Where to Cash a Bond: From Local Banks to Online

Cashing a bond requires understanding its type and available redemption methods. Different bonds, such as U.S. Treasury savings bonds, corporate, or municipal bonds, each have distinct procedures for converting them into cash. This guide covers the necessary steps and considerations for cashing various bond types.

Cashing U.S. Treasury Savings Bonds

U.S. Treasury Savings Bonds, such as Series EE and Series I, have specific cashing procedures. The redemption process depends on whether your bond is a physical paper certificate or held electronically through TreasuryDirect. Understanding your bond’s format is the first step.

For paper savings bonds, you need the physical bond certificate and valid government-issued identification, such as a driver’s license or state ID. Some financial institutions may require two forms of identification. If cashing by mail, complete FS Form 1522, available on the TreasuryDirect website. This form requires your name, Social Security Number or Employer Identification Number, and banking information for direct deposit. For redemptions exceeding $1,000, your signature on FS Form 1522 must be certified by a certifying officer or notary public.

Paper savings bonds can be cashed at many local financial institutions, including banks and credit unions. Contact your bank beforehand, as not all institutions offer this service, or may only provide it to account holders. The bank will verify your identity and the bond’s authenticity before processing. Alternatively, you can mail your paper savings bond with the completed and, if necessary, certified FS Form 1522 directly to the U.S. Department of the Treasury for redemption.

Electronic savings bonds, held in a TreasuryDirect account, offer a streamlined online redemption process. To cash these bonds, log into your TreasuryDirect account, navigate to “ManageDirect,” and select “Redeem securities.” Choose the electronic bond you wish to redeem. While paper bonds must be cashed in their entirety, electronic bonds allow partial redemptions, provided you redeem a minimum of $25 and leave at least $25 remaining.

Savings bonds must be held for at least one year from their issue date before redemption. If you cash a savings bond within five years, you forfeit the last three months of earned interest. Interest earned on savings bonds is subject to federal income tax, but exempt from state and local income taxes. You can report this interest annually or defer reporting it until the bond is redeemed. In certain circumstances, if proceeds are used for qualified higher education expenses, the interest may be exempt from federal income tax.

Cashing Other Types of Bonds

Beyond U.S. Treasury savings bonds, other types of bonds, such as corporate, municipal, or older paper Treasury notes, are typically held and cashed differently. These bonds are generally managed through a brokerage account, rather than directly with the government or a local bank. This distinction is key to their redemption process.

If you possess a physical certificate for a corporate, municipal, or older Treasury bond, the initial step involves depositing it into a brokerage account. This converts the physical asset into a digital holding within your investment portfolio, which can take several business days. Once the bond is held in a brokerage account, proof of ownership and valid identification will be required for any transaction.

The primary method for cashing these bonds is by selling them through your brokerage firm. Bonds can be sold on the secondary market before their maturity date or redeemed directly with the issuer at maturity. Selling a bond before its maturity means its price will be influenced by current market conditions, including prevailing interest rates and the issuer’s credit quality. This market price may be higher or lower than the bond’s face value.

Alternatively, you can hold the bond until its maturity date, at which point the issuer will repay the bond’s face value to your brokerage account. Your brokerage firm facilitates the transaction, handling the execution of the sale or redemption and disbursing the funds to the bank account linked to your brokerage account. If you do not already have a brokerage account, you would need to open one to deposit and manage these types of bonds.

The tax implications for these bonds vary based on their type. Interest earned on corporate bonds is generally subject to both federal and state income taxes. For municipal bonds, the interest income is typically exempt from federal income tax, and often from state and local taxes if you reside in the state where the bond was issued. Any capital gains realized from selling a bond for more than its purchase price are generally taxable. Interest from older Treasury bonds is subject to federal income tax but is exempt from state and local income taxes.

Common Considerations for Cashing Any Bond

Once the initial submission process for any bond type is complete, several common considerations apply regardless of the bond’s specific category. These aspects relate to proving ownership, processing times, fund disbursement, and potential costs. Understanding these elements helps manage expectations for receiving your funds.

A consistent requirement across all bond redemptions is to prove ownership and identity. You will need to present valid government-issued identification, such as a driver’s license or passport, to verify you are the rightful owner. This step helps prevent fraud and ensures funds are released to the correct individual.

The time to receive your funds can vary depending on the bond type and redemption method. For electronic redemptions of U.S. Treasury savings bonds through TreasuryDirect, funds are typically deposited into your bank account within two business days. Cashing paper bonds, especially if mailed to the Treasury, can take longer, potentially several weeks to a few months. Cashing bonds through a brokerage firm generally aligns with typical investment transaction settlement periods, usually a few business days.

Funds from cashed bonds are most commonly disbursed via direct deposit into a designated bank account. This method is generally the quickest and most secure way to receive your money. For mailed paper bond redemptions, a physical check may be issued and sent to your address of record, though this often involves longer wait times.

While direct fees for cashing bonds from the issuer are uncommon, certain circumstances might incur costs. Some financial institutions may charge a service fee for processing paper bond redemptions, especially if you are not an account holder. When selling corporate or municipal bonds through a brokerage firm, you may encounter standard brokerage commissions or transaction fees. It is prudent to inquire about any potential fees before initiating the cashing process.