Question about purchasing online CDs or iBonds

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Question about purchasing online CDs or iBonds

Postby crboone » Sat Feb 02, 2013 1:41 am

If I would like to purchase iBonds from Treasury Direct or a CD from an online bank, is it as simple as transferring some available funds directly from Vanguard to TD or the bank? Or would I need to fill out paperwork and/or transfer the money from my local bank?
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Re: Question about purchasing online CDs or iBonds

Postby jimkinny » Sat Feb 02, 2013 5:39 am

You can not buy I Bonds through Vanguard. You have to set up an account with Treasury Direct. TD will link this account with your checking account. You can buy Treasury notes/bonds and TIPS with this account as well as I Bonds. There is no cost to you.

To buy CDs via Vanguard, you will need to create a brokerage account with Vanguard. Then you will use that account to buy CDs. You will need to have the money in a MM account that Vanguard will link to the brokerage account. You can link the account that has the MM fund with your checking account.

You can use your Vanguard brokerage account to buy Treasury notes/bonds and TIPS. You may want to do this because Vanguard can be the custodian for an IRA. Treasury Direct will not serve as the custodian.

Jim
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Re: Question about purchasing online CDs or iBonds

Postby Rainier » Sat Feb 02, 2013 7:23 am

You can link treasury direct accounts with other accounts if they have a routing and account number (checking, savings, mm). I think it's and ach transfer.

They key is to link with an account you will have for awhile because it is hard to change once linked.
- Bill
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Re: Question about purchasing online CDs or iBonds

Postby sscritic » Sat Feb 02, 2013 9:06 am

crboone wrote: is it as simple as transferring some available funds directly from Vanguard to TD or the bank?

You can not buy I Bonds through Vanguard. You have to set up an account with Treasury Direct.

Not the question. The question is whether you can use your Vanguard MMF as your bank to transfer money to TD. I don't know the answer, but I think I know the question. Or did "not buy" mean "not transfer"?

A: transfer from Vanguard to checking, then transfer from checking to TD.
B: transfer from Vanguard to TD.

We know A works, but does B?
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Re: Question about purchasing online CDs or iBonds

Postby HueyLD » Sat Feb 02, 2013 9:54 am

crboone wrote:If I would like to purchase iBonds from Treasury Direct or a CD from an online bank, is it as simple as transferring some available funds directly from Vanguard to TD or the bank? Or would I need to fill out paperwork and/or transfer the money from my local bank?

Per this TD website ( http://www.treasurydirect.gov/indiv/hel ... ptions.htm ):

"ACH Credits:

You may receive incoming credit transactions if you schedule regular deductions with your employer or electronic deposits with your financial institution. All incoming credits result in the purchase of a Zero-Percent C of I within your account. You then schedule the purchase of securities in TreasuryDirect using your C of I as the source of funds.

To begin receiving credits in your account, give your payroll office or financial institution the following information for scheduling electronic deposits in your TreasuryDirect account:

1.TreasuryDirect's Routing Number 051736158;

2.Your ten-digit TreasuryDirect account number, without hyphens (Example: A123456789);

3.Amount of the deposit;

4.Frequency of the deposit (if applicable); and

5.Your TreasuryDirect account can be marked as a type 22 (checking) or 32 (savings). We will accept either type.

When you purchase a Zero-Percent C of I, it will not earn interest. It is only used to fund the purchase of other eligible securities."


Nothing is going to be simple. You need to have a TD account first before you can initiate the above activity. In addition, you need to establish a link at Vanguard between an eligible Vanguard fund and the TD account and such a process could take two weeks.

Also, every bank has its own "unique" fund transfer procedures and you have to ask each one of the banks you want to do business with.

Again, money transfers, especially transferring out of YOUR account should never be easy. That's why it takes a while to establish a link for sending money out of your account.
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Re: Question about purchasing online CDs or iBonds

Postby crboone » Sat Feb 02, 2013 1:32 pm

Yes, thank you. That answers my question. I was only wondering if I could transfer the money *from* my Vanguard MM directly to a Treasury Direct account, or to an online bank CD account -- to use Vanguard as the hub rather than my checking account. I realize it's easy enough to transfer the money back to my checking first, but if I can do so directly from Vanguard I may as well do that instead of moving the money around twice. My current habit is to transfer money from checking to Vanguard as soon as I'm able, and then if I can accumulate enough in the MM for something like iBonds or a CD I could go from there.

Also, I believe my checking account charges a fee for transfers initiated from within the account.

Thank you!!
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Re: Question about purchasing online CDs or iBonds

Postby tfb » Sat Feb 02, 2013 1:50 pm

crboone wrote:I was only wondering if I could transfer the money *from* my Vanguard MM directly to a Treasury Direct account, or to an online bank CD account -- to use Vanguard as the hub rather than my checking account.

The answer is no. Vanguard doesn't like outside entities debiting the account.
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Re: Question about purchasing online CDs or iBonds

Postby HueyLD » Sat Feb 02, 2013 1:54 pm

tfb wrote:
crboone wrote:I was only wondering if I could transfer the money *from* my Vanguard MM directly to a Treasury Direct account, or to an online bank CD account -- to use Vanguard as the hub rather than my checking account.

The answer is no. Vanguard doesn't like outside entities debiting the account.

Harry,

Vanguard will initiate both debit and credit ACH transactions from an eligible VG account (such as VMMXX). I've done both types of transactions many times. The only requirement is that the bank information is established ahead of time.
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Re: Question about purchasing online CDs or iBonds

Postby tfb » Sat Feb 02, 2013 2:21 pm

HueyLD wrote:
tfb wrote:
crboone wrote:I was only wondering if I could transfer the money *from* my Vanguard MM directly to a Treasury Direct account, or to an online bank CD account -- to use Vanguard as the hub rather than my checking account.

The answer is no. Vanguard doesn't like outside entities debiting the account.

Harry,

Vanguard will initiate both debit and credit ACH transactions from an eligible VG account (such as VMMXX). I've done both types of transactions many times. The only requirement is that the bank information is established ahead of time.

Correct. I said Vanguard doesn't like outside entities such as TreasuryDirect or another bank debiting the Vanguard account, not that Vanguard itself can't initiate them. Buying I Bonds at TreasuryDirect normally requires TD to debit the linked account, unless you go through the trouble of pushing the money to buy C of I. Not sure if TD would take the random deposits Vanguard does if you do go through C of I. At many banks, buying a CD online means you give an account for them to debit. Vanguard doesn't like it.
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Re: Question about purchasing online CDs or iBonds

Postby crboone » Sat Feb 02, 2013 3:02 pm

Oh okay. So it sounds like I do need to transfer back to my checking first, then. I appreciate the information.
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Re: Question about purchasing online CDs or iBonds

Postby sscritic » Sat Feb 02, 2013 3:14 pm

crboone wrote:Oh okay. So it sounds like I do need to transfer back to my checking first, then. I appreciate the information.

That's not how I read. I think the conclusion was that you could push money from Vanguard to TD so that you would have money at TD to buy I bonds. That doesn't mean you can redeem an I bond at TD and push the money back to Vanguard. TD will push the money back to your linked checking account, which you can also use for purchases. We are waiting for a final answer on the push from Vanguard question, but my guess is yes. tfb said no, but I think he later admitted that he was answering a different question.
Correct. I said Vanguard doesn't like outside entities such as TreasuryDirect or another bank debiting the Vanguard account, not that Vanguard itself can't initiate them. Buying I Bonds at TreasuryDirect normally requires TD to debit the linked account, unless you go through the trouble of pushing the money to buy C of I.

C of I: Zero-Percent Certificate of Indebtedness That's a holding cell at TD for money that hasn't been used to purchase anything yet.

What is a Zero-Percent Certificate of Indebtedness (Zero-Percent C of I or C of I)?
The Zero-Percent Certificate of Indebtedness (Zero-Percent C of I or 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.

Is there a limit to the amount of money I can hold in my Zero-Percent C of I?
No. There's no limit to how much money you can hold, but remember, your Zero-Percent C of I does not earn any interest.

How do I fund my Zero-Percent C of I?
You may instruct us to debit your bank account for a security purchase or you may establish a payroll deduction that will credit the Zero-Percent C of I in your account. You may also use your Zero-Percent C of I as a payment destination for savings bond redemptions and marketable security maturity and interest payments. Click Payroll Zero-Percent Certificate of Indebtedness for information about funding your Payroll C of I to purchase savings bonds through the Payroll Savings Plan.

Is there a limit to the amount of money I may request from my bank account to fund my Zero-Percent C of I?
Each transaction is limited to $1,000. You may, however, schedule multiple transactions each business day to fund your Zero-Percent C of I.

When are funds in the Zero-Percent C of I available to use for purchases?
Electronic deposits are generally available to use for purchases the business day the funds are received.

Can I redeem a security within my account and have the proceeds sent to my Zero-Percent C of I?
Yes. You may designate Zero-Percent C of I as the payment destination when you schedule a redemption.

Can I use both my Zero-Percent C of I and my bank account to purchase a security?
No. The source of funds selected for a security purchase can be either Zero-Percent C of I or a designated bank account, not both.

How do I buy securities with a Zero-Percent C of I?
You may buy interest-bearing securities with a Zero-Percent C of I by selecting it as a source of funds on Buy Direct.
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Re: Question about purchasing online CDs or iBonds

Postby crboone » Sun Feb 03, 2013 1:22 pm

sscritic wrote:That's not how I read. I think the conclusion was that you could push money from Vanguard to TD so that you would have money at TD to buy I bonds. That doesn't mean you can redeem an I bond at TD and push the money back to Vanguard. TD will push the money back to your linked checking account, which you can also use for purchases. We are waiting for a final answer on the push from Vanguard question, but my guess is yes. tfb said no, but I think he later admitted that he was answering a different question.


I see -- so I could transfer in "one" step on purchase (pushing from Vanguard) and simply transfer the redemption back to checking later. Thank you for the clarification.
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Re: Question about purchasing online CDs or iBonds

Postby sscritic » Sun Feb 03, 2013 1:28 pm

crboone wrote:I see -- so I could transfer in "one" step on purchase (pushing from Vanguard) and simply transfer the redemption back to checking later. Thank you for the clarification.

Maybe. "Waiting for a final answer."
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