How does the money from the interest on my bond get to me?

By Investopedia Staff AAA
A:

When you buy a regular coupon bond, you are entitled to a coupon, which is typically paid at regular intervals, and the face value of the bond (the amount you initially invested), which is typically paid upon maturity. Most coupons are paid on a semi-annual basis, but some may be paid monthly or annually.

Like stocks, bonds can be in street or bearer form, and the payment of your coupon depends on how your bond is registered. If the bond is registered in street form, the company that issued the bond will transfer the coupon payment to your broker, who will then shift the coupon payment to your account. If the bond is registered in bearer form, there are two possible ways for you to receive your money: If you are the owner of record, as documented in the bond issuer's records, the issuer will send you the coupon payments directly. If the bond has no owner of record and is freely transferable, then you will have to clip the coupon attached to the bond and send it to the bond issuer to receive the payment.

If you don't want to be receiving checks in the mail, there are two things you can do. First, you can transfer the bond to your brokerage account and have your brokerage deal with the coupon payments. When you transfer the bond, it will be taken out of bearer form, and the payments will be made in the way they are for street form bonds. Second, some companies that issue many different bonds provide the direct deposit of coupons into bank accounts. You can try to contact the company that issued your bond and find out if it provides this service.

To learn more about bonds, check out our Bond Basics and Advanced Bond Concepts.

RELATED FAQS

  1. What is the difference between EE and I Bonds?

    Read about the similarities and differences between the EE and I savings bond programs created by the U.S. Department of ...
  2. What is the Education Savings Bond Program?

    Learn about the education savings bond program and find out if you are eligible to use your savings bonds for payments toward ...
  3. Why should I keep records on my tax-exempt bond transactions?

    Keep your purchase records on all investments, including tax-exempt bonds. Though the interest is tax-free, you may owe taxes ...
  4. How long will it take for a bond to reach its face value?

    Learn when different savings bonds reach face value, and determine the best time to cash them in to get the highest return ...
RELATED TERMS
  1. Class 3-6 Bonds

    Several classes of noninvestment grade bonds held by an insurance ...
  2. Impact investing

  3. Promotional CD rate (Bonus CD rate)

    A limited-time offer of a higher rate of return on a certificate ...
  4. Direct Bidder

    An entity that purchases Treasury securities at auction for a ...
  5. Indirect Bidder

    An entity that purchases Treasury securities at auction through ...
  6. Bid Wanted

    An announcement by an investor who holds a security that he or ...
Related Articles
  1. How Does Janus's Fund Lineup Look Now?
    Investing Basics

    How Does Janus's Fund Lineup Look Now?

  2. Thank You, Pimco: BlackRock Drops Bond-Fund ...
    Investing Basics

    Thank You, Pimco: BlackRock Drops Bond-Fund ...

  3. Preferred Stocks versus Bonds: How to ...
    Trading Strategies

    Preferred Stocks versus Bonds: How to ...

  4. Why BOND Still Might Be In A Class Of ...
    Investing

    Why BOND Still Might Be In A Class Of ...

  5. Keeping More Of Your ETF Capital Gains ...
    Investing

    Keeping More Of Your ETF Capital Gains ...

Trading Center