Treasury bills, or T-bills, are short-term government debt securities. When you buy one, you are lending money to the Treasury for a set period, typically between four and 52 weeks. In exchange, you receive a predictable payoff on a specific maturity date.

On TreasuryDirect, T-bills have a $100 minimum, are purchased in $100 increments, and non-competitive bids can go up to $10 million per auction. You can also buy T-bills through banks, brokerage firms, and some retirement accounts that permit individual bond purchases.

How T-Bills Work

Unlike many bonds that pay regular interest, T-bills are sold at a discount to their face value and mature at full face value. The difference is your interest. For example, paying $9,800 today for a T-bill that matures at $10,000 means you earn $200 over the holding period.

Your yield depends on the discount at purchase and the time remaining until maturity. You can hold a bill to maturity or sell it earlier on the secondary market. The return is generally subject to federal income tax and is generally exempt from state and local income taxes, which may make T-bills more appealing than some deposit products.

Pros And Cons

The biggest advantage of T-bills is safety. Because they are backed by the U.S. Treasury, they are considered among the lowest-risk investments available. Historically, the federal government has always honored its obligations, so credit risk is viewed as extremely low compared with corporate bonds or stock investments.

T-bills are also accessible and flexible. With a $100 minimum and maturities measured in weeks, they work well for parking cash you may need soon while still earning a competitive yield. They are easy to buy, easy to redeem at maturity and can be sold early if a better opportunity appears.

On the downside, T-bills are not built for long-term growth. Over decades, they typically deliver lower returns than diversified stock funds or even longer-term bonds. If all your money sits in short-term government debt, your wealth may struggle to keep up with inflation over a full working lifetime.

There is also reinvestment risk. Because T-bills mature quickly, you must regularly decide where to reinvest the proceeds. If interest rates fall by the time a bill matures, your next purchase could lock in a lower yield. That constant rollover process is the trade-off for short-term safety and flexibility.

Buying On TreasuryDirect

If T-bills fit your goals, a direct option is TreasuryDirect, the Treasury Department’s online platform. After creating an account and linking a checking or savings account, you can purchase and manage T-bills without brokerage commissions.

Treasury bills are sold through regular auctions. On TreasuryDirect, selecting the “BuyDirect” option and then choosing “Bills” under marketable securities will show a calendar of upcoming issues. You will see the maturity length, auction date and issue date, which is when the bill becomes active and your bank account is debited.

Most individual buyers use the non-competitive process. With a non-competitive order, you choose the dollar amount and agree to accept the yield determined at auction. This approach is designed to be simpler than competitive bidding and is subject to the standard purchase limits.

Before finalizing your purchase, you can also choose whether to schedule reinvestment. Auto-reinvestment allows the Treasury to use the maturity proceeds to buy a new bill of the same term at the next auction, which can simplify managing a ladder of short-term holdings. You can change or cancel reinvestment instructions up to several business days before maturity.

Other Purchase Paths

Not everyone wants to use TreasuryDirect directly. Many banks allow customers to buy T-bills through their existing accounts. The bank acts as an intermediary in the auction process or on the secondary market and may charge a service fee for the convenience.

Full-service and online brokerage firms also offer T-bills. Inside a brokerage account, you can buy new issues at auction or trade existing bills just like other bonds. This route can be helpful if you already manage other investments there, but check for any ticket charges or markups before placing an order.

Another indirect method is investing through money market mutual funds or short-term Treasury funds. These funds hold a diversified basket of T-bills and related securities and are run by professional managers. In return for convenience and automatic reinvestment, you pay an ongoing expense ratio that slightly reduces your effective yield.

Key Investing Tips

Start by matching maturities to your needs. If you know you will need funds in three months, an eight- or thirteen-week bill may be suitable. If your time frame is less certain, building a ladder—buying several bills that mature at staggered dates—can keep money regularly coming due while still earning yield.

T-bills generally work best as one component of a broader plan, not the entire plan. Combining them with diversified holdings can balance stability and growth potential, depending on your risk tolerance and time frame.

Tod Gordon, a financial services consultant, said that “Savers could do better with Treasury bills.”

When short-term yields are meaningfully higher than what you can earn in many standard deposit accounts, T-bills can be a useful tool for managing near-term cash while keeping risk relatively low.

Monitor interest rates and inflation. When yields on T-bills are comfortably above the inflation rate, they are especially attractive for parking near-term cash. When yields fall, you may want to keep only your essential short-term reserves in T-bills and direct additional savings to higher-growth investments.

Final Thoughts

Treasury bills can offer a simple way to earn modest returns on short-term cash while keeping maturities predictable. Used thoughtfully—alongside a broader allocation that fits your goals—they can help you keep near-term reserves productive without taking on unnecessary complexity.