You can buy government bonds directly from the U.S. Treasury, through a bank or brokerage, or from a bond dealer
The easiest route for most people is TreasuryDirect, a free online platform run by the U.S. Department of the Treasury. You open an account, link a bank account, and buy bonds directly without paying a middleman fee. The downside: you can only buy new bonds when the Treasury issues them, and you cannot sell before maturity through TreasuryDirect itself.
If you want to buy existing bonds or need more flexibility, you can use a brokerage account at firms like Fidelity, Charles Schwab, or Vanguard. These charge a small fee per transaction but give you access to the secondary market — bonds already issued that other investors are selling. Banks also sell government bonds, though they typically charge higher fees than brokerages.
The choice depends on what you want to hold and when you might need the money. TreasuryDirect works well for buy-and-hold investors. A brokerage works better if you think you might sell before the bond matures, or if you want to buy bonds that are no longer being newly issued.
Key Takeaways
- TreasuryDirect is free and lets you buy directly from the U.S. Treasury, but you can only purchase new bonds when they are issued and cannot easily sell before maturity.
- Brokerages like Fidelity, Schwab, and Vanguard charge a small fee per transaction but give you access to bonds already in circulation and let you sell whenever you want.
- Banks sell government bonds but typically charge higher fees than brokerages for the same service.
- Your choice depends on whether you plan to hold the bond until it matures or might need to sell it earlier.
How to Open a TreasuryDirect Account
Go to treasurydirect.gov and click "Open an Account." You will need a Social Security number, a valid email address, and a U.S. bank account. The site will ask you to create a username and password, then verify your identity by answering security questions based on your credit history.
Once your account is open, you link your bank account and wait for the Treasury to announce the next auction. Auctions happen on a regular schedule: Treasury bills every week, notes every month, and bonds every few months. The Treasury website shows the auction calendar and the terms of each offering. When an auction opens, you enter a bid or accept the noncompetitive bid (which means you pay whatever the average bid turns out to be). The money is drawn from your bank account on the settlement date, usually a few days after the auction closes.
You can hold your bonds in TreasuryDirect until they mature, and the principal and interest are deposited directly into your bank account. If you need to sell before maturity, you have to transfer the bond to a brokerage account first, which costs money and takes time.
Buying Through a Brokerage Account
Open an account at any major brokerage — Fidelity, Charles Schwab, E-Trade, Vanguard, and others all offer bond trading. The process is the same as opening a stock brokerage account: you provide your name, address, Social Security number, and employment information, and link a bank account.
Once your account is funded, you can search for government bonds by type (Treasury bills, notes, or bonds), maturity date, and yield. The brokerage shows you the bid-ask spread — the difference between what buyers are offering and what sellers are asking. You place an order to buy, and the transaction settles in one or two business days. The brokerage charges a commission, which varies but is often $1 to $10 per bond depending on the firm and the bond's size.
The advantage is flexibility: you can sell any time without penalty, and you have access to older bonds that are no longer being newly issued. The disadvantage is the fee and the bid-ask spread, which means you pay slightly more to buy and receive slightly less to sell compared to the midpoint price.
Buying Bonds Through a Bank
Most banks offer government bond sales through their investment or wealth management departments. You typically need to visit a branch or call a banker, provide your account information, and place an order. The bank acts as a broker and charges a markup on the bond price — usually higher than what you would pay at a discount brokerage.
Banks are convenient if you already have a relationship with them and prefer to do business in person or over the phone. However, you will pay more for that convenience. If cost matters to you, a brokerage is almost always cheaper.
Understanding the Costs and Timing
TreasuryDirect has no fees, but you are limited to new issues and cannot easily exit early. Brokerages charge per transaction — typically $1 to $10 — but give you full flexibility. Banks charge a markup that can be $10 to $50 or more per bond, depending on the size and type.
Timing also matters. If you want to buy a specific bond that is no longer being issued, you must use a brokerage or bank. If you want the lowest cost and do not mind waiting for the next auction, TreasuryDirect is the way to go. If you think you might need to sell before maturity, a brokerage is worth the fee because selling through TreasuryDirect requires transferring the bond out first, which costs money anyway.
What Happens After You Buy
Once you own a government bond, you receive interest payments on a set schedule — usually every six months for Treasury notes and bonds, and all at maturity for Treasury bills. The interest is deposited into your account (TreasuryDirect) or your brokerage account (if you bought through a broker).
When the bond matures, you receive the full face value back. If you bought through TreasuryDirect, the money goes to your linked bank account. If you bought through a brokerage, it goes to your brokerage cash balance. You can then reinvest it, withdraw it, or hold it in cash.
If you sell before maturity through a brokerage, the price you receive depends on current interest rates and the bond's remaining time to maturity. If rates have risen since you bought, the bond is worth less. If rates have fallen, it is worth more. This is why bonds are less predictable if you do not hold them to maturity.
Frequently Asked Questions
Can I buy government bonds with a small amount of money?
Yes. TreasuryDirect lets you buy Treasury bills for as little as $100. Brokerages typically have a $1,000 minimum per bond, though some allow smaller purchases through bond funds. Banks usually require larger minimums, often $5,000 or more.
What is the difference between a Treasury bill, note, and bond?
Treasury bills mature in one year or less, notes mature in 2 to 10 years, and bonds mature in 20 or 30 years. All three are backed by the U.S. government and sold through the same channels. Longer maturities typically pay higher interest rates.
Do I have to pay taxes on government bond interest?
Yes. Interest from Treasury bonds is subject to federal income tax but is exempt from state and local income taxes. You report the interest on your federal tax return each year, even if you have not sold the bond yet.
What if I need to sell a bond before it matures?
If you bought through a brokerage, you can sell anytime on the secondary market. If you bought through TreasuryDirect, you must transfer the bond to a brokerage account first, which costs money and takes several days. Selling before maturity means your return depends on current market prices, not the original rate you locked in.
Is there a penalty for holding a government bond past maturity?
No. When a bond matures, the Treasury automatically returns your principal. You do not have to do anything. If you want to reinvest, you can buy new bonds, but there is no penalty for letting the money sit in your account.