What Is a Treasury Bill, and How Does It Pay Interest?

A Treasury bill, or T-bill, is a short-term Treasury security. It is different from a stock, a savings account and a savings bond. Understanding its purchase price and maturity date helps explain what you receive and when.

How does a bill pay you?

TreasuryDirect says bills are sold at a discount or at face value. When a bill matures, you receive its face value. Interest is the difference between the price paid and the face value received at maturity.

That is different from expecting a separate monthly interest payment. Read the purchase details so you know the amount you are committing, the face value and the maturity date. A quoted rate and the dollars deposited at maturity are related, but they are not the same description of the transaction.

How short is short-term?

TreasuryDirect lists regular bill terms from four to fifty-two weeks. It also offers Cash Management Bills with variable terms at various times; those are available through a bank, broker or dealer rather than TreasuryDirect.

The listed minimum purchase for bills is one hundred dollars, in one-hundred-dollar increments. Check the current offering and the channel you plan to use rather than assuming every Treasury security has identical purchase rules.

What if you need to sell before maturity?

TreasuryDirect notes that bills may be held to maturity or sold earlier. Treat those as distinct plans. Before buying, ask the platform how an early sale would work, what price would apply and whether any fees or transfer steps are involved.

Match the maturity to your actual cash needs rather than using the term short-term as a substitute for a date. TreasuryDirect also notes that bill interest is subject to federal income tax but not state or local income taxes. Personal tax circumstances still deserve individual review.

Frequently asked questions

Do T-bills pay monthly coupons? No. TreasuryDirect describes bill interest as the purchase-price difference paid through the face value at maturity.

Are T-bills the same as I bonds? No. They are different Treasury securities with different terms and access rules.

Sources and further reading: TreasuryDirect, Treasury Bills (https://www.treasurydirect.gov/marketable-securities/treasury-bills/).