CD vs. Treasury Bills: Which Earns More in 2026?

CDs and Treasury bills are both short-term, fixed-yield products. Both are about as close to risk-free as you get in personal finance. Both are boring in the best possible way. And right now, both are paying somewhere around 4% — close enough that the choice actually matters and deserves a serious look rather than a coin flip.

But they're not the same thing. The yield you see isn't the yield you keep, especially if you live in a state with an income tax. The liquidity profiles are fundamentally different. The backing mechanisms are different. And if you're building a ladder, they can actually be complementary rather than competing.

I've been watching this particular comparison more closely since the Fed started cutting in late 2025. As CD rates fell, T-bill yields fell too — but at slightly different paces. The divergence is small but real, and the after-tax math pushes the answer in one direction depending heavily on what state you live in.

Short version for the impatient: if you're in a high-tax state (California, New York, New Jersey, Oregon), T-bills probably win after taxes on equivalent gross yields. If you're in a no-income-tax state (Texas, Florida, Nevada, etc.), T-bills' state-tax advantage disappears and CDs may win on gross yield alone. The full story has more nuance.

Here's where the market actually sits as of mid-March 2026.

Treasury Bills: 4-week T-bill: approximately 3.70% yield (annualized, bond-equivalent) 13-week T-bill: approximately 4.10-4.20% 26-week T-bill: approximately 4.15-4.25% 52-week T-bill: approximately 4.10-4.20%

These are secondary market rates and they move daily. Buy through TreasuryDirect.gov directly, or through a brokerage like Fidelity, Schwab, or Vanguard where you can buy at auction with no fees.

Best 1-Year CDs (March 2026): Apple Federal Credit Union: 5.00% APY Lafayette Federal Credit Union: 4.28% APY E*TRADE/Morgan Stanley: 4.10% APY Popular Direct: 4.05% APY Marcus by Goldman Sachs: 4.00% APY

On gross yield alone, the top credit union CDs are substantially beating T-bills. Even the second-tier online bank CDs (4.00-4.10%) are roughly equal to or slightly ahead of comparable T-bill yields.

So at first glance, CDs win on rate. But the tax story changes that calculation meaningfully.

Treasury interest — including T-bills, T-notes, and T-bonds — is exempt from state and local income taxes. CD interest is not. It's fully taxable at the federal, state, and local level.

For someone in a state with no income tax (Florida, Texas, Nevada, Wyoming, South Dakota, Washington, Alaska, Tennessee, New Hampshire), this difference is irrelevant. State tax exemption on something you're already not paying is zero benefit. In those states, compare gross yields and pick the higher one — which is usually the top-rate CD.

But for high-tax states, the math genuinely flips.

California example: California has a top marginal state income tax of 13.3%. Say you have a 1-year CD at 4.00% APY vs. a 1-year T-bill at 4.15%. On a $25,000 investment, the CD earns $1,000. At 4.15%, the T-bill earns $1,037.50 gross. But the CD's $1,000 is subject to California's state tax, costing roughly $133 in state taxes (13.3%). T-bill interest: exempt. After-state-tax comparison: CD yields $867 after state tax, T-bill yields $1,037.50 net. T-bill wins by $170 on a $25,000 investment — without even getting into federal tax, which is equal for both.

New York example: New York's combined state + NYC income tax can reach 10.9% for city residents. A 4.00% CD vs. 4.00% T-bill — same gross yield — becomes roughly 3.56% effective for the CD after state/city tax vs. 4.00% for the T-bill. The T-bill wins on identical gross yields.

Oregon (9.9% top rate), Minnesota (9.85%), New Jersey (10.75%), Vermont (8.75%) — all high-tax states where T-bill's exemption creates meaningful after-tax advantage.

The crossover point: a CD needs to yield roughly 0.5-1.0% more than a T-bill (depending on your state rate) to come out equal after tax in a typical high-tax state. In California, you'd need a CD at around 4.65-4.75% to beat a 4.15% T-bill on an after-tax basis. Those CD rates exist (Apple Federal at 5.00%) but they're at credit unions with restricted membership, not universally accessible. For most people in high-tax states, the accessible CD rates (4.00-4.10% from online banks) don't clear the hurdle.

CDs are illiquid by design. You commit your money for a term. If you need it early, you pay a penalty — typically 90-180 days of interest on a 1-year CD. You can't sell a traditional CD to get out early (unless it's a brokered CD). You're stuck or paying.

T-bills trade freely on secondary markets. If you buy a 26-week T-bill and need your money at week 8, you sell it through your brokerage at the current market price. That price may be slightly above or below your purchase price depending on how rates moved in the interim — if rates went up after you bought, your T-bill is worth slightly less than par. If rates went down, it's worth slightly more. For short-duration T-bills, that price movement is small. But it's not zero.

For a 4-week T-bill, there's almost no price risk even if you need to sell early — the duration is so short that interest rate movements barely matter. For a 52-week T-bill, there's more price sensitivity but still modest compared to longer bonds.

So T-bills give you de facto liquidity at the cost of minor price uncertainty. CDs give you a guaranteed rate at the cost of genuine illiquidity (or penalty costs for early exit).

If there's any chance you need the money: T-bill or HYSA. No question. If you're certain you don't need the money for the full term: CD's rate lock has real value, especially if a top-rate credit union CD is clearing 4.20%+ vs. T-bill yields around 4.15-4.20%.

This comes up a lot and people get more confused about it than they should.

FDIC insurance protects bank deposits up to $250,000 per depositor per institution. If an FDIC-insured bank fails, you get your money back. This has happened — banks fail — and the system works. Your CD at Marcus is backed by FDIC insurance up to the limit.

U.S. Treasury securities are backed by the full faith and credit of the U.S. government. They are direct obligations of the federal government, not intermediated through a bank. The U.S. government would have to default for Treasury holders to lose money. That has never happened and any scenario where it would happen is also a scenario where FDIC insurance is probably problematic too (the FDIC is ultimately backstopped by Treasury as well).

For practical purposes: both are as safe as anything in the financial system. There's no meaningful safety advantage of T-bills over FDIC-insured CDs for amounts under $250K per institution. The T-bill theoretical backstop is marginally more direct, but this distinction only matters in scenarios you'd probably prefer not to think about too hard.

For amounts over $250K: you can hold unlimited T-bills without coverage concerns (since they're not deposits, the limit doesn't apply). To hold more than $250K in CDs without exceeding FDIC limits, you'd need to spread across multiple institutions. T-bills are simpler for large depositors from an insurance perspective.

Both instruments work for laddering — the practice of staggering maturities so you always have money coming due at regular intervals.

A T-bill ladder is almost stupidly easy to implement through a brokerage. Set up auto-roll on 4-week, 13-week, or 26-week T-bills and you can essentially never think about it again. Fidelity and Schwab both offer Treasury auto-roll features where the proceeds from a maturing T-bill automatically go into buying the next one at auction. It's near-zero maintenance.

A CD ladder requires more active management. You need to track maturity dates across multiple institutions, manually direct funds at each maturity (since auto-renewal at a new institution isn't automatic), and potentially deal with varying ACH windows. It's more friction.

But the CD ladder can earn more — especially if you're accessing credit union rates. A 4-rung CD ladder across Lafayette Federal (4.28%), E*TRADE (4.10%), Marcus (4.00%), and Bread Savings (3.95%) earns a blended 4.08% APY. A comparable T-bill ladder across 13-week, 26-week, and 52-week yields might land around 4.10-4.20% gross but after state taxes (if applicable) could fall below the CD ladder's after-tax return.

The hybrid approach is actually interesting for certain investors. T-bills for the short end of the ladder (4-13 weeks) where their liquidity advantage is most valuable, and CDs for the middle (6-month, 1-year) where credit union rates beat T-bill yields meaningfully. This combines the accessibility of T-bills for near-term cash with the rate advantage of competitive CDs for committed money. Works well if you have the organizational tolerance to manage both.