The basic steps to turn a bond into cash

To cash a bond, you contact the issuer or the financial institution holding it, request redemption, and receive the money in your account or by check. The exact process depends on what type of bond you own and where it is held. A bond issued by the U.S. Treasury works differently from a corporate bond or a municipal bond, and the steps also change depending on whether you bought it directly from the issuer or through a bank or brokerage.

Most bonds can be cashed before their maturity date, though you may receive less than you paid if interest rates have risen since you bought it. Some bonds have restrictions on early redemption. The redemption process itself usually takes three to five business days once you submit your request, though the exact timing depends on your financial institution and the bond type.

Key Takeaways

  • Treasury bonds are redeemed through TreasuryDirect (the federal website) or through your bank or brokerage, depending on where you bought them.
  • Corporate and municipal bonds must be sold through a broker or the financial institution holding them, not redeemed directly with the issuer.
  • Cashing a bond before maturity may result in a loss if interest rates have risen, because the bond's market value falls when new bonds pay higher rates.
  • The redemption process typically takes three to five business days after you submit your request, and funds arrive by check or direct deposit.
  • Some bonds have call provisions or surrender charges that limit when you can cash them or reduce what you receive.

Cashing Treasury bonds through TreasuryDirect

If you own a Treasury bond and bought it directly from the U.S. Treasury through TreasuryDirect, you redeem it on that same website. Log into your TreasuryDirect account, navigate to the "Manage Securities" section, and select the bond you want to redeem. The website will show you the current value and ask you to confirm the redemption request.

TreasuryDirect processes redemptions on business days only. If you submit your request before 12 p.m. Eastern time on a business day, the funds typically arrive in your linked bank account the next business day. If you submit after that time, it may take two business days. The amount you receive is the bond's current market value, not necessarily what you paid for it.

You will need to have a valid bank account linked to your TreasuryDirect account before you can redeem. If you have not set one up, you can add it in the account settings section before you request the redemption.

Cashing Treasury bonds held at a bank or brokerage

If you own a Treasury bond but purchased it through a bank, brokerage, or investment firm rather than directly from TreasuryDirect, you redeem it through that institution instead. Contact your bank or broker by phone, online, or in person and tell them you want to redeem the bond. They will ask you to identify which bond (by its maturity date and interest rate) and confirm where you want the money sent.

The institution will handle the redemption on your behalf and deposit the funds into your account there, or transfer them to your linked bank account. This process usually takes three to five business days. Some institutions charge a redemption fee, typically $25 to $50, though many do not. Ask before you request the redemption so you know what to expect.

Cashing corporate and municipal bonds

Corporate bonds and municipal bonds cannot be redeemed directly with the issuer the way Treasury bonds can. Instead, you must sell them through a broker or the financial institution that holds them. This is because corporate and municipal bonds trade on secondary markets, and the issuer does not buy them back.

Contact your broker or the institution holding the bond and ask to sell it. They will tell you the current market price, which may be higher or lower than what you paid. If interest rates have risen since you bought the bond, its market value will have fallen, and you will receive less than your original investment. If interest rates have fallen, the bond's value will have risen, and you may receive more. The sale typically settles in two to three business days, and the proceeds go into your account.

Some corporate bonds have call provisions, which means the issuer can force you to redeem the bond at a set price before its maturity date. If your bond has been called, you will receive notice from your broker, and the redemption happens automatically on the call date.

Understanding the difference between redemption value and market value

When you cash a bond before maturity, the amount you receive depends on the bond type and current interest rates. Treasury bonds and many corporate bonds have a par value (usually $1,000 per bond), and if you hold them until maturity, you receive that full amount. But if you redeem early, you receive the current market value instead.

Market value changes based on interest rates. When new bonds are issued with higher interest rates, existing bonds become less attractive to buyers, so their market value drops. When new bonds are issued with lower interest rates, existing bonds become more attractive, so their market value rises. If you need to cash your bond when interest rates are high, you may receive significantly less than you paid.

For example, if you bought a corporate bond for $1,000 paying 3% interest, and interest rates have since risen so new bonds pay 5%, your bond is worth less on the market because it pays less interest. A buyer would pay less to own it. The exact loss depends on how much rates have risen and how much time remains until maturity.

Fees and charges you may encounter

Treasury bonds redeemed through TreasuryDirect have no redemption fee. If you redeem through a bank or broker, some charge a fee of $25 to $50, though many do not. Ask your institution what they charge before you submit your redemption request.

Corporate and municipal bonds sold through a broker may include a markup or commission. The broker buys the bond from you at one price and sells it to another buyer at a slightly higher price; the difference is their profit. This is not always listed as a separate fee, but it reduces what you receive. Ask your broker for the current bid price (what they will pay you) before you agree to sell.

Some bonds, particularly older corporate bonds or bonds sold through insurance companies, may have surrender charges that penalize you for cashing them early. These charges typically decrease over time. Check your bond documents or contact the issuer to learn about yours has a surrender charge and how much it is.

What happens if your bond has matured

If your bond has reached its maturity date, you do not need to request redemption—the issuer will automatically pay you the par value plus any final interest payment. For Treasury bonds, the funds arrive in your TreasuryDirect account or linked bank account automatically. For bonds held at a bank or broker, the proceeds are deposited into your account there.

If you do not claim the funds after a certain period (usually several years), they may be turned over to your state as unclaimed property. You can still recover them by contacting your state's unclaimed property office, but it is easier to keep track of your bonds and redeem them when they mature.

Frequently Asked Questions

Can I cash a bond before it matures?

Yes, most bonds can be cashed early, but you may receive less than you paid if interest rates have risen. Treasury bonds and corporate bonds can usually be redeemed or sold at any time. Some bonds have restrictions or penalties for early redemption, so check your bond documents first.

How long does it take to get my money after I request redemption?

Treasury bonds redeemed through TreasuryDirect arrive the next business day if you submit before noon Eastern time. Bonds redeemed through a bank or broker typically take three to five business days. Corporate and municipal bonds sold through a broker settle in two to three business days.

What if I lose money when I cash my bond early?

If interest rates have risen since you bought the bond, its market value will be lower than what you paid. This is a real loss, but it only happens if you sell before maturity. If you hold the bond until it matures, you receive the full par value regardless of interest rate changes.

Do I have to pay taxes when I cash a bond?

This guide covers how to redeem bonds, not tax consequences. Tax treatment depends on the bond type and how long you held it. Speak with a tax professional or review IRS guidance for your specific situation.

What if I cannot find my bond or do not know where it is held?

If you own a Treasury bond, check TreasuryDirect first. If it is not there, contact the bank or broker where you think you bought it. If you cannot locate it, your state's unclaimed property office may have a record if it was turned over after years of inactivity.