For $100, you can lend money directly to the United States government and get paid for it. That is the entire premise of a Treasury bill: a short-term IOU from the U.S. Treasury, sold in terms of one year or less, backed by the full faith and credit of the federal government, and available to any individual with a free online account at TreasuryDirect. No broker, no commission, no minimum beyond that first $100.
T-bills have become a favorite parking spot for savers comparing them against CDs and high-yield savings accounts, and they carry one quiet bonus: the interest is exempt from state and local income tax, which fattens the effective yield for anyone in a state with an income tax. Here is how the product works and exactly how a first-time buyer gets one.
How a T-bill pays you
Bills do not make interest payments along the way. Instead, you buy at a discount and get paid face value at maturity; the gap is your interest. TreasuryDirect’s own example: at a price of $99.986111 per $100, a $1,000 bill costs $999.86, and at maturity you receive the full $1,000. The Treasury bills page at TreasuryDirect lays out the mechanics, and the site’s pricing explainer shows how auction results translate into the price you pay.
Bills come in six regularly scheduled terms: 4, 6, 8, 13, 17, 26, and 52 weeks. Purchases start at $100 and go up in $100 increments, so this is one of the most accessible government securities there is.
The auction, without the jargon
Every bill is sold at auction on a published schedule: 13-week and 26-week bills typically auction on Mondays, 4-week and 8-week bills on Thursdays, other terms on their own weekly rhythm, and the 52-week bill every four weeks, per TreasuryDirect’s general auction timing page. As an individual, you will almost certainly bid noncompetitively, which simply means you agree to accept the rate the auction produces and you are guaranteed to receive the full amount you requested. Competitive bidding, where you name your own rate and risk getting nothing, is the professionals’ lane. Noncompetitive buyers do not need to watch the auction or time anything; you place the order, the auction sets the rate, and the discount does the rest.
Setting up and placing the order
Start at TreasuryDirect.gov and open an individual account, which requires your Social Security number, a U.S. address, and a linked bank account for moving money in and out. Once you are in, the purchase itself takes a few minutes: choose Bills under the marketable securities menu, pick a term, enter the dollar amount in $100 multiples, and select the upcoming auction date. On issue day, TreasuryDirect pulls the discounted price from your bank account, and at maturity it deposits the face value back, or, if you selected the reinvestment option, rolls the proceeds into a new bill of the same term automatically. There are no account fees and no commissions at any step.
One practical note: TreasuryDirect holdings are securities registered to you at the Treasury, not bank deposits, so there is no FDIC insurance involved and none needed; the credit behind a bill is the U.S. government itself. If you prefer to hold bills inside a brokerage account, most brokers also offer new-issue Treasury auctions, sometimes with their own minimums, and brokerage holdings can be sold before maturity more easily than TreasuryDirect holdings, which must be transferred to a broker first if you want to sell early.
The tax treatment, and why it sweetens the yield
Interest on Treasury securities is subject to federal income tax but exempt from state and local income taxes. For a saver in a high-tax state, that exemption can make a T-bill outyield a CD with a nominally higher rate once taxes are counted. Each January, TreasuryDirect posts a 1099 in your online account showing the interest to report. The discount you earned on a bill held to maturity is treated as interest income for the year the bill matures.
How bills compare to the alternatives
Against a high-yield savings account, a bill trades instant access for a locked rate: your money is committed until maturity, though terms as short as four weeks keep the commitment small. Against a CD, bills of similar terms have often paid comparable rates, with the state-tax exemption and the $100 minimum as tiebreakers, while CDs answer with deposit insurance and fixed multi-year terms that bills do not offer. Many savers ladder bills exactly the way they ladder CDs, staggering 4-week through 26-week maturities so cash keeps arriving on schedule.
The honest summary: a T-bill is one of the simplest, safest instruments a beginner can buy, and buying one directly is mostly a matter of opening the account and clicking through a short form. Start with $100 on a 4-week bill if you want to watch the whole cycle once before committing real money. Four weeks later, the face value lands back in your bank account, and the product will have explained itself better than any article can.
