Zero-Percent Certificate Of Indebtedness
Treasury is counting on your naïveté to balance some budget deficits. If you used TreasuryDirect, you will notice besides the decade-old Series EE Savings Bond and Series I Savings Bond, a new product called Zero-Percent Certificate Of Indebtedness (C of I) is available.
Oh, Zero-Percent Certificate Of Indebtedness. What a fancy name!
Here is what the deal really is, according to the help file from TreasuryDirect:
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 traditional Treasury security purchases.
You may build the amount held in a C of I a number of ways:
- Follow the Funding Options directions in Manage Direct to schedule regular payroll deductions with your employer or electronic deposits with your financial institution.
- Select "Zero-Percent C of I" as the Product Type on Buy Direct to withdraw funds from a designated bank account (maximum of $25.00 per transaction).
- Redeem securities in your TreasuryDirect account to "Zero-Percent C of I" instead of a traditional bank account.
Once you establish regular electronic deposits toward the purchase of your C of I, you can use it to schedule security purchases up to five years into the future. After you've accumulated enough for the security you wish to purchase, simply select "Zero-Percent C of I" as a source of funds in Buy Direct, and the security is purchased. For your convenience, should your C of I balance be insufficient to cover a scheduled security purchase, money being deposited toward the purchase of your C of I the next business day will be used to issue your security.
There's no limit to the amount you may hold in your C of I. All purchase and redemption activity is conveniently recorded in your C of I History.
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.
In other words, you can purchase C of I for the deemed flexibility to buy EE Savings Bond or I Savings Bond at any time, but before you do that, Treasury is not going to give you a dime of interest for your C of I holdings.
Mind you that you can always link your checking account to TreasuryDirect and schedule a number of future purchases at the same site. Even a no-interest checking account will allow you to write some checks. What's the value of C of I?
Is it an indication that balance deficit is a looming problem? I cannot judge from my expertise, but I do firmly believe this Zero-Percent Certificate Of Indebtedness has no value at all for a rational consumer.
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