Treasury bills are short-term loans you make to the federal government, and you buy them directly from the U.S. Department of the Treasury with no broker or middleman required

A Treasury bill (or T-bill) is a debt security issued by the U.S. Treasury that matures in one year or less. You lend money to the government, and in return you receive a fixed payment when the bill matures. The government uses the money to fund operations. T-bills are considered among the safest investments because they are backed by the full faith and credit of the United States.

You can buy T-bills directly from TreasuryDirect, the Treasury's official online platform, without paying a broker fee. The minimum purchase is $100, and you can buy in increments of $100 after that. The process takes about 15 minutes if you already have a bank account and a Social Security number or tax ID.

T-bills work differently from bonds or stocks. You do not receive interest payments while you hold the bill. Instead, you buy the bill at a discount to its face value—meaning you pay less than $100 for a $100 bill—and when it matures, the Treasury pays you the full $100. The difference between what you paid and what you receive is your return.

Key Takeaways

  • You buy T-bills directly from TreasuryDirect.gov with a minimum purchase of $100 and no broker fees involved.
  • T-bills mature in four weeks, 13 weeks, 26 weeks, or 52 weeks, and you receive your full face value when they mature.
  • Your return comes from buying at a discount—you pay less than face value upfront and receive the full amount at maturity.
  • T-bills are considered very low-risk because they are backed by the U.S. government, though your return is lower than stocks or longer-term bonds.

Setting up a TreasuryDirect account

Start by going to TreasuryDirect.gov and clicking "Open an Account." You will need a valid Social Security number or employer identification number, a U.S. bank account (checking or savings), and a valid email address. The site will ask you to create a username and password.

During setup, you link your bank account so the Treasury can withdraw money when you buy bills and deposit money when they mature. This takes a few minutes and requires your routing number and account number, which you can find on a check or in your online banking portal.

Once your account is open, you can log in and begin purchasing. The entire process from account creation to your first purchase typically takes less than an hour.

Choosing which T-bill to buy

The Treasury holds auctions on a regular schedule. Four-week and 13-week bills are auctioned every week. Twenty-six-week and 52-week bills are auctioned every four weeks. When you log into TreasuryDirect, you will see upcoming auctions and the current discount rates for each maturity.

The discount rate tells you how much less than face value you will pay. A higher discount rate means a bigger discount and a higher return. For example, if a 13-week bill has a 5% discount rate, you might pay $98.75 for a $100 bill. When the bill matures in 13 weeks, you receive $100, earning $1.25.

Longer-term bills (26 weeks and 52 weeks) typically offer higher discount rates than shorter-term bills because you are lending money for a longer period. Choose based on when you will need the money. If you need cash in three months, buy a 13-week bill. If you can wait a year, a 52-week bill may offer a better return.

Placing your bid and completing the purchase

On TreasuryDirect, you can place a "competitive bid" or a "noncompetitive bid." Most individual investors use noncompetitive bids because they are simpler and you are may provide to receive the bills you request.

With a noncompetitive bid, you tell the Treasury how many bills you want to buy (in $100 increments), and you accept whatever discount rate results from that week's auction. You do not have to guess what the rate will be. The Treasury will charge your bank account the discounted price and credit your account with the bills.

To place your bid, log into TreasuryDirect, select the bill type and maturity you want, enter the amount, and confirm. The auction closes at 11:00 a.m. Eastern time on the auction date. Your bank account will be debited a few days later, and the bills will appear in your account.

Understanding the auction schedule and settlement

The Treasury publishes its auction calendar months in advance on TreasuryDirect.gov. You can see exactly when each bill type will be auctioned and when it will mature. Mark these dates if you want to plan your purchases around when you need the money.

After you place a bid, settlement occurs a few days later. Your bank account is debited, and the bills are added to your TreasuryDirect account. You can hold the bills until maturity, or you can sell them before maturity on the secondary market (though selling early requires using a broker and may involve fees).

When your bill matures, the Treasury automatically deposits the full face value into your linked bank account. You do not have to do anything. If you want to reinvest, you can place a new bid in the next auction.

Tax treatment and reporting

The interest you earn on T-bills—the difference between what you paid and what you received—is subject to federal income tax but not state or local income tax. This is a significant advantage over many other investments.

At the end of each year, TreasuryDirect will send you a Form 1099-INT showing the interest you earned. You report this on your federal tax return. Keep records of your purchase price and maturity value so you can calculate your earnings accurately.

Because T-bills are very short-term, you may have bills maturing in different tax years. A bill you buy in December and that matures in January will have its interest reported in the year it matures, not the year you bought it.

Comparing T-bills to other short-term investments

T-bills are one option for parking money short-term. High-yield savings accounts currently offer rates that are sometimes competitive with T-bill rates, and your money is more liquid—you can withdraw it any day without waiting for maturity. Money market funds and certificates of deposit (CDs) are other alternatives.

The main advantage of T-bills is that they are backed by the federal government and have no default risk. Savings accounts are insured by the FDIC up to $250,000 per account, which is also very safe. T-bills offer no insurance, but the government's ability to pay is considered stronger than any bank's.

If you need the money before maturity, selling a T-bill on the secondary market can be expensive and complicated. Savings accounts and money market funds are easier to access. If you are certain you can hold until maturity, T-bills eliminate the need to shop for rates—you know exactly what you will receive on the day you buy.

Frequently Asked Questions

Can I lose money on a T-bill?

You cannot lose money if you hold the bill until maturity—the Treasury will pay you the full face value. If you sell before maturity on the secondary market, the price you receive depends on interest rates at that time. If rates have risen, you may receive less than you paid. If rates have fallen, you may receive more.

What is the minimum amount I need to invest?

The minimum purchase on TreasuryDirect is $100, and you can buy in $100 increments after that. There is no maximum limit per purchase, though very large purchases may take longer to settle.

How do I access my money if I need it before the bill matures?

You can sell your T-bill on the secondary market through a broker, but this involves fees and the price depends on current interest rates. For most people, it is simpler to wait until maturity. If you think you might need the money early, consider a shorter-maturity bill (four weeks or 13 weeks) instead.

Do I need a broker to buy T-bills?

No. TreasuryDirect allows you to buy directly from the government with no broker or fees. Some brokers also sell T-bills, but they charge commissions. Using TreasuryDirect is the lowest-cost option for most individual investors.

What happens if the government defaults?

A U.S. government default on T-bills has never occurred. T-bills are considered the safest investment available because they are backed by the full taxing and borrowing power of the federal government. This is why they offer lower returns than riskier investments.