You can buy U.S. government bonds directly from the Treasury, through a bank or brokerage, or via a mutual fund
The most straightforward route is TreasuryDirect, the U.S. Department of the Treasury's online platform where you buy bonds straight from the government with no middleman fees. You create an account, link a bank account, and purchase Treasury bills, notes, or bonds in amounts as small as $100. The second option is a bank or brokerage firm — Fidelity, Vanguard, Charles Schwab, and most traditional banks sell government bonds and handle the paperwork for you, though they charge a small fee per transaction. The third option is a mutual fund or exchange-traded fund (ETF) that holds government bonds, which spreads your money across many bonds and is useful if you want to start small or prefer automatic management.
Each route has a different cost structure and works best for different situations. TreasuryDirect costs nothing but requires you to manage each bond individually and has a slower process for selling before maturity. A brokerage charges a fee — typically $1 to $10 per bond depending on the firm — but gives you faster access to your money and more flexibility. A bond fund charges an annual management fee (usually 0.05% to 0.20% of what you invest) but requires less hands-on work.
Key Takeaways
- TreasuryDirect is free and lets you buy directly from the U.S. Treasury, but you must hold bonds until maturity or sell them through a separate process.
- Banks and brokerages charge a small fee per transaction but offer faster buying and selling, plus access to a wider range of bond types.
- Bond mutual funds and ETFs let you own many bonds at once with a single purchase and are useful if you have a small amount to invest.
- The minimum purchase is $100 on TreasuryDirect, but brokerages and funds may have different minimums depending on the firm.
Buying directly through TreasuryDirect
TreasuryDirect is the official U.S. Treasury platform and the only place you can buy Treasury bonds with zero fees. You set up an account at treasurydirect.gov using your Social Security number, create a login, and link a checking or savings account. Once your account is verified — which takes a few business days — you can purchase Treasury bills (short-term, maturing in weeks to months), Treasury notes (medium-term, maturing in 2 to 10 years), or Treasury bonds (long-term, maturing in 20 or 30 years).
The catch is that TreasuryDirect is designed for people who plan to hold bonds until they mature. If you need to sell before maturity, you must transfer the bond to a brokerage account and sell it there, which involves extra steps and may trigger a fee. Also, TreasuryDirect does not offer real-time pricing or instant execution — purchases are processed at the next auction date, which can be days away. For most homeowners saving for retirement or building an emergency fund, this is not a problem, but it is worth knowing if you think you might need the money sooner.
Buying through a bank or brokerage
Banks and brokerages like Fidelity, Vanguard, Charles Schwab, E-Trade, and most regional banks sell government bonds and handle the entire transaction for you. You open an account (which may take 10 to 15 minutes online), link a bank account, and buy bonds through their platform. The firm charges a transaction fee — usually $1 to $10 per bond depending on the type and the firm — but you get immediate execution and can sell the bond at any time if you need the money.
This route is faster and more flexible than TreasuryDirect, and it gives you access to a wider range of bonds, including Treasury Inflation-Protected Securities (TIPS) and I Bonds (savings bonds that adjust for inflation). The downside is the fee, which adds up if you buy many small bonds. For someone buying a single $10,000 bond, a $5 fee is negligible; for someone buying ten $1,000 bonds, the fees are more noticeable. Compare fees across firms before you open an account — some brokerages waive fees for certain bond types or offer lower rates if you maintain a minimum balance.
Buying through a mutual fund or ETF
A bond mutual fund or ETF pools money from many investors and buys a portfolio of government bonds. You buy shares of the fund, not individual bonds, which means you own a small piece of many bonds at once. This approach works well if you have $1,000 to $5,000 to invest and do not want to pick individual bonds, or if you want automatic diversification. Funds are available through any brokerage and many banks, and you can buy them with the same ease as a stock.
The cost is an annual management fee, typically 0.05% to 0.20% of your investment per year. On a $10,000 investment in a fund charging 0.10%, you pay $10 per year. This is usually lower than buying individual bonds through a brokerage if you are making multiple purchases, but higher than TreasuryDirect if you are buying a single large bond and holding it to maturity. Bond funds also fluctuate in price daily, so if you sell before the bonds inside the fund mature, you might get more or less than you paid. For long-term holding, this usually does not matter, but it is a difference from owning an individual bond to maturity, where you know exactly what you will get back.
Understanding the differences in cost and timing
The three routes differ in how much you pay and how long transactions take. TreasuryDirect costs nothing but processes purchases at the next auction date, which can be 1 to 7 days away depending on the bond type. A brokerage charges a per-transaction fee but executes immediately during market hours. A bond fund charges an annual percentage fee and settles in 1 to 2 business days.
For a $10,000 Treasury note purchase, TreasuryDirect costs $0 but takes up to a week. A brokerage costs $5 to $10 and settles the same day. A bond fund costs roughly $10 per year (on a 0.10% fee) but you own the fund instantly. If you are buying a single bond and holding it to maturity, TreasuryDirect is cheapest. If you might need to sell early or want flexibility, a brokerage is worth the fee. If you are building a diversified bond portfolio over time with small amounts, a fund is usually most practical.
What you need before you buy
Regardless of which route you choose, have these items ready: a valid government ID, your Social Security number, and a bank account in your name. If you are buying through a brokerage, you will also need to choose the type of account — a regular taxable account, an IRA, or a 401(k) if your employer plan allows it. The account type affects how the interest you earn is taxed, so think about whether you want the bond in a retirement account (where interest is tax-deferred) or a regular account (where you pay taxes on interest each year).
You should also decide what type of bond fits your timeline. A Treasury bill matures in weeks to months and pays a lower interest rate but is very safe and liquid. A Treasury note matures in 2 to 10 years and pays a moderate rate. A Treasury bond matures in 20 to 30 years and pays a higher rate but locks your money up longer. If you are saving for a down payment in 3 years, a 2-year note makes sense. If you are saving for retirement 20 years away, a longer bond may offer better returns. I Bonds and TIPS are useful if you are worried about inflation eating into your savings.
Comparing the routes side by side
| Route | Cost | Minimum Purchase | Time to Buy | Flexibility to Sell Early |
|---|---|---|---|---|
| TreasuryDirect | $0 | $100 | 1–7 days (auction date) | Difficult; requires transfer to brokerage |
| Bank or Brokerage | $1–$10 per bond | Varies by firm, often $1,000–$5,000 | Same day (during market hours) | Easy; sell anytime during market hours |
| Bond Mutual Fund or ETF | 0.05%–0.20% annually | Varies by fund, often $100–$1,000 | 1–2 business days | Easy; sell anytime during market hours |
Frequently Asked Questions
Can I buy government bonds if I have bad credit?
Yes. Government bonds are not a loan, so credit score does not matter. You only need a valid ID, Social Security number, and a bank account. The Treasury and brokerages do not run credit checks.
What is the difference between buying a bond and buying a bond fund?
A bond is a single loan you make to the government; you know exactly when it matures and how much interest you will earn. A bond fund is a pool of many bonds managed by a professional; the value fluctuates daily, but you get instant diversification and do not have to pick individual bonds.
Do I have to hold a government bond until it matures?
No. You can sell any bond before maturity through a brokerage, though the price you get depends on interest rates and market conditions. TreasuryDirect bonds are harder to sell early because you must transfer them to a brokerage first.
Which route is best for a first-time buyer with $5,000?
A bond mutual fund or ETF is usually easiest. You can buy shares for $5,000 in minutes through any brokerage, own many bonds at once, and avoid picking individual bonds. If you want to own a single bond and hold it to maturity, TreasuryDirect is cheaper.
Are government bonds taxed?
Yes. Interest from Treasury bonds is taxed as ordinary income at the federal level but is exempt from state and local income tax. If you hold bonds in a traditional IRA or 401(k), the interest is tax-deferred until you withdraw it.