You can cash it at a bank, through the Treasury, or hold it until maturity
A U.S. savings bond is yours to keep, sell, or redeem whenever you choose — there is no single "right" thing to do with it. The most common choice is to hold it until it stops earning interest (called final maturity), then cash it. But you can also redeem it early if you need the money, though you may lose some earnings. You can transfer it to someone else, use it as collateral for a loan, or leave it to your heirs in your will.
The path you take depends on when you need access to the money, how much interest you want to earn, and whether you have other uses for it. Each choice has real trade-offs in timing, taxes, and the amount you receive.
Key Takeaways
- You can redeem a savings bond at most banks and credit unions, or directly through TreasuryDirect, and receive the current value within days.
- Redeeming a Series EE or I bond before five years have passed means you lose the last three months of interest, which can be a significant penalty.
- Interest on savings bonds is subject to federal income tax but not state or local tax, and you can choose to pay taxes each year or all at once when you redeem.
- If you hold a bond past its final maturity date, it stops earning interest and you should redeem it to move the money somewhere it can grow.
- You can transfer a bond to someone else, name a beneficiary, or use it as collateral, but the original owner remains responsible for the taxes owed.
Redeeming a bond at a bank or through TreasuryDirect
The fastest way to turn a bond into cash is to take it to a bank or credit union where you have an account. Most financial institutions will redeem Series EE and Series I bonds on the spot, verify your identity, and deposit the money into your account within one business day. You do not need to be a customer of that specific bank — many will redeem bonds for non-customers, though some charge a small fee.
If you do not have the physical bond certificate (many bonds issued after 2002 exist only as digital records in TreasuryDirect), you can redeem directly through your TreasuryDirect account online. Log in, select the bond, and request redemption. The money typically arrives in your linked bank account within three to five business days. You will receive a 1099-INT form from the Treasury showing the interest earned, which you use to report the income on your tax return.
The early redemption penalty and when it matters
If you redeem a Series EE or I bond before it has been held for five years, you lose the last three months of interest. This is called the early redemption penalty. For example, if you bought a bond four years and eleven months ago and it has earned $100 in interest, you would receive only $75 when you redeem it — the $100 minus three months of accrued interest.
After five years, you can redeem without penalty and receive the full current value. The penalty exists to discourage people from treating savings bonds like checking accounts. If you are considering early redemption, calculate whether the penalty is worth the cost of waiting. Sometimes it is — if you need money for an emergency, losing three months of interest may be the better choice than taking on debt. Other times it is not — if you can wait six months, you avoid the penalty entirely.
How taxes work when you redeem
Interest earned on a U.S. savings bond is subject to federal income tax but not state or local tax. You have two choices about when to pay: you can report the interest each year as it accrues (called the accrual method), or you can wait and report all the interest at once when you redeem the bond (called the deferral method). Most people choose deferral because it delays the tax bill.
When you redeem, the Treasury sends you a 1099-INT form showing the total interest earned over the life of the bond. You report this on your federal tax return for the year you redeem. If the bond was held in a child's name, the interest may be taxable to the child at their lower tax rate, which can save the family money — but there are limits and rules about this, so check with a tax professional if that applies to you.
If you have a large bond or many bonds, you can spread the redemptions across multiple years to stay in a lower tax bracket. For example, instead of cashing five bonds in one year, you might redeem one or two per year over several years.
Holding a bond until it stops earning interest
Series EE bonds earn interest for 30 years. Series I bonds earn interest for 30 years as well. After that final maturity date, the bond stops earning anything — it just sits there at its current value. If you own a bond past its maturity date, you should redeem it and move the money to a savings account, CD, or other investment that continues to earn.
Check the issue date on your bond to know when it reaches final maturity. You can find this information on the physical certificate or in your TreasuryDirect account. Once a bond matures, there is no reason to hold it — you are leaving money on the table that could be earning interest elsewhere.
Transferring a bond or naming a beneficiary
You can transfer ownership of a bond to someone else, though the process depends on whether it is a paper certificate or a digital bond. For digital bonds in TreasuryDirect, you can name a beneficiary who will inherit the bond if you die. The beneficiary does not own it during your lifetime, but they can claim it after your death without going through probate.
If you want to give a bond to someone while you are alive, you can do so, but the original owner remains responsible for paying taxes on the interest earned up to that point. The new owner then pays taxes on any interest earned after the transfer. This can get complicated, so it is worth discussing with a tax professional if you are transferring a bond with significant interest.
Using a bond as collateral for a loan
Some banks and credit unions will lend you money using a savings bond as collateral. The lender holds the bond and you repay the loan; if you default, they keep the bond. This can be useful if you need cash but do not want to redeem the bond and lose the interest or trigger the early redemption penalty.
The interest rate on a collateral loan is typically lower than an unsecured personal loan because the lender has the bond as backup. However, you are still paying interest on the loan while the bond continues to earn interest — so you are paying to borrow your own money. Compare the loan rate to the bond's interest rate to see whether this makes financial sense for your situation.
Frequently Asked Questions
Can I redeem a savings bond before five years without losing money?
No. If you redeem a Series EE or I bond before five years, you lose the last three months of interest. After five years, you can redeem without penalty. If you need the money before five years, the penalty is the cost of early access — weigh it against your other options.
What happens if I lose my savings bond certificate?
If you have a digital bond in TreasuryDirect, there is no certificate to lose — you redeem through your online account. If you have a paper certificate, contact the Treasury's Bureau of the Fiscal Service to report it lost or destroyed. They can issue a replacement or help you redeem it.
Do I have to pay state taxes on savings bond interest?
No. Interest on U.S. savings bonds is exempt from state and local income tax. You only owe federal income tax on the interest earned. This is one advantage savings bonds have over some other savings vehicles.
What if I want to keep the bond but need cash?
You can use the bond as collateral for a loan from a bank or credit union, or you can redeem it and reinvest the money elsewhere. A collateral loan lets you keep the bond earning interest while you borrow against it, but you pay interest on the loan.
Can I cash a savings bond at any bank?
Most banks and credit unions will redeem Series EE and I bonds, but policies vary. Call ahead to confirm they offer this service. Some may charge a small fee for non-customers. TreasuryDirect redemption is always free and available online.