T-Bills vs. CDs: Where to Put Your Cash Now (November 2025)
In November 2025, the market for safe, short-term cash instruments remains highly attractive despite the recent Federal Reserve rate cut (to a target range of 3.75% to 4.00% in October 2025). The decision to place cash in Treasury Bills (T-Bills) or Certificates of Deposit (CDs) is a strategic one, hinging on your needs for **liquidity, tax efficiency, and absolute safety.**
The Key Differences in Safety and Tax Treatment
Both T-Bills and CDs are excellent for preserving capital, but their underlying guarantees differ:
| Feature | T-Bills (Treasury Bills) | CDs (Certificates of Deposit) |
|---|---|---|
| Issuer/Backing | U.S. Treasury (Full Faith and Credit of the U.S. Government). | Banks/Credit Unions (FDIC or NCUA insured up to $\text{\$250,000}$). |
| State Tax | **EXEMPT** from state and local income tax. | Fully taxable at federal, state, and local levels. |
| Liquidity/Access | **High.** Can be sold on the secondary market with no penalty (though the price can fluctuate). | **Low.** Funds are locked until maturity; early withdrawal incurs an interest forfeiture penalty. |
| Current Yields (Approx. 6-Month Term) | $\text{3.65\%}$ YTM (Yield to Maturity) | Up to $\text{4.40\%}$ APY (Top Nationwide Banks) |
1. The After-Tax Yield Tie-Breaker (Crucial for High-Tax States)
While the absolute Annual Percentage Yield (APY) on the best nationwide CDs (up to $\text{4.40\%}$ for 6-month terms) may look higher than the T-Bill yield (around $\text{3.65\%}$ for 6-month terms), the **after-tax yield** is what truly matters.
T-Bill's Tax Advantage
If you live in a state with high income tax (like California, New York, or Oregon), the **state and local tax exemption** on T-Bills can make them the superior investment on an after-tax basis.
For example, if you are subject to a $\text{10\%}$ state income tax rate, a T-Bill yielding $\text{3.65\%}$ is effectively competitive with a CD yielding over $\text{4.20\%}$, depending on your federal tax bracket.
Conclusion on Yield: If you are a high-income earner in a high-tax state, the T-Bill is generally the better choice.
2. Liquidity and Flexibility
Your timeline for needing the cash is the most decisive non-yield factor:
- **Choose CDs if:** You are absolutely certain you will not need the money for the full term (e.g., 6, 9, or 12 months). CDs offer a slightly simpler purchase process and a fixed, contractual APY.
- **Choose T-Bills if:** You need maximum flexibility. Since T-Bills can be sold on the secondary market without penalty (unlike the early withdrawal penalty of a CD), they are perfect for money you might need access to quickly. This is ideal for emergency funds or funds earmarked for a down payment with a flexible closing date.
3. The Safety Ceiling
While both are safe, for large cash holdings, the T-Bill offers a unique advantage:
- CDs are insured up to $\text{\$250,000}$ per person, per institution.
- T-Bills carry **no insurance limit** because they are backed by the sovereign credit of the U.S. government. For amounts substantially over $\text{\$250,000}$, T-Bills (or brokered CDs) are the preferred choice for maximum safety.
The choice ultimately comes down to location and time horizon. For a taxable account in a high-tax state needing flexibility, the **T-Bill wins**. For simplicity, certainty, and access to the highest headline APY for small amounts, the **CD is a reliable option.**
Access our proprietary tax-equivalent yield calculator for T-Bills vs. CDs to determine your optimal choice.
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