The Advantages of Treasury Notes Vs. the Advantages of Certificates of Deposit

by Wanda Thibodeaux

When you are looking for way to invest your money with relatively low risk, the Treasury note and certificate of deposit (CD) are two viable options. A treasury note is similar to a savings bond, and a CD is similar to a savings account, except you can't withdraw your funds whenever you want. Comparing the advantages of these two investments may help you decide what option is best for you.

Predictability and Complexity

With both CDs and treasury notes, you know exactly when you can get your money and how much interest you will earn. This makes them both very safe options for people who need steady, predictable income. However, CDs can be much more complex than a Treasury note. With a Treasury note, for example, you only have one choice of issuer and have only a few maturity date options. With a CD, you can choose from hundreds of banks and choose CD accounts that provide perks like adjusting your interest rate over time. Even though this makes choosing a CD more difficult, you are more likely to get an investment that is tailored for your needs.


Both Treasury notes and CDs are backed securities, meaning the issuer guarantees you'll get your funds back. CDs are backed by the Federal Deposit Insurance Corporation (FDIC), and only up to $250,000 at each bank. By contrast, the U.S. Department of Treasury backs treasury notes. They are always guaranteed for their entire face value. CDs thus are somewhat riskier than treasury notes, which are considered one of the safest securities in the world.


Both a CD and Treasury note draw interest. However, interest on a note is exempt from state and local tax, whereas interest on a CD is not. Both can have fixed interest rates, but the interest rates on a CD tends to be higher than on notes because CDs are a little riskier. Additionally, notes usually pay interest twice a year. CDs can vary on when they pay interest.


One advantage of Treasury notes is that there is a market for them -- you can sell your notes before they mature if you want. This means they are highly liquid even though they have set dates for maturity. CDs can be sold before maturity, as well, provided you've purchased the CD through a brokerage firm. However, the market is much smaller for CDs than for notes. At the same time, with a CD, you can invest and leave the account alone.

About the Author

Wanda Thibodeaux is a freelance writer and editor based in Eagan, Minn. She has been published in both print and Web publications and has written on everything from fly fishing to parenting. She currently works through her business website,, which functions globally and welcomes new clients.

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