The US Treasury stopped issuing paper savings bonds in January 2012, switching to online platforms. There is a slight exception where a paper Series I may be purchased with proceeds from a federal income tax refund, but they are extremely rare. What they failed to explain is that US banks are NOT required to cash in these bonds.

A friend’s daughter recently ran into an issue on her 30^th birthday when she attempted to cash in a number of bonds that had finally matured. Her bank simply told her, “No. We will not cash them.” She called customer service, and the bank explained that they had no legal obligation to cash government bonds.

She was told to mail in the paper bonds with a completed FS Form 1522 to the Treasury directly, along with copies of her personal government-issued identifications. Obviously, this does not seem secure, as mail is lost all the time, regardless of tracking numbers.

There are currently no options to cash paper savings bonds online. The government has made it deliberately difficult to cash in these bonds. She attempted a loophole where you previously were able to redeem bonds at larger institutions if they were worth under $1,000, but still, she her request was declined.

According to Treasury Direct, “Banks vary in how much they will cash at one time – or if they cash savings bonds at all.” We have seen numerous banks fail and begin to consolidate. Regional banks are struggling with liquidity, and larger institutions simply do not want to hand out cash if they’re not required to do so.

Naturally my friend wished those 30-year bonds were invested in equities or anything other than bonds. She would have made far more than the government bonds could ever provide, and now it will be a difficult task to snail mail personal information to the Treasury and await a response. Yet another strike against purchasing government debt.