Are CDs or T-Bills a Better Investment in April 2024?

Certificates of deposit (CDs) and Treasury bills are popular fixed-income investments. They guarantee a fixed interest rate over a set time period, both of which depend on the CD or T-bill you choose.

It's a great time to open one of these, because interest rates are high right now. If you have money you don't mind locking up in return for a solid payout, you could do that with a CD or T-bill.

With this type of investment, rates are one of the most important factors. To help you decide between them, here's a look at the top CD rates and recent rates from T-bill auctions.

CD rates vs. T-bill rates in April 2024

T-bills are available with terms ranging from four to 52 weeks. The table below has the highest CD rates I could find after reviewing dozens of options, as well as T-bill rates for approximately the same term.

Keep in mind that T-bill rates change at each auction, and you must bid before the auction. If you buy T-bills this way through Treasury Direct, you won't know the exact rate you'll get until after the auction ends. If you don't want to go through the auction process, you can also buy them through the secondary market with a stock broker.

CD and T-bill rates are close, which is often the case. You may get a better deal on a T-bill if you want a six-month term. But 1-year CDs are currently paying more than one-year T-bills.

CD rates vs. T-note rates

In addition to T-bills, the U.S. Treasury also sells Treasury notes and Treasury bonds, which have longer terms. T-notes have terms ranging from two to 10 years, so they also provide an alternative to CDs. T-bonds are available with 20- and 30-year terms.

Most banks don't offer CDs for longer than 10 years. So if you want a fixed-income investment that will last decades, you'll need to go with T-bonds. If you're looking for something in the two- to 10-year range, here's how CDs and T-notes compare.

For terms of two, three, and five years, CDs are paying more. T-notes have the edge for 10-year terms. To be fair, 10-year T-notes are only offered every four weeks. Rates could be higher or lower at the next auction. But CD rates can change at any time, too (until you open one and lock in the current rate).

CDs vs. T-bills: Other factors to consider

Interest income from CDs and T-bills is considered taxable income on your federal tax return. However, T-bills (and other Treasuries) are exempt from state income taxes. CDs aren't. So if your state has income taxes, it could be better to invest in T-bills over CDs, as long as rates are similar.

T-bills also offer more flexibility. If you need to get your cash before the maturity date, you can sell your T-bill on the secondary market. With CDs, you'll pay an early withdrawal penalty if you need your money before the end of the term. There are ways to avoid this, though -- some banks offer no-penalty CDs, and many stock brokers offer brokered CDs that can be sold on a secondary market.

At their current rates, you can't go wrong with CDs or T-bills. But if you want to maximize your return, first figure out how long of a term you want. Once you know that, you can see whether CDs or T-bills are offering higher rates over that time period.