You buy government bonds through a brokerage account, a bank, or directly from the U.S. Treasury
The most common route for individual investors is opening a brokerage account at firms like Fidelity, Charles Schwab, or Vanguard, then purchasing bonds through their platforms the same way you would buy stocks. You can also buy directly from the U.S. Treasury through TreasuryDirect.gov without a broker — this costs nothing and works well if you plan to hold bonds until maturity. Banks and credit unions sell bonds too, though they typically charge fees that brokerages do not.
The method you choose depends on how hands-on you want to be and whether you plan to sell before the bond matures. Direct Treasury purchases lock you in until maturity or force you through a more complicated sale process. A brokerage account gives you flexibility to trade, but you pay a small commission or spread (the difference between buying and selling price).
Key Takeaways
- TreasuryDirect is free and straightforward for bonds you plan to hold until maturity, but selling early requires moving the bond to a brokerage first.
- A brokerage account costs nothing to open and lets you buy, sell, or hold bonds with flexibility, though you may pay small trading fees.
- Government bonds come in different maturities — Treasury bills (under one year), notes (2 to 10 years), and bonds (20 to 30 years) — and each pays a different interest rate.
- You need at least $100 to start with TreasuryDirect and typically $1,000 or less to buy individual bonds through a brokerage.
- Interest payments arrive twice a year for most bonds, and you owe federal income tax on that interest, though not state or local tax.
Opening a TreasuryDirect account for direct purchases
TreasuryDirect is the U.S. Treasury's own platform, and it is the cheapest way to buy if you do not plan to sell. You create an account at TreasuryDirect.gov, link a bank account, and bid on bonds during auctions held throughout the year. The minimum purchase is $100, and you can set up automatic reinvestment so interest payments buy new bonds instead of sitting in cash.
The downside is that selling before maturity is cumbersome. You cannot sell directly on TreasuryDirect; you have to transfer the bond to a brokerage account first, which takes time and may involve fees. If you think you might need the money before the bond matures, a brokerage is simpler. But if you are buying bonds to hold for their full term — say, a 10-year Treasury note that you will not touch — TreasuryDirect saves you money and eliminates middlemen.
Using a brokerage account to buy and trade bonds
Opening a brokerage account takes 10 to 15 minutes online. You provide your name, address, Social Security number, and employment information, then link a bank account to fund it. Major brokerages like Fidelity, Schwab, and Vanguard all offer government bonds with no account fees. Once your account is open and funded, you can search for bonds by maturity date, interest rate, or other details and place an order immediately.
Brokerages charge a small fee per trade — typically $0 to $10 depending on the firm — or they make money on the spread, the tiny difference between what they pay for the bond and what they charge you. This spread is usually invisible to you; you just see the price you pay. The real advantage of a brokerage is that you can sell any bond at any time without jumping through hoops, which matters if your financial situation changes or interest rates move in a way that makes selling attractive.
Understanding bond types and maturity dates
The U.S. Treasury issues three main types of bonds, each with a different time horizon. Treasury bills mature in less than one year and pay lower interest rates because the risk is very low and your money is tied up for a short time. Treasury notes mature in 2, 3, 5, 7, or 10 years and pay moderate interest rates. Treasury bonds mature in 20 or 30 years and typically pay the highest rates because you are lending money for decades.
The longer the maturity, the more the bond's price swings if interest rates change. If you buy a 30-year bond and rates rise, the bond's market value drops because new bonds now pay more. If you hold to maturity, you get your full principal back regardless. But if you need to sell early, a long-term bond in a rising-rate environment can mean a loss. Shorter-term bonds are less sensitive to rate changes, which is why they appeal to conservative investors.
How much money you need to get your free guide
TreasuryDirect requires a minimum of $100 per purchase, and you can buy in $100 increments up to $5 million per auction. Most brokerages have no minimum to open an account, though individual bond purchases typically start at $1,000. Some brokerages offer bond funds or ETFs that track government bonds, which can start as low as $1 per share, making them accessible if you have less capital.
If you are just starting out with a small amount, a bond fund or ETF is often simpler than buying individual bonds. You own a slice of many bonds at once, which spreads your risk and requires less money upfront. The trade-off is that funds do not have a fixed maturity date — they hold bonds of varying lengths and constantly buy and sell — so your principal is not may provide the way it is with an individual bond held to maturity.
Tax treatment of government bond interest
Interest you earn on U.S. Treasury bonds is subject to federal income tax but exempt from state and local income tax. This is a real advantage if you live in a high-tax state like California or New York. You report the interest on your federal tax return each year, even if you have not sold the bond yet. If you sell a bond before maturity for more than you paid, that gain is also taxable as a capital gain.
Some investors use bonds in tax-advantaged accounts like IRAs or 401(k)s to avoid paying tax on the interest each year. If you hold bonds in a regular taxable brokerage account, you owe tax annually on interest, which can reduce your effective return. Keep records of what you paid for each bond and when you sold it so you can calculate gains or losses accurately at tax time.
Comparing your options: TreasuryDirect vs. brokerage vs. bank
Each route has trade-offs in cost, convenience, and flexibility. The table below shows the key differences so you can decide which fits your situation.
| Route | Minimum | Cost | Selling Before Maturity | Best For |
|---|---|---|---|---|
| TreasuryDirect | $100 | Free | Cumbersome (transfer to brokerage first) | Buy-and-hold investors with small amounts |
| Brokerage (Fidelity, Schwab, Vanguard) | $0 to open; $1,000 per bond | $0–$10 per trade or spread | Easy and immediate | Active traders or those who may sell early |
| Bank or credit union | Varies | Often $25–$100 per transaction | Varies by institution | Rarely the best choice; higher fees |
Banks and credit unions are rarely the most cost-effective option because their per-transaction fees eat into your returns, especially on smaller purchases. If you already have a relationship with a bank and they offer competitive pricing, it may be worth asking, but TreasuryDirect and major brokerages almost always come out ahead.
Frequently Asked Questions
Can I lose money on a government bond?
If you hold a bond to maturity, you get your full principal back — there is no default risk with U.S. Treasury bonds. But if you sell before maturity and interest rates have risen, the bond's market value will be lower than what you paid, resulting in a loss. Longer-term bonds are more sensitive to rate changes than shorter ones.
How often do I get paid interest?
Most Treasury bonds pay interest twice a year. The exact dates depend on when the bond was issued. Interest arrives automatically in your TreasuryDirect account or brokerage account on the scheduled payment dates.
What is the difference between buying individual bonds and bond funds?
Individual bonds have a fixed maturity date and return your principal at that date if you hold them. Bond funds own many bonds and do not have a maturity date; their value fluctuates daily. Funds are simpler if you have a small amount to invest, but individual bonds offer more certainty if you know when you will need the money.
Do I need a financial advisor to buy government bonds?
No. Buying bonds through TreasuryDirect or a brokerage is straightforward enough to do yourself. A financial advisor can help you decide how much to allocate to bonds based on your overall goals, but the actual purchase does not require professional help.
Can I buy bonds for someone else, like a child?
Yes, but the account must be in their name or set up as a custodial account if they are a minor. TreasuryDirect and brokerages both offer custodial options. Consult the specific platform for their rules on age and account setup.