Business

Buying U.S. savings bonds still takes a paper trail

Demand for bonds is rising as interest rates turn up again, but it's not easy to buy some of the simplest bonds.

The New York Times

March 19, 2022 at 1:00PM

The TreasuryDirect digital system requires paper when customers update their linked bank account. (Till Lauer | New York Times/The Minnesota Star Tribune)

As inflation has surged, many consumers have turned to the federal government's online TreasuryDirect system to buy inflation-indexed savings bonds. But the 20-year-old website may be showing its age.

In particular, users may face hurdles when changing or updating the bank account they link to their TreasuryDirect account, the site for buying savings bonds as well as other government securities, including Treasury notes and bonds. A personal checking or savings account is required to pay for bond and note purchases and to accept funds when the bonds or notes are redeemed.

Users submit their bank information when they sign up for TreasuryDirect. But changing their bank account later, if necessary, still requires a paper form.

Monica Beisel, a nurse practitioner in San Angelo, Texas, learned about the hoops that customers must go through after urging her four children, all young adults, to update their bank accounts on TreasuryDirect, she said.

The children opened TreasuryDirect accounts to hold savings bonds their grandmother had bought for them, but the linked accounts had since been closed, Beisel said. She urged her children to update the accounts in part so they could buy Series I bonds, which are paying a much higher interest rate than savings accounts.

The Treasury Department offers a short video that directs users to log on to TreasuryDirect and scroll to a tab to "add or edit" their bank account. But instead of making the change with a few clicks, users are next directed to print out a form and take it to a bank or credit union to sign it and have it certified by a bank officer, before mailing it to a Treasury post office box in Minneapolis.

"That's ridiculous," Beisel said. Her children are busy and far-flung, she said, and not all of them have had time to complete the task. "Who would have thought in this day and age that updating personal bank account information would be a hassle?"

She added: "It's as if the government doesn't want regular citizens to purchase savings bonds."

Her concerns aren't new. Online forums show that people were frustrated by the process as far back as 2013.

Ken Tumin, founder of the consumer banking website DepositAccounts.com and a close watcher of I bonds, said he was in the same situation: His TreasuryDirect account is linked to a bank account he no longer uses. He said he planned to visit his bank "soon" to have the form signed and update the account. The paper process may help thwart hackers, he said, but "it's important to link your TreasuryDirect account to a bank account that you plan to keep and maintain for the long term."

Bank branch closings during the pandemic may have added another challenge. Some banks may offer remote online notary services, but laws vary by state. The TreasuryDirect form required for changing banks states that "notary certification is not acceptable," but it may be allowed if the notary is a bank employee, according to TreasuryDirect.

The TreasuryDirect website was created in late 2002 as part of a federal shift from paper to digital bonds, replacing a system that let people buy bonds on the phone.

"The system will provide greater flexibility and convenience for the investor by eliminating the paperwork burden inherent in the current TreasuryDirect system," according to the announcement about the website published in the Federal Register. The notice said that "the online transactions that an account owner may conduct" included "making changes to account information."

John Rizzo, a Treasury Department spokesman, said in an e-mailed statement that a paper form was a security step "aimed at preventing unauthorized transactions." Banks will typically certify the form without charge, he said. Tumin, however, said some branches might charge you a fee, depending on your relationship with the bank.

The department is developing an "updated, modern replacement" for the TreasuryDirect system with security protocols that allow account changes without paper forms, Rizzo said. He didn't cite a timeline but said the upgrade was "a priority."

"We are committed to ensuring that TreasuryDirect users have a positive customer experience in addition to keeping their financial information safe," he said.

Here are some questions and answers about using TreasuryDirect:

If I mail the form to change my bank, how long does it take TreasuryDirect to update my account?

The customer's TreasuryDirect account is usually updated within 10 business days after a completed form is received, Rizzo said.

You can also add secondary bank accounts to your TreasuryDirect account using the paper method, then later designate one of them as your primary account by contacting TreasuryDirect by phone or e-mail, according to the website.

If you want to use an internet bank as your personal account, it's probably best to do it when you establish your TreasuryDirect account. Adding one later can present problems, since virtual banks lack traditional branches to visit.

Is there still a way to buy paper savings bonds?

Yes. You can buy paper I bonds — up to $5,000 — using all or part of your federal income tax refund. Fill out the second part of Form 8888 and file it with your tax return. The Internal Revenue Service will mail the bonds to you. You can also complete the first part of the form to buy digital bonds with your refund and have them deposited in your TreasuryDirect account.