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Savings Bonds Are Nearly Extinct

Poll QuestionSavings bonds are going the way of the dinosaur.

Yes, extinction is just over the horizon, as the species-killing asteroid has already struck in the form of paperless bonds.

The U.S. Treasury issued 40.6 million savings bonds in 2000, but only 400,000 in 2013.

That’s quite a shift in only 13 years.

A recent CNNMoney article, “The death of U.S. savings bonds,” points to poor interest rates and online-only sales as the culprits.

Let’s face it, one of the joys of a bond was how official it looked. Even classy.

But paper savings bonds have been replaced by ones you print out at home – and that’s after you’ve gone through the rigmarole of buying one online.

By all reports, that’s not the simplest of tasks.

Paperless bonds sure can take a lot of the blame.

In 2011, the U.S. Treasury reported 6.8 million bond sales. In 2012, when paper bonds stopped being sold in most instances, sales fell to less than 1 million.

That all but killed a product that was already in slow decline.

Here’s where interest rates come in.

EE Bonds sold since 2005 earn a variable rate of interest. These 30-year bonds currently pay 0.50% annual interest – nearly as terrible as the best nationally available 3-month CD rate.

Yikes.

We regularly write about another Treasury offering, the Series I Savings Bond. New-issue bonds today pay a decent 1.94%.

But other investments – even ones that come in paper form – pay considerably more.

And those investments don’t come with a $10,000 annual purchase limit, like I Bonds.

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When was the last time you bought a savings bond?
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