CD vs. Treasury Bill vs. Money Market Fund: Where Parked Cash Goes Further

Two rates on a screen rarely tell the whole story. A certificate of deposit paying more than a Treasury bill looks like the obvious winner — until tax time, when the T-bill's interest skips state and local income tax entirely and the CD's doesn't. Add a money market fund into the mix — a different animal entirely, since it's not a bank deposit at all — and "which one pays more" turns into "more of what, after what."

Here's how the three actually compare, and where the after-tax math can flip the answer.

The three products, in plain terms

• A CD is a deposit at a bank or credit union. You lock up a fixed sum for a set term in exchange for a fixed rate, and it's FDIC- or NCUA-insured up to the standard $250,000 limit. Break it early and you generally owe an early-withdrawal penalty.
• A Treasury bill is a short-term debt obligation of the U.S. government, sold in terms from 4 to 52 weeks. Per TreasuryDirect, bills don't pay a stated interest rate the way a CD does — you buy at a discount to face value, and "interest" is simply the difference between what you paid and the face value you're paid at maturity. T-bills aren't FDIC-insured, but they carry the federal government's own full-faith-and-credit backing, which the FDIC's own page on uninsured products draws a clear line under: Treasuries sit outside FDIC insurance, but for a different reason than a stock or a mutual fund does.
• A money market fund (MMF) is a mutual fund, not a deposit account at all. Per the SEC's own investor-education page, MMFs invest in liquid, short-term debt — cash equivalents, short Treasuries, high-grade commercial paper — and come in government, prime, and tax-exempt (municipal) varieties. Retail MMFs typically hold a stable $1.00 share price, but the SEC is explicit that this isn't guaranteed: a fund can "break the buck" in a stress event, and — critically — "money invested in a money market fund is not guaranteed by the FDIC like bank accounts are." This is a completely different topic from a bank's money market account, which is FDIC-insured; see our money market account vs. high-yield savings explainer for that distinction.

What the rates actually look like right now

Rates move constantly, so treat any snapshot as exactly that — a snapshot, dated. As of the FDIC's most recent national average deposit rates release (data as of July 20, 2026), the average CD nationally pays:

• 3-month: 1.15%
• 6-month: 1.38%
• 12-month: 1.68%
• 24-month: 1.56%
• 36-month: 1.34%
• 60-month: 1.36%

That's a national average across every insured institution, including plenty of big banks that pay next to nothing — it's a floor, not the ceiling. Online banks routinely advertise CD rates well above this average, so use it as a baseline for "am I getting a bad deal," not as the market rate.

Over the same window, Treasury bill auctions cleared at a 13-week high investment rate of 3.818% and a 26-week high investment rate of 3.965%, both from auctions dated July 20, 2026, per TreasuryDirect's own auction data. In other words, on that same day, short Treasury bills were yielding well above the FDIC's national CD average — though, again, that FDIC figure understates what a competitive online bank actually pays, so a direct bank-by-bank comparison is the only fair one.

A money market fund's yield isn't quoted as a single fixed number the way a CD or T-bill auction result is — it floats daily with the short-term instruments the fund holds, and each fund publishes its own current 7-day yield. A government MMF, which holds mostly Treasury bills and Treasury-backed repurchase agreements, tends to track T-bill yields fairly closely. Check the specific fund's own current yield disclosure before assuming any number here applies to it.

The part that changes the comparison: taxes

This is the detail that gets skipped in most headline-rate comparisons. Per the IRS and TreasuryDirect, Treasury bill interest is subject to federal income tax but exempt from state and local income tax. A bank CD's interest has no such exemption — it's fully taxable at the federal, state, and local level, same as ordinary income (see our guide on how savings account interest is taxed for the mechanics, which apply the same way to CDs).

A government money market fund that holds primarily Treasury obligations may pass through some portion of that same state-tax exemption to its shareholders, depending on the fund and the state — but this varies by fund and isn't universal, so check the specific fund's own tax disclosure rather than assuming it works exactly like a direct T-bill purchase.

What that means in practice: in a state with meaningful income tax, a T-bill yielding a bit less than a CD on paper can still leave you with more money after taxes, because none of that T-bill interest gets touched by the state. In a state with no income tax, that exemption is worth nothing, and the higher headline rate wins outright. There's no universal answer here — it depends on your state's tax rate and your bracket, so it's worth running your own numbers rather than assuming either product automatically wins.

Liquidity and insurance, side by side

• CD: Fixed term, early-withdrawal penalty to break it, FDIC/NCUA-insured to $250,000.
• Treasury bill: Fixed term (4-52 weeks), but can be sold on the secondary market before maturity if you need the cash — at whatever price the market offers that day, which may be more or less than you paid. Not FDIC-insured, but backed directly by the U.S. government.
• Money market fund: No fixed term — shares can typically be redeemed any business day, which is the main liquidity advantage over a CD or a bill held to maturity. Not FDIC-insured, and — unlike a Treasury bill — not backed by any government guarantee at all; it carries fund-level investment risk, however small in practice.

Bottom line

None of the three is categorically "better" — each trades yield, liquidity, and tax treatment differently. A CD locks in a fixed rate and is the only one of the three with deposit insurance, at the cost of an early-withdrawal penalty. A Treasury bill often clears a competitive rate and skips state/local tax, at the cost of no FDIC backing (offset by the government's own guarantee) and a secondary-market sale if you need the cash early. A money market fund trades a small amount of yield certainty for same-day liquidity and no fixed term, with no insurance backing at all.

Before parking a meaningful sum in any of the three, compare the actual dated rate you're being offered — not a number from last month — and if you're in a state with income tax, run the after-tax math before assuming the higher headline number wins. See our CD laddering guide if you're choosing among CD terms, or how FDIC insurance works to confirm your total deposits at one bank stay inside the insured limit.

ClearValue Banking is an educational publisher and comparison resource — not a bank, and we don't hold deposits, sell Treasury securities, or manage money market funds. If you're deciding where parked cash should live, it's worth comparing accounts against our published standard rather than assuming last month's rate still applies.