Here’s a Jeopardy question.
A financial service charges no fee if you have less than $100,000 with them. If your account has $100,000 or more, they charge you $100 a year account maintenance fee. If you create multiple accounts, each with less than $100,000, then you will pay no fee for all your accounts.
The answer: What is Legacy Treasury Direct?
“Legacy Treasury Direct is a program in which investors buy Treasury bills, Treasury notes, and Treasury Inflation-Protected Securities (TIPS) directly from the U.S. Treasury, without a broker.
Established in 1986, Legacy Treasury Direct allows customers to conduct transactions through the Web, over an automated phone system, or by mail.
… …
If your account holds more than $100,000, we charge an annual fee of $100.”
Most financial services reward their larger accounts with freebies or lower fees because larger accounts are less costly to maintain and more profitable to the business. Not U.S. Department of Treasury. They punish their larger customers with a fee other customers don’t pay. If you break up your large account into several small ones, then you avoid the fee altogether. Don’t you love how our government runs its business?
This question came up on Bob Brinker’s Money Talk program on the radio two weekends ago. A woman caller said she got a notice from the Treasury Department about the fee being increased from $25 a year to $100 a year(!). She asked Brinker what to do. Bob Brinker totally blew the question. He said she would have to transfer the account to a broker and pay maintenance fees and commissions or buy CDs instead of Treasurys. Not true. There are several options for avoiding the fees and still investing in Treasurys if that’s what the woman wants.
- Stay with Legacy Treasury Direct but break up the account into two or more smaller accounts, each with less than $100k.
- Migrate to the new TreasuryDirect, although she will lose the ability to conduct business by phone or by mail because the new TreasuryDirect is online only.
- Transfer the Treasury securities to Fidelity or Schwab, neither of which charges annual maintenance fees or commissions for purchasing Treasury securities online at auction or on the secondary market.
You can’t trust what’s being said on the radio or TV, even if the person sounds like an expert.
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