savings bonds

Should Investors Redeem Their U.S. Savings Bonds To Pay Off Credit Card Debt?

Posted on February 18, 2016

The average American household is burdened with an estimated $16,000.00 in credit card debt and likely paying high interest rates on those card balances. To reduce or even eliminate that debt, investors should carefully consider cashing in some or all of their U.S. Savings Bonds that may be stashed away. They might be surprised to learn how much their bond portfolio is worth, and that some of those bonds may not be earning any interest.

Before running to the bank to redeem their bonds, investors should consider these three important points:

Learn cash-in (redemption) values and interest rates for each bond. Most savings bonds are not created equal, and do not earn the same interest rates. The values, performance, rules and regulations, timing and maturity issues depend on the series of bond, such as E, EE or I, and when it was issued.'s complimentary online calculator provides first time users a detailed, bond-by-bond, color coded, personalized, printable, Savings Bond Inventory Report© along with a "what this means to you," explanation. The unique report helps investors better understand what their savings bonds are worth, the interest rates they are earning, along with important maturity, timing and taxation issues, which is simple and easy to understand.

Never arbitrarily redeem bonds. The goal should be to hold onto the winners and cash in the losers first in a savings bond portfolio. Some older bonds (which have not yet reached final maturity) might be earning the highest interest rates in a portfolio and should be redeemed last or if earning high interest rates, should be held onto. Paper bonds can often be worth a lot more than the face value (amount printed on the front of the bond). Confused? The company's Cash In Report© (offered via a VIP Membership©) helps eliminate guesswork by suggesting which bonds should be cashed in first based on the overall interest rate performance, maturity dates, and the amount of money needed.

Determine potential tax consequences before redeeming. The difference between the purchase price and the cash in value of a savings bond is considered report-able interest income. That amount ($10 or more) should be reported on a Federal Income Tax Return, as ordinary income, in the year the bonds were redeemed (or the year the bond reaches final maturity, whichever occurs first). When redeeming paper bonds at a bank or financial institution, a 1099-INT will be issued either on the spot, or mailed within the first few months of the following year after redemption. Electronic bonds require that investors access the 1099-INT from their online account.

Holding onto savings bonds that have reached final maturity and are no longer earning any interest is like giving Uncle Sam an interest free loan. Depending on ones financial situation, and the value of the bonds, redeeming a lot of bonds at once could result in having to reporting a lot of interest income in a given year. This may not be a prudent financial move. After creating a complimentary Savings Bond Inventory Report©, investors should consult with a financial professional before redeeming any bonds to discuss potential tax consequences, cash-in strategies, and overall investment objectives.

There is no doubt that Americans are encouraged to save and should carefully consider whether they should cash in any investments they had earmarked for retirement (or education) purposes. However, for years savings bonds have not been earning nearly the same double digit interest rates that investors are likely being charged on their credit card balances. That difference could be significant. Redeeming savings bonds, especially lower yielding, or those not earning any interest, and using the proceeds to reduce or even eliminate credit card debt, could be a very smart financial decision.

Contact Jackie Brahney, Marketing Director,,, Twitter: @savingsbondsgal


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