By David Enna, Tipswatch.com
A helpful reader alerted me last week that TreasuryDirect was asking investors to clear out their Zero-Interest Certificates of Indebtedness (C of I) holdings. Based on the wording of the email, I’d call it a “warning,” a little more urgent than the “please pay attention” message sent earlier in October about delivering all sets of gift-box I Bonds.
Read about the gift-box messaging here: “TreasuryDirect email is an omen of coming changes.”
What is a C of I?
Basically, it is a lousy deal and probably a throw-back to days when investors didn’t have low-cost brokerage accounts to fund transactions at TreasuryDirect. It is a holding security that pays zero interest. Maybe in the days when your bank was paying 0.05% interest it made sense to use C of I, but today it is only useful for a one- or two-day investment holding, preparing for another purchase.
TreasuryDirect’s User Guide used to encourage use of the C of I:
The Zero-Percent Certificate of Indebtedness (Zero-Percent C of I or simply, C of I) is a Treasury security that does not earn any interest. It is intended to be used as a source of funds for purchasing eligible interest-bearing securities. …
Need one less worry about your security payments? If payments to your bank are returned to us for any reason, the returned funds will be automatically deposited in your C of I. You’re then able to use the deposited funds to purchase additional securities in your account or redeem all or part of them to your bank. It’s your choice.
Unexpected changes in your plans? Choose the option to redeem your C of I, and the amount you enter is redeemed from your C of I and deposited into your designated bank account.
All C of I purchase and redemption activity is conveniently recorded in your C of I History.
But honestly, C of I was literally a worthless and undesirable investment any time your deposits could earn daily interest, such as in a brokerage’s money market account. The email TreasuryDirect sent out last week fully admits this:
Zero-Percent C of I is designed to temporarily hold funds for purchasing other securities. It does not earn interest, so leaving money in this account limits its growth potential. By cashing your C of I or using it to purchase interest-bearing securities, you can put your funds to work immediately! Start taking advantage of investment opportunities and avoid leaving money idle in a non-interest-bearing account.
Here is the full text of the email:
The real message
TreasuryDirect again is clearly telling us that changes — and probably big changes — are coming to its investment process, which will affect both savings bonds and purchases of Treasury bills, notes and bonds. It says:
Please note, there may be changes to Zero-Percent C of I to help streamline the process of investing with the Treasury, so cashing your C of I now will help you prepare. Stay tuned as more information becomes available on how we’re enhancing the TreasuryDirect customer experience.
TreasuryDirect also created an FAQ to reassure investors that the email was legit and to explain why action is needed.
How is Treasury enhancing the experience of TreasuryDirect customers?
We are always looking to improve your experience. Future enhancements are still being determined but we will share information on changes as it becomes available.
Is Zero-Interest C of I changing?
Payroll C of I has already been eliminated. For C of I you currently hold, we are continually evaluating ways to streamline the process of investing with the US Treasury and there may be changes to C of I in the future. We will proactively send communications as more information becomes available.
Is there a deadline for cashing C of I?
Redeeming C of I proactively prepares you for upcoming enhancements while also enabling you to make the most of your investment. … You don’t earn any interest on money you keep in your C of I.
Is redeeming my C of I mandatory?
You are encouraged to cash C of I now to ensure you are prepared for coming enhancements and so you can make the most of your investment.
Take action
I suspect that very few Tipswatch readers actively use C of I, but I know a few do to ease rollover transactions. It’s time to get the money out of there and into your bank or brokerage account. Also, make sure all future maturities will be directed to those accounts instead of to C of I.
An anecdote: I have a friend who changed cities and changed bank accounts to link to TreasuryDirect for maturities. She wasn’t a frequent user of TreasuryDirect. She tried to establish a new connected account and somehow failed.
When her sizable investment matured, the entire amount went into C of I. And then when she tried to remedy this situation, she messed up her login (or security questions) and was locked out of TreasuryDirect. This was during a high-call-in period of I Bond mania and it took her more than a week to get this resolved.
Harry Sit, creator of TheFinanceBuff.com, wrote about a similar — and more serious — problem in September 2023. The article title: “Stay Away from Zero-Percent C of I in TreasuryDirect.”
You would think this Zero-Percent C of I is useless because drawing from and sending to the bank account works just fine and you can at least earn some interest while the money is in your bank account, but some people decide to use Zero-Percent C of I to hold cash in TreasuryDirect.
Sit tells the story of an investor whose account was flagged by Risk Management and placed on “hard lock.” The investor was asked to fill out a notarized FS Form 5444 and was told the time for processing this form was “20 weeks minimum.”
A Boglehead forum member related a similar issue this month:
I got an email from Treasury Direct (2 months ago) saying my account is locked and I will no longer be getting any interest payments and they are holding my interest payments in a non interest bearing account. I had to get my signature notarized which I did and Treasury Direct received my documentation on August 18th. They said it would take 2 weeks to open account. Now they are saying there is no timeframe and the account is still locked.
Sit concludes:
Treat TreasuryDirect as a delicate object. Do as little as possible with it. Stay on the beaten path. Buy your I Bonds. Sell your I Bonds. Use your linked bank account to transact. Don’t use the browser’s back button. Remember your password and your answers to the security questions. Be extra careful not to get your account locked. Use your brokerage account when you buy regular Treasuries. Stay away from Zero-Percent C of I in TreasuryDirect.
Changes are coming
We don’t know what is coming, and if you call and ask you won’t get an answer. But TreasuryDirect is now stepping up the pace of changes:
- In September 2024 it ended issuance of paper I Bonds in lieu of a federal tax refund.
- In October 2024 it sent investors an email encouraging them to deliver gift-box sets of savings bonds “as soon as possible.” This set off much confusion.
- In December 2024 it ended its Payroll Savings Plan for automatic investments in savings bonds. This program dated back to 1942.
- In January 2025 it sent out a survey on the use of the gift-box loophole for adding to purchases of savings bonds.
- In October 2025 it sent an email strongly encouraging investors to empty out gift-box holdings by delivering them to recipients.
- And now, in October 2025 it is encouraging investors to empty out C of I holdings.
I know that several readers are going to comment that they will never use TreasuryDirect and don’t trust it. I do use it, and after a decade-plus of regular use, I trust it. But I am a very experienced user. I still use TreasuryDirect to purchase I Bonds and to roll-over T-bill investments. Those two processes work well for me.
I wonder if the Treasury is considering outsourcing some of the management of TreasuryDirect accounts. I have no basis for this idea, but it looks like TD is trying to simplify its operations and … er … improve the investor experience? At this point, we are all just guessing.
My advice, though … get money out of that C of I account.
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Treasury Inflation-Protected Securities 
I made a $1 deposit into the C of I in two different entity accounts (made using trusts) to check the linkage of a second bank account and got locked out of both Treasury Direct accounts. I am leaving those two $1 deposits right where they are so I don’t get locked out again.
If they mail me a check or ACH transfer to the primary bank account, fine. If the money disappears, also fine. Touching the C of I is not worth the risk.
This comment, among others, convinces me that the modernization and simplification of TD through a “from the ground up” website redesign is absolutely on its way. In order to provide an efficient service without the necessary staffing support to fulfill requests in a timely fashion (weeks not months, days not weeks), it’s an absolute must that the issues like this are no longer in play.
I think it’s an anti-fraud measure, honestly. I made $1 transactions to test a new bank account linkage. I know it was legit, but it probably tipped off their system.
They do make very clear that anyone who gets your login credentials can access funds at Treasury Direct, and that they are not liable for that, etc…. I think they take the security stuff seriously.
From a comment on this topic under another TIPS Watch article,
Treasury Investor and Long time reader said in part:
“I received an email from Treasury Direct to redeem my C of I balance as changes might be coming. I use that as staging when I want to combine or break certain investments before reinvesting.”
This is true for me as well. In fact I have a couple of T-Bills maturing on the same day next month that I want to combine into a new one being issued on the date of maturity. Currently I have this scheduled to occur through the 0% Certificate of Indebtedness.
The problem is that the timing of TD’s ACH deposits into my bank from maturing securities don’t necessarily match up with their ACH withdrawals for new securities. That means either I have to have twice as much free cash available in the bank account to cover for any delays in fund arrival, or plan on delaying the new purchase for a week or more. This is the same sort of annoying behavior that I deal with in my Schwab accounts that keeps me from relying on their T-Bill reinvestment choice.
An additional concern is that at least one of my banks imposes 30-day ACH limits as well as daily limits. The added activity could well pose a problem for me.
Use to be that one should verify that they have the funds available before using them! Be careful for bounced “checks.” And the amount of lost use of funds equates to …% or $….
Exactly. Hence my preference for using the C of I. The Treasury Direct website clearly states that the order of operation is to apply the day’s electronic credits to the C of I prior to issuing new securities. In my experience, this includes credited funds from TD securities maturing that day and paying into the C of I.
“For your convenience, daily incoming electronic deposits are applied toward your C of I immediately prior to issuing other securities in your account. As long as any deposits to C of I are received for the purchase request date and the balance is sufficient, your security will be issued as scheduled.“
https://www.treasurydirect.gov/indiv/help/treasurydirect-help/user-guide/151-160/#152
David, I just came across your web site. I had an I bond on treasurydirect. I sold the bond and got confirmation from TD it was being sent to my bank. Then the funds were actually sent to an unauthorized user at pathward bank. I have a case number with treasury direct. It been over four months and they won’t investigate. I found others on boglehead and Reddit who have experienced the exact same. It doesn’t seem TreasuryDirect has data loss protection measures in place. I wonder if this is a topic you consider looking into or writing about.
Amy, that is awful. Do you believe your TD account was hacked and the destination bank account was altered? Do you have any idea why the payment was misdirected?
Im gonna do a test transfer with a small amount and make sure it goes to the right place.
I have no idea why the payment has been misdirected. TreasuryDirect has not yet investigated and when I call for updates, I’m told my case is pending examination.
File a theft/criminal complaint with the Feds including the DoJ…
Here’s how I use TD without having to touch its delicate features only once every 3 months: I have two rolling 4-week treasuries (one for each of my kids as beneficiaries) set for 3-month reinvestment, with enough funds to cover 2 years of my expenses if I’m incapacitated. They will automatically mature into my checking account, where all my bills are on autopay, if I don’t continue to roll them. That way my kids won’t have to worry that my bills are paid. In my “death binder” I have instructions to download the 1099 from the TD website each year. Even with this setup, I have to be very alert not to spring any of TD’s tripwires. I hate it, but I can’t think of any other way to enact this scenario that makes things easy for my kids and also assures my bills are paid if I’m incapacitated. I closed out all my IBonds from my individual and sole proprietor accounts solely because of the BS that my kids would have to go through at TD at some point.
You have to watch as they report your death, accounts are not locked down. One thing about estate planning one will never know if it worked.
I would not be surprised if the government shut down the savings bond program completely. It’s already close to death by a thousand cuts. They would have to keep a skeleton crew to help service existing customers. Or they might move it all to a private sector firm, so our complex questions could be “answered” by Eddie in India or Mike in the Philippines.
Don’t have T-bills, I-Bonds, Bonds or Notes at TreasuryDirect at death! They will take at least 6 months after receipt of your documentation to do anything to recognize your administrator or heirs and will not pay interest on any matured USTs in the meantime. Except for I-Bonds (since you can’t buy anywhere else) i would not recommend TreasuryDirect as you can purchase at auction T-Bills, Bonds and Notes through a Fidelity, Schwab, etc. at no cost and they will not sweep your $ into non-interest bearing status at death.
Does one dare to send paper ibonds to be converted to TD account at this time?
Yeah, may be risky if you need a quick turnaround. I think Treasury would love to have auto payouts at maturity, with taxes due. So conversions ought to be encouraged.
I doubt anyone at Treasury thinks or cares much about how many paper bonds are floating around out there.
To the contrary Robert, a lot of effort has been put into matured but unredeemed savings bonds, and the digitization of paper bond records. This report shows the surprising amount of effort that has been put in, over decades. https://www.treasurydirect.gov/files/savings-bonds/mud-executive-order-report.pdf
I recently sent a few I Bonds from tax refunds to the Treasury. Took three weeks until I received email acknowledgement, which said the conversion process would take at least 6 weeks. The bonds appeared in my conversion account about 5 weeks later, a week after the shutdown had started. Despite the shutdown, the conversion process was faster than in early 2023 when it took 13 weeks.
I would send them in for conversion. Paper bonds are becoming obsolete. Where does one store paper bonds? Banks do not particularly want to handle them and safety deposit boxes are also going away like so many things from the 20th century. The biggest advantage of converting paper bonds to electronic is you can track them and see them in one place, how much they are worth, the current interest rate, when they will mature. You can designate beneficiaries.
I have sent all my paper bonds in for conversion. In 2023 it took months before they were finally posted on my TD account. But now they are safe on the Treasury website. Having certificates floating around made me nervous.
You can only have one other name on the account. So if your referring to a joint account with beneficiary this aint it.
I sent some in for conversion in August and I am still waiting to see them in my account. And now there is the shutdown. I am getting concerned. I would wait at least until the shutdown is over.
Robt, I sent some paperwork to TD to transfer I-Bonds in August 2024, and they showed up in my account on January 27, 2025. The good news is that it didn’t count toward my 2025 year I-Bond purchases, and I was able to purchase a $10k I-Bond on January 29, 2025, for my annual allowance.
How does one change the payment destination of automatically redeemed converted (i.e. paper) bonds? I believe these are still going into the “Zero % C of I” account and I don’t see any way to change that.
I have the same concern. I have converted I-Bonds on TreasuryDirect that will mature over the next 3 to 6 years. I don’t plan to make any other use of my TD account.
It appears that I could redeem these I-Bonds a month or two before maturity so as to have the proceeds go directly to my bank account, but that could result in some loss of income if the rate available on the “outside” investment is lower than the I-Bond rates (for me CPI plus an average fixed rate of 3.3%).
I would be delighted to see either (i) the whole 0% COI structure go away entirely, or (ii) made merely an option for the payment of amounts due on I-Bonds at their maturity.
As I’ve previously observed in thread comments here, I take it with a huge grain of salt when I see that all of these TreasuryDirect mass messages begin with the boilerplate statement that TD is “always looking for ways to enhance your experience.” Because the single most important thing Treasury could do to “enhance” this household’s “experience” would be to hire enough employees so that transactions requiring submission of Treasury’s own medallion-guaranteed paper forms don’t take half a year or more to get processed. It was May 9 when TreasuryDirect first acknowledged receipt of papers from my wife and me to move I Bonds from individual accounts to our joint trust account, and we’re still waiting. But I don’t expect that situation to improve, and, given the current administration’s attitude toward federal staffing and public service, I actually expect it to get worse.
As far as the zero-interest C of I, when I first heard of it, I thought it was a great idea. For about 10 minutes, before additional reading made clear that depositing a substantial amount of money in a C of I–in other words, money which would already be “at” TreasuryDirect–did not in any way increase the annual dollar limit on I Bond purchases. So we never did C of I and instead just kept using electronic TreasuryDirect transactions to and from our household checking account, just as we always had.
We have resigned TD to be a probate item, passed through our wills. The only reason we needed a trust was for this account, ridiculous. I could never find a Medallion person anyway, and banks are clueless in Florida.Glad this isnt a big part of my money!
I’ve previously speculated that all of these simplification measures are being taken in advance of the launch of a completely redesigned public-facing TD website. I have no insider information, but I believe a new site is being designed from scratch, so the fewer data elements that need to be migrated, the better. It also explains why the messages are vague and the advanced notice lead time is so prolonged. A Web design and programming task of this magnitude is a big undertaking and completion is difficult to predict, especially with financial , cybersecurity and data privacy issues being paramount , user interface elements to consider and ADA compliance issues to build in. It is long overdue so this is what I am expecting.
Hope they do away with converted accounts!
Why would the encourage transfer of funds that Treaury pays no interest upon? I would love to know the balance in the C&I accounts.
You would do that if you are abandoning the feature entirely and migrating to a new website without it (my theory).
They will still require a “holding tank” for matured bond proceeds, since the connected bank account may no longer be valid. Still, it makes sense to end other usage.
Over a year of this nonsense! Any substantive change will require regulatory implementation! Where is the due process? The opportunity to comment? The 60 day lead period required by the APA? On and on.
One reads this nonsense and what comes to mind is a bunch of baseball players waiving their arms in the air!
David, you and some of your colleagues have sent letters to TD before and they are available to be read. Why not turn the gain up and send TD a constructive letter on why these vague emails are being sent by TD? Why doesn’t TD solicit public input through the statutory provided Federal Register…rumor has it “at least some of the public” may have some good ideas? Compliance with the Administrative Procedure Act…that seems to be a {pipe}dream! On and on! Talk about the process by TD! It is clear that if the problem is solely (at least that seems to be the thrust), public comments on the transfer of ownership, outright purchase, and/or gift box was not thought through before implementation in the past…by TD! Will the past repeat itself by TD with the upcoming “whatever?” Stay tuned is not a way for any government to operate!
Go for it David…at least some at TD will know that some out there are alive! Thanks for reading!
Maybe we should go for it ourselves, thousands of people in the streets is what its gonna take. There are no more independent agencies, nobody to read anything.
Hello, David…what says you to a joint letter with your colleagues?
We, your readers, know what we can do, and should be doing it. But you all have more skin in the game! Can we see your letter?
Thanks
While I have had limited contact with Treasury officials, I am sure I don’t have any influence over big-picture changes.
You have more influence than you think…give your/colleagues background, number of readers, etc. Take the kudos but only after your letter…otherwise, all of this is for….
You don’t need to permission to submit prior letters nor a newer one!
Also a reminder, there is no notice sent of any redemptions due to time limits and they do not sent out 1099s and you have to download them yourselves.
Speculation only here of course, but it makes me think of political goals to privatize government functions. Get the treasury out of the business of being a investment function, stop having gov employees running website and service functions, and move all of these bonds to the private market. That’d be a notable change for I Bonds of course. I wonder how much some of the major players would like to buy out this function and have everyone with a TreasuryDirect account become their customer.
Id be for that TD is an estate planning nightmare unless you have a trust.
John, that’s an interesting theory in line with the current governing philosophy, but these changes began with the last administration and a different governing philosophy, so my guess (and that’s all it is) is that privatization of TD is not the end game here. What is the end game? My guess is modernization , simplification, and perhaps some loophole-closing.
I agree on the timing observation Marc, though I’d note that privatization as an idea has been around longer than the previous two or even four presidents. That why I was trying to steer clear of phasing it as “this administration’s goals” for instance.
Also, the 2024 communications hinting at closing the “gift box” (which people may consider a loophole that was being abused) may have had started with different policy objectives than the more recent hints about of C of I.
The whole thing is rather more slow, cautious motion than the current administration is known for, too.
The last point is another reason to lean towards the motivation being modernization and simplification (and perhaps loophole closing) and not privatization. You’re right that it is not a new idea and I hadn’t thought of it until you mentioned it, but it is not one of the stated priorities that has been mentioned as far as I can tell: Regardless of what we may think of the particulars , this administration has a lot of irons in the fire — savings bonds don’t appear to be one of them. I think the folks at TD have been working on this upgrade for years and I’m sure the government shutdown doesn’t help with their timeframe. At this pace, we might be speculating like this a year from now.
I think you’re on to something, Another reader with website construction experience had the same idea – TD is going to outsource the management of all Treasury Direct security holding to a private firm. The modernization and security that comes with it would be welcome.
Be careful what you wish for. Outsourcing is not free, and the government will not be paying for it. Likely most Treasury Direct accounts are small, so an annual fee of 1% would not be out of the question.
Payable in bitcoin!
Chris, I wouldn’t expect outsourcing. I’d expect close down TD, sell all treasuries through the market.
Thank you!
Recommendation: If you use TD I-bills as a second tier of your emergency fund, then consider proactively submitting a notarized FS Form 5444 to avoid an unexpected hard lock.
Thanks for the article and the blog! Just wanted to share that I too had received the “hard lock” on my account shortly after I opened it to build out our emergency fund with I-bonds and T-bills. I was completely surprised when I put money into the C-of-I in preparation for a T-bill purchase, and my account got locked due to this transfer. Fortunately this happened early when the balance was low, and I was only out a couple months of interest for T-bills that were not scheduled to reinvest. If this had happened during a time when I needed to access the emergency funds, it would have been a difficult situation. I have since moved the T-bills to our brokerage account, and only use TD for I-bonds.
TD sure is a dinosaur. But I got locked out of my SS account for no reason, but TD chugs on.
is it wise to buy gift boxes for the I-bonds? And also where can you buy I-bonds besides TD? Thank you
You need a trusted partner for the gift box, and then it depends on your personal needs. (I did it this month.) TD is the only place to buy and store I Bonds.
Thanks for the reply. I was actually referring to the current administration/changes for the gifting of I-bonds. A lot of changes for TD and not 100% confident on putting our money into the TD portal currently.