Those government-backed slips, doled out by generations of well-meaning grandparents to children expecting more exciting gifts, were long thought to be as good as cash. Shaped like dollar bills, savings bonds promise recipients a lucrative lesson in the value of prudence: The longer you keep them, the more interest they accrue and the more they will be worth when you finally cash them.
Of course it doesn’t matter how much something is theoretically worth if you can’t exchange it for money. And in the case of savings bonds, trying to do so increasingly results in a journey into a world of colliding, inconsistently enforced bank policies.
If this sounds simple, it should be, but since you’re lending to the U.S. government, the last step gets tricky. You can’t just waltz into any government building and demand your money. (Until 1977, post offices sold bonds, but never redeemed them.) You can either send your savings bonds to the Treasury — more on that later — or try cashing them at a bank.
The fine print on the back of savings bonds usually reads, “payable by any financial institution.” Hence, any bank should do.
Banks, however, are merely an intermediary, so this is true only in theory. If they agree to exchange the bond for cash, they are essentially fronting money for a piece of paper that they then have to chase after the government for.
Many, like Capital One and USAA, which caters to military families, simply won’t cash savings bonds for anyone. A Capital One spokeswoman cited “limited consumer demand.” Other banks reject the bonds, citing policies they don’t actually hold or are incorrectly applied, or offering reasons that are the equivalent of “sorry, we just don’t feel like it.”
Depositors who have tried cashing savings bonds at banks recently have been inundated with questions, they said. How long have you been a bank client? How much are looking to cash out? Are you willing to put a hold on your account until the funds clear? Have you ever changed your name — and why?
“Everyone thinks that bonds are like cash — well, not anymore,” said Pam Dubier, a 62-year-old San Francisco real estate broker who underwent a four-month odyssey this year to help her retired mother cash her savings bonds.
The process is only getting harder. In May, the nation’s largest bank, JPMorgan Chase, began imposing a $500 limit on each savings bond cashed for longtime depositors — that’s total redemption value, so including any interest owed. Wells Fargo and Citi place a $1,000 limit on new customers. U.S. Bank has a five-year waiting period before it will cash a bond for a new customer.
No bank will accept savings bonds via electronic deposit, as they do with nearly all personal checks.
If you haven’t heard of any of this, you’re not alone. Few banks post their savings bond policies publicly, and all allow themselves wiggle room to bend their own rules. Colin Wright, a Citi spokesman, said that while Citi would theoretically cash any sum for a longtime depositor, “it’s hard to say that in every instance we would do it.” Asked why, he said the decision would be based on “a number of other factors.”
by Rob Copeland, NY Times | Read more:
Image: Paul Hoppe
[ed. Surprise, surprise. Banks. What good are they, other than the minimal effort they expend to keep the economy lubricated and running? (... and hardly accomplishing even that without periodic government bailouts and fines).]
[ed. Surprise, surprise. Banks. What good are they, other than the minimal effort they expend to keep the economy lubricated and running? (... and hardly accomplishing even that without periodic government bailouts and fines).]
