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The new way to buy savings bonds

Series I and EE paper bonds have gone electronic

Consumer Reports magazine: September 2012

The current 2.2 percent rate on Series I savings bonds may be tempting, but buying the bonds has become more complicated. You can no longer purchase paper Series I and EE savings bonds—those convenient envelope-stuffer gifts—at banks and credit unions; you must buy electronic bonds through the Treasury Department’s Web-based system, TreasuryDirect. In buying a savings bond for her young nephew, our reporter learned that the process can be clunky. Here’s help:

First, go to treasurydirect.gov and click on “Open an Account.” Have on hand your Social Security or taxpayer identification number (and the recipient’s, if it’s a gift), the savings or checking account number from which you’ll be making purchases, and the institution’s routing number. To open an account for a child, the parent or guardian must first set up his or her own account, then the child’s account. The accounts are linked, and the parent has control until the child turns 18.

Once you receive your account number and enter it, TreasuryDirect will send you an e-mail with a one-time “passcode”—different from the account password—to access the account. Registering your computer eliminates the need for a passcode each time you log in.

You choose security settings, then add a “registration,” or owner. Choose “sole owner” if one person—you or a gift recipient—will own the bond. Choose “primary owner” if two people will own the bond (the site lets you designate a second-named registrant). Choose “beneficiary” only to designate who gets the bond when you die. Next, TreasuryDirect takes you to a new page, where you choose the owner’s name from the “Add New Registration” drop-down menu.

If you’re buying for someone who doesn’t yet have a TreasuryDirect account, you can still buy the bond by clicking  “This is a Gift” during purchase. Until you transfer the bond to the recipient, it will be stored in a virtual gift box.

Series I and EE savings bonds have a fixed rate of return. New EE bonds’ current rate is 0.6 percent. Series I bonds also have a variable, semiannual inflation rate that is adjusted in May and November. You can buy electronic bonds in any denomination between $25 and $10,000, down to the penny. They’re bought at face value: A $50 bond costs $50. Interest begins to accrue at the point of purchase.

To get a piece of paper to hand the recipient, print out a gift certificate in one of several designs offered on the TreasuryDirect site, on any printable surface you like.

Tips for using TreasuryDirect

For the most comprehensive help on buying savings bonds online go to TreasuryDirect’s Help page and get a demonstration on buying a gift savings bond. Also:

  • Move with care. Be careful to click on the system’s “return” button on the bottom left—or on another menu button—to move from one page to another. Our reporter, who was not registered, inadvertently hit her browser’s “back” button and TreasuryDirect automatically ended the session. She had to log in again and wait for another passcode.
  • Beware potential delays. It took our reporter just 11 minutes to set up an account. But it was eight hours before she received her account number by e-mail. A TreasuryDirect spokesperson said the delay was caused by our Internet service provider, not the Treasury’s system. It takes up to one business day for a gift bond to arrive in your gift box. Until then, you can find it on your account page under “Pending Purchases, Reinvestments, and Redemptions.” (Once our reporter transferred the bond to her nephew’s account, TreasuryDirect sent an instant e-mail notification to the boy’s mother announcing the gift.)
  • Use the system for other transactions. You can use TreasuryDirect to buy bills, notes, bonds, Treasury inflation-protected securities (TIPS), and savings bonds; price your savings bonds; convert paper bonds to electronic ones; and arrange for purchases through payroll deductions.

How to get a paper bond

There’s still one way to buy a paper Series I bond: through a tax refund. You’ll need to complete IRS Form 8888, Allocation of Refund. You must purchase paper bonds in multiples of $50. Get specifics from the IRS.


   

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