01/12/2004
Reports of the Death of Paper Bonds Greatly Exaggerated
Reports have recently surfaced in some financial media stating that paper savings bonds would no longer be available after 2003. These reports are not true.
In fact, paper savings bonds remain on sale through all financial institutions serving as savings bonds issuing agents and through payroll savings plans offered by thousands of employers across the nation - and will continue to be sold for a considerable time to come.
The reports seem to have originated in the misinterpretation of three actions the Treasury Department has taken in recent months. The first was the launching of the TreasuryDirect all-electronic account system in October 2002. TreasuryDirect is an Internet-based method through which consumers can establish electronic accounts directly with the Treasury to buy, manage, and eventually redeem savings bonds and - at some point in the future - other Treasury securities with no paper securities or paperwork. TreasuryDirect is envisioned as a long-term replacement for the current paper-based savings bonds system, but it should be emphasized that no decision has yet been made to discontinue the sale of paper bonds.
At the end of December 2003, Treasury discontinued Savings Bonds Direct, through which investors could purchase paper bonds using a credit card. Savings Bonds Direct was launched in 1999 to test online purchasing of bonds at a time when credit cards, rather than the electronic debits used by TreasuryDirect, were the only way to make secure Internet purchases. Technological advances, and the relative expense of credit card purchases to the Treasury, have led to Savings Bonds Direct's replacement by TreasuryDirect.
In addition, the Savings Bonds EasySaver Plan - allowing recurrent purchases of paper bonds by automatic debit of a designated savings or checking account - stopped accepting new accounts at the end of 2003. While current account-holders will continue to be serviced into 2005, investors who want to set up a schedule to regularly buy bonds can now do so through TreasuryDirect, which also debits a designated account.
In the meantime, the Bureau of the Public Debt has launched an extensive public-outreach effort to educate consumers about TreasuryDirect and encourage its use. While we believe that TreasuryDirect represents the future of the savings bonds program, for the present both electronic and paper options will be available to investors, allowing consumers the freedom to choose what suits them best.
