interest payments

[lawman]

It's my understanding that when I buy a C. D. from Schwab that it does not begin drawing interest until settlement date and that when I buy a Treasury it begins drawing interest the next day. Is that correct?

 

[Spock]

It's my understanding that when I buy a C. D. from Schwab that it does not begin drawing interest until settlement date and that when I buy a Treasury it begins drawing interest the next day. Is that correct?

I don't know about Schwab. My experience is none of them begin until the settlement date. The only distinction I've seen is that Treasuries on the secondary market seem to settle instantaneously, or atleast much faster than other issues.

 

[audreyh1]

Settlement date starts the clock and interest paid is determined from that date. The settlement date is well published for both CDs and treasuries as well as the payment dates for any coupon.

 

[Car-Guy]

^^^^^

Yep, that's the way it works. Look closely at what you are buying, it should be clearly documented.

Since you mentioned interest payments, one surprise I had recently was not getting interest payments "on time". Example: If you buy a one year CD that pays interest monthly, you "may not" receive your monthly interest payments on time as you might be expecting. I've had several interest payments post to my account several days late. Schwab tells me they won't post interest payments until they actually receive them from the issuing bank. Seems they have some sort of a grace period. Most have been paying on time but a few don't.

Too bad that doesn't work that way when I'm paying my bills.

 

[COcheesehead]

^^^^^

Yep, that's the way it works. Look closely at what you are buying, it should be clearly documented.

Since you mentioned interest payments, one surprise I had recently was not getting interest payments "on time". Example: If you buy a one year CD that pays interest monthly, you "may not" receive your monthly interest payments on time as you might be expecting. I've had several interest payments post to my account several days late. Schwab tells me they won't post interest payments until they actually receive them from the issuing bank. Seems they have some sort of a grace period. Most have been paying on time but a few don't.

Too bad that doesn't work that way when I'm paying my bills.

The posting date is weird. I always have received interest from bonds on the date due.

 

[Car-Guy]

The first time it happened I thought I had misread the payment date. But no, they get away with it. (Maybe it's unique to CD's)