Short-Term CDs vs T-Bills: Which Wins in 2026?

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Both are safe places to park cash for 3–12 months at 4–5% yields in 2026. The right choice depends on details most savers miss.

CDs: The Basics

A Certificate of Deposit locks money for a set term in exchange for a guaranteed yield. FDIC insured up to $250k per bank. Early withdrawal incurs a penalty (typically 3–12 months of interest).

Best CD rates 2026: 4.3–4.9% for 6–12 month terms at top online banks.

Treasury Bills (T-Bills): The Basics

US government debt sold at a discount. You buy a T-bill at, say, $9,800 and at maturity you get $10,000. The difference is your yield. Terms: 4, 8, 13, 17, 26, 52 weeks.

Current T-bill yields: 4.4–5.0% depending on term.

The Tax Advantage of T-Bills

T-bill interest is exempt from state and local income tax. CD interest is fully taxable everywhere.

This matters a lot in high-tax states:

California (9.3% state): A 5% T-bill ≈ 5.46% equivalent CD after-tax
New York City (10.9% combined): A 5% T-bill ≈ 5.56% equivalent CD after-tax
No-state-tax states (FL, TX, WA, etc.): Tax advantage disappears

Liquidity Comparison

CDs: Penalty for early withdrawal. Effectively illiquid.
T-bills: Can be sold on secondary market at any time (Fidelity, Vanguard, Schwab brokerage). Price may be slightly above or below par depending on rates.

Where to Buy

CDs:

Online banks for highest rates (Ally, Marcus, Synchrony)
Brokerage “brokered CDs” for variety

T-Bills:

TreasuryDirect.gov: Direct purchase, no fees, but clunky UI
Fidelity / Schwab / Vanguard: Easier interface, no fees on auto-roll
Avoid third-party brokers charging markup

Decision Framework

You’re in a high-tax state: T-bills win
You can hold to maturity: Either, prefer T-bills for tax efficiency
You might need access mid-term: T-bills (sellable) or HYSA (no lockup)
You want absolute simplicity: CD at your existing bank

💡 Pro Tip: Build a 4-week T-bill ladder. Every Tuesday, one matures and rolls. Continuous yield with weekly liquidity.