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.

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