The move by the federal government to end the sale of paper savings bonds at banks and credit unions next year is bad news for savers in more ways than one.
The amount of savings bonds consumers can buy each year will be significantly reduced. And even though people can still purchase bonds online, the government's website is not easy to use. It's so difficult, in fact, that the nonprofit Maryland CASH Campaign has created a video of consumers struggling to navigate it.
The Treasury Department's ultimate goal is to save millions by having consumers buy all savings bonds online through TreasuryDirect.gov. As part of that, the government stopped selling paper bonds last year through payroll deductions. That move, along with eliminating paper bond sales at financial institutions, is expected to save $120 million over the next five years in printing, mailing and other costs.
Starting next year, the only way to get a paper bond will be by buying an inflation-protected Series I bond with a tax refund when you file your federal return.
Savings bonds were introduced about 75 years ago and have been popular with small investors. You can buy bonds for as little as $25 and they are backed by the U.S. government. (The rate on newly issued I bonds is 4.6 percent and subject to change in November. Newly issued EE bonds earn a fixed rate of 1.1 percent.)
But changes in the program are making the bonds less appealing, bond experts say.
"It's the purchase limits that are killing the program," says Tom Adams, author of "Savings Bond Advisor."
Just a few years ago, you could purchase as much as $30,000 in Series I bonds and another $30,000 in Series EE bonds each year. Now, you can buy up to $20,000 a year — or $5,000 each of electronic and paper versions of both I and EE bonds.
Next year, the maximum online purchase will be $10,000, says Joyce Harris, spokeswoman for the Bureau of the Public Debt. You still will be able to buy up to $5,000 in paper I bonds with your tax refund, she adds.
Consumer advocates, meanwhile, say they are sympathetic to the government's need to save money. But pushing consumers to buy bonds online, they say, sets up barriers for lower-income savers.
Robin McKinney, director of the Maryland CASH Campaign, says her group works mostly with people whose income is under $25,000, and about two-thirds of them don't have access to the Internet.
TreasuryDirect also requires online buyers to have a bank account — and not everyone has one, she says. And if that weren't enough, McKinney says, "the website is incredibly difficult to use."
With TreasuryDirect, consumers must take multiple steps to purchase a bond. You first must open an account online, then wait up to two weeks for the government to send you an access card. Once you get the card, you then must go back to the site to buy a bond.
Only 11 percent of savings bonds are sold online, according to the Bureau of the Public Debt.
Three nonprofits, the Maryland CASH Campaign, Doorways to Dreams and Baltimore CASH Campaign, produced a video showing the difficulty consumers have using the system (to see a clip, go to baltimoresun.com/business).
Angela Weems of Baltimore is one of the featured consumers struggling with TreasuryDirect.
"I consider myself very computer literate," Weems says. "If I wasn't, it would be even more frustrating."
Weems says she didn't feel comfortable with the site, which asked for personal information such as Social Security and bank account numbers. Weems says only after her access card came in the mail a couple of weeks later did she feel at ease.
She bought a bond online. But, says the 54-year-old, "I wouldn't go that route again."
(I tried out TreasuryDirect, although I had the advantage of being somewhat familiar with the site. It took 11 minutes to open an account, but I had to click the "submit" button three times before my information went through.)
Public Debt's Harris says the government is aware of consumer complaints and expects to make changes within the year so the site will be easier to use.