'll receive.

Selling a T-bill takes one business day to settle. The proceeds appear in your cash balance the next day, and you can use that money to buy other investments or withdraw it from your account.

Tax Treatment of T-Bill Interest

The interest you earn on T-bills is subject to federal income tax but exempt from state and local income tax. This makes them slightly more tax-efficient than bonds or savings accounts if you live in a high-tax state, though the difference is usually small.

When your T-bill matures, Fidelity reports the interest to the IRS on Form 1099-INT. You'll receive a copy in January of the following year. Include this amount in your taxable income when you file your tax return. If you sold the T-bill before maturity and realized a gain or loss, that's reported separately on Form 1099-B.

Frequently Asked Questions

What's the minimum amount I can invest in a T-bill on Fidelity?

Fidelity's minimum purchase is $100, and you can buy in $100 increments. So you could buy $100, $200, $500, or any multiple of $100. There's no maximum limit per purchase, though your account's cash balance sets the practical upper limit.

Can I buy T-bills directly from the government instead of through Fidelity?

Yes, you can buy T-bills directly from the U.S. Treasury through TreasuryDirect.gov without paying any fees. However, Fidelity offers convenience and the ability to sell before maturity on the secondary market, which TreasuryDirect doesn't allow. Fidelity charges no commission on T-bill purchases, so the main trade-off is flexibility versus simplicity.

What happens if I don't have enough cash in my Fidelity account to buy a T-bill?

Fidelity will reject your purchase order if your cash balance is too low. You'll need to deposit more money first. If you have other investments in your account, you can sell them to raise cash, though that takes one business day to settle.

Do I have to hold a T-bill until maturity?

No. You can sell it anytime on the secondary market through Fidelity. The price you receive depends on current interest rates and the time remaining. If you need the money quickly, selling is faster than waiting for maturity, though you may receive more or less than you paid depending on rate movements.

How do I know which T-bill maturity to choose?

Match the maturity to when you'll need the money. If you need funds in two months, a thirteen-week T-bill is appropriate. If you're comfortable locking money away for six months, a twenty-six-week T-bill typically offers a higher rate. Longer maturities usually pay more, but they carry more interest-rate risk if you need to sell early.