Zero-Percent Certificate of Indebtedness ???

[Craig]

I'm either very myopic, or the U.S. Treasury does indeed have a sense of humor!* *:

What am I missing here?* Just signed up for their new Treasury Direct service, and I'm reading about their "C of I".* Shades of the late 19th century, when a stable dollar and less stable institutions reportedly led to depositors paying banks to hold their funds!

(my emphasis below)

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Message

Subject: Product Notification

Date: 11-18-2005

Dear Charles:

Check out the new addition to the TreasuryDirect family of products--the Zero-Percent Certificate of Indebtedness (Zero-Percent C of I or simply, C of I) security. The Zero-Percent 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 receive incoming credit transactions if you schedule regular payroll deductions with your employer or electronic deposits with your financial instituion. All incoming credits result in the automatic purchase of a Zero-Percent C of I within your account. For more information about the Zero-Percent C of I go to Manage Direct.

Thank you for investing through TreasuryDirect.


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Zero-Percent Certificate of Indebtedness

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 your 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 $1,000.00 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, daily incoming electronic deposits are applied toward your C of I immediately prior to issuing other securities in your account. So, if your C of I balance is insufficient to cover a security purchase you've scheduled, that's okay. 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. Note: Marketable securities are issued before savings bonds when C of I is selected as the Source of Funds.

Need one less worry about your security payments? If payments to your bank are returned to us for any reason, TreasuryDirect no longer stores them as undeliverable. Instead, we automatically deposit the returned funds in your C of I. Once there, you're free to purchase additional securities in your account or redeem all or part of it to your bank. It's your choice.

There's no limit to the amount you may hold in your C of I. [Chas ... gee, thanks! ]* 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. However, if you purchase a C of I by debiting your financial institution, the balance will be ineligible for redemption for five days. TreasuryDirect must initiate this hold, in the event your C of I purchase request is returned to us by your bank. Five business days following the receipt of the debit purchase, your funds are once again eligible for redemption.