Bring them to a teller at your local bank, and they should be able to deposit the proceeds into your bank account with no problem. If you don't have an account with the bank, I believe they can limit the amount of bonds you can cash, which I think is $1,500. Yes, there is a three month interest penalty for cashing the bonds from six months to five years from their issue month/date (printed on the bond). There is a calculator on www.savingsbonds.gov, which you put in the face value of the bond and the issue date, and it will tell you what they're worth, including computing any interest penalty.