Certificate of Deposits Vs. Treasury Bills

If you wish to invest in high-safety interest-bearing instruments, your choices include certificates of deposit and Treasury bills. Insured CDs are relatively safe and Treasury bills are backed by the full faith and credit of the U.S. government. As of July 2014, the rates on these investments were puny. The national average interest rate for one-year CDs was 0.23 percent and that for one-year T-Bills was 0.11 percent.

Certificates of Deposits

A certificate of deposit, or CD, is generally issued by a local bank. You can purchase these with different maturity dates, from three months to five years, and they can be issued in any denomination. When purchased, there is a specified interest rate which will provide you with a solid base to predetermine the return on your investment. The CD will pay out interest to you at specified times, which will be stated at the time of purchase.

Pros and Cons

The best thing about a certificate of deposit is that it is relatively very safe. The Federal Deposit Insurance Corporation (FDIC) guarantees your investment up to $250,000. And, because the interest rate is posted, you will know your rate of return ahead of time. Now for some of the down side. You can't withdraw the money before maturity without paying a penalty. You should carefully weigh other options before withdrawing before maturity. And, because of the limited risk, the returns are usually smaller than those of high-risk investments.

Treasury Bills

Treasury bills are essentially the governments way of raising money. They mature in one year or less from their issue date and are issued in three-month, six-month and one-year increments. When you purchase a T-bill you actually pay less than the face value of it. Then, at the time of maturity, you will be paid the full face value. Your profit is calculated as the face value minus your original purchase price. You can purchase a T-bill from a broker, bank, or directly from the government. Because of their simplicity, T-bills remain a very popular investment choice.

Pros and Cons

The benefits of the T-bill are numerous. They are affordable for the average investor, starting at a face value of $1,000, and are considered the safest investment in the world since they are backed by the U.S. Government. You know what your return will be up front and any profits are exempt from taxes. A possible down side may be that you may lose some of your initial investment if you cash out your T-bill before the maturity date.


Both certificates of deposits or Treasury bills are considered safe investment options. If you're not ready to tackle stock or bond investing, try your hand in the money market. It's an attractive option for those just looking to get their feet wet, and also for those who want limited risk with their investments. As people approach retirement and beyond, the money market, including certificates of deposits and Treasury bills, will be used to continue getting returns on investments without the risk of the stock market.

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