The vast majority of U.S. Savings Bonds are now sold through banks and credit unions. But come 2012, the only way to buy these staid, safe-but-underwhelming products is via the Internet. The move is expected to save the government $70 million over the next five years. But how much will the government lose out on because fewer people will be buying bonds?
According to USA Today, only 11% of U.S. Savings Bonds purchased over the last nine months were bought through TreasuryDirect, the Treasury Department’s financial services website. In the interest of stirring up more e-business—and cutting costs related to paper bonds—Treasury announced today that as of January 1, 2012, savings bonds will no longer be sold at financial institutions. They’ll only be available in electronic form by direct purchase through TreasuryDirect, though paper bonds can still be bought with one’s tax refund.
This action, which supports the U.S. Department of the Treasury’s goal to increase the number of electronic transactions with citizens and businesses, will save American taxpayers approximately $70 million over the first five years.
How much less money will be invested in bonds once they’re not available at banks and credit unions? That remains to be seen, and the department hasn’t offered an estimate.
But seeing as the vast majority of bonds have traditionally not been purchased via the web, and seeing as the number of bonds sold overall has been on a swift decline—20.2 million sold in 2010, compared to 43.6 million in 2003—surely the move to e-only bonds can’t be expected to increase sales.
Electronic bonds do have a few things going for them. Unlike paper bonds sold at a bank, electronic savings bonds are available for purchase 24/7. They’re also automatically redeemed at maturity. That’s not the case with paper savings bonds, and some $16 billion in unredeemed bonds is just sitting there, no longer earning any interest whatsoever, because the owners haven’t taken action.
Something tells me, however, that many people who are interested in savings bonds either don’t have access to the Internet, or may be uncomfortable buying bonds online. As for the folks who are online all the time, and who have gotten over any concerns about shopping and investing via the Internet, will they be more likely to buy bonds now? Probably not. Electronic bonds have been sold at TreasuryDirect since 2002, and there’s not much new incentive to all of a sudden consider them a hot investment. And chances are, the folks who live on the Internet already have accounts with online banks that are arguably better investments than anything available from physical banks or the U.S. government.