Savings Bond Alert #009

Treasury to allow conversion of paper Savings Bonds to TreasuryDirect

Soon TreasuryDirect account holders will have the opportunity to submit their paper savings bonds and have them converted to TreasuryDirect's electronic savings bonds.

Conversion will simplify finding out how much your bonds are worth and what rate they're currently paying, as the information will be available simply by logging on to your TreasuryDirect account.

However, the rules for the bonds won't change. For example, some older bonds have a potential hidden interest rate penalty because they pay interest only every six months. Since the rules won't change, these bonds will continue to have that penalty after they're moved to TreasuryDirect.

About 250,000 people have opened TreasuryDirect accounts - a small fraction of the 55 million people who own savings bonds. Accounts can be opened online. The process is described in more detail in my book, Savings Bond Alert.

As mentioned in the book, although the technical level of security of TreasuryDirect is superb, I would be more comfortable recommending TreasuryDirect accounts if the security processes were also state-of-the-art.

For example, if you change your address online with a mutual fund company, the company will typically send a letter to both your old and new address to help prevent fraud. The Treasury never sends so much as an email to confirm changes in your account. The Treasury's reluctance to communicate with savings bond account holders is puzzling.