MilesBuzz! - Savings Bond Min Holding Period Now 1 Year

U.S. Extends Minimum Holding Time for Savings Bonds to 1 Year

Washington, Jan. 15 (Bloomberg) -- The U.S. Treasury is
extending the minimum holding period for U.S. Savings Bonds to a
year from six months.
``The new holding period will prevent purchasers from taking
advantage of the current spread between savings bond returns and
historically low short-term interest rates by cashing in bonds
after six months,'' the Treasury said in a statement. ``Savings
Bonds are designed to be a long-term savings vehicle.''
The current semi-annual rate on a standard Series EE savings
bond is 3.25 percent, and the rate on inflation-indexed Series I
bonds is 4.08 percent. Six-month Treasury bills are trading at
about 1.2 percent.
``We're trying to make sure this doesn't become a problem,''
said Stephen Meyerhardt at the Bureau of Public Debt, which
oversees the Savings Bond program. ``The potential is there.''
The new holding period will take effect Feb. 1.

I suppose this makes sense. I just becamse aware that this was a good way to earn miles. Unfortunately, I don't think I'll be able to buy a substantial amount before they change the holding period.

Out of curiousity, how many of you have successfully purchased bonds to accrue miles? Any tips for a beginner? And when you sell them, do you just sell them back to the government through the site?

I assume all bonds purchased through Jan 2003 will be grand-fathered under the 6-month holding period. But, making assumptions with regards to the federal government can be dangerous.

I just purcahsed $20K worth of bonds in December to take advantage of the Delta double miles promotion. I was counting on those funds being available in June.

From http://www.savingsbonds.gov/sav/sbeeiholding.htm --
<font face="Verdana, Arial, Helvetica, sans-serif" size="2">The minimum holding period for Series EE and Series I bonds has been extended from 6 months to 12 months, effective February 1, 2003. Bonds issued January 2003 and earlier will continue to have a 6-month minimum holding period.

This means if you purchase a Series EE or I bond issued February 2003 or later, you must hold on to the bond for 12 months before you can cash it or exchange it for a Series HH bond. Bonds issued January 2003 or earlier can still be cashed or exchanged when they are 6 months old.</font>

Are bonds purchased this month January or February? I know this sounds a little dumb, as it's January, but I'm a tad confused.

Thanks.

Manku

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by MeLike2Travel:
And when you sell them, do you just sell them back to the government through the site?</font>

You can take them to a bank.

http://www.flyertalk.com/forum/frown.gif It was great while it lasted... Just how many times I have said that in various occasions in the past year...

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by manku:
Are bonds purchased this month January or February? </font>

The issue date is the date that your credit card company forks over the money to Uncle Sam. In my experience, this takes 1 to 2 days from when your place the order online.

So, I would expect any order placed on Jan 27 or 28 to be safely assured of a Jan issue date.

(Actually, all this does is to increase the amount of $$$ that you have tied up. The max yearly amount that you invest is going to be the same, whether you hold the bonds for 6 months, 12 months, or leventy-seven years.)

Thanks for the heads up, highgamma. Just bought two big ones.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by MeLike2Travel:


Out of curiousity, how many of you have successfully purchased bonds to accrue miles? Any tips for a beginner? And when you sell them, do you just sell them back to the government through the site?</font>

There was a frenzy of purchases made during the double/triple miles bonuses last year. There should be some discussion in several threads that talked about all of the pros/cons, etc. I purchased $20k in bonds last year and got 60k DL points. Nice http://www.flyertalk.com/forum/smile.gif

From their website:

The minimum holding period for Series EE and Series I bonds has been extended from 6 months to 12 months, effective February 1, 2003. Bonds issued January 2003 and earlier will continue to have a 6-month minimum holding period.

This means if you purchase a Series EE or I bond issued February 2003 or later, you must hold on to the bond for 12 months before you can cash it or exchange it for a Series HH bond. Bonds issued January 2003 or earlier can still be cashed or exchanged when they are 6 months old.

Do banks charge any kind of fee when you cash them in?

Well, it was great while it lasted. I guess I'm going to have to settle for $1=1 mile in order to beat the deadline. Last chance to churn $45k per person 2x in one year.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by MeLike2Travel:
Do banks charge any kind of fee when you cash them in?</font>

No but you will owe taxes on the interest.

So has the interest "penalty" on bonds cashed prior to 5 years changed?

I couldn't find anything on the Savings Bond Direct (http://www.publicdebt.treas.gov/ols/olshome.htm) website which discusses if there is any change to the interest penalty from the current 3 months.

What was the interest penalty? I guess what I'm getting at is, was this a good deal for both miles and finances? Or just miles?

What is everyone's opinion of doing it now with the holding period change? It seems to me that if it was a good deal before that it's a good deal now. I mean, as long as you have the money, and don't mind tying it up for a year.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by MeLike2Travel:
What was the interest penalty? I guess what I'm getting at is, was this a good deal for both miles and finances? Or just miles?

What is everyone's opinion of doing it now with the holding period change? It seems to me that if it was a good deal before that it's a good deal now. I mean, as long as you have the money, and don't mind tying it up for a year.</font>

If you are planning on cashing them in after 6 months, they are not a great deal from a financial standpoint - but not too bad if done right. If you don't need the cash, then you should hold them as long as they give you better interest than something else. A 5 year CD might get a little more interest, but there is a greater penalty for early withdrawal. Also - there are State tax free, which is an added bonus. And the miles are a great bonus.

Best deal is to transfer them to a credit card offering 0% interest for 12 months, or something like that. Then it is all a bonus.

Thanks for the news! God I love FT!

If you purchase them with your Amex you can get the MR points then convert them to CO at 125% or 1 MR = 1.25 OP miles.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by MeLike2Travel:
What was the interest penalty? I guess what I'm getting at is, was this a good deal for both miles and finances? Or just miles?

What is everyone's opinion of doing it now with the holding period change? It seems to me that if it was a good deal before that it's a good deal now. I mean, as long as you have the money, and don't mind tying it up for a year.</font>

Welcome to FT! If you do a search in MilesBuzz on "savings bonds" you will find numerous threads discussing the pros and cons and everything inbetween regarding buying savings bonds with credit cards for the miles.

While you may not get rich on the interest rates paid by savings bonds (4.08% for EE, 3.25% for I), at least they are paying more than a money market account.

IMHO, it is best to buy bonds only with $$ which would otherwise just be sitting in another low yield account such as a money market or savings account. If you compare the total yield of buying bonds with a miles earning credit card (interest earned, minus any interest penalty, plus the "value" of the FF miles you receive) to yield of a money market or savings account, then they are not too shabby of an investment.

But, if you compare the total yield of buying bonds with a credit card to the yield you would receive from a long term CD or (historically, but generally not recently) the stock market, or some other higher yielding investment taking into account that US Savings bonds are a pretty low risk investment, then...well it is up to you to decide if "was this a good deal for both miles and finances? Or just miles?"

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by SteveHOU:
If you purchase them with your Amex you can get the MR points then convert them to CO at 125% or 1 MR = 1.25 OP miles.</font>

If you use a Starwood AMEX, you get 1.25% conversion* for a number of FF programs when you transfer Starwood points into FF miles.

*Must convert Starwood points to FF miles in 20k Starwood point increments to receive the 25% bonus.

Outch !
They made "yield management" more difficult. Notice that they still reset the interest rate after 6 month, so bondholder now will be locked into unknown rate for the second 6 month of one year holding period.
Someone smart at the Treasury figured out that under the current administration the deficit will grow, interest rates would have to follow.
So, most likely, it would've been profitable to cash in bonds after 6 month and to buy new ones with a higher interest. By making it 1 year, the'd probably save couple of billions - not that it will make a dent in a deficit.

In terms of miles - yes, they made it harder, but really - how much of us flipped 90K annualy? Not me, it requres a real dedication http://www.flyertalk.com/forum/biggrin.gif

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by VolleyballFerd:
A 5 year CD might get a little more interest, but there is a greater penalty for early withdrawal. Also - there are State tax free, which is an added bonus. And the miles are a great bonus.


</font>

You also have the ability to defer paying taxes on the interes on savings bonds until they are cashed in.

Wanted of the complaints by AMEX had any influence on this decision. They had repeatedly been threatening to post bond purchases as cash advances and not as purchase transactions, because they felt you could roll over the money too easily.

Jeff

FYI - Delta Amex

Earn Triple Miles on Delta Purchases of $250 or More January 15 through February 15, 2003

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by SteveHOU:
FYI - Delta Amex

Earn Triple Miles on Delta Purchases of $250 or More January 15 through February 15, 2003

</font>
don't toy with us, please post a link to this offer. thanks

Sorrrry....It was an email anouncement. Here ya' go

http://www.delta.com/skymiles/sm_offers/amexearntriple/index.jsp

I also want to apologize for getting everyone's hopes up if the following is correct. The way I read it now after accessing the link above, it states "Delta" purchases. I guess that nixes bond purchases. http://www.flyertalk.com/forum/frown.gif

[This message has been edited by SteveHOU (edited 01-16-2003).]

whoops

[This message has been edited by emaij (edited 01-16-2003).]

Not exactly the end of the world. I buy $20,000 of savings bonds a year for the purpose of earning mileage. I already did some purchases this year, but this news has prompted me to make all $20,000 of purchases this month. In February and March I can redeem $15,000 worth of bonds, if I desire.
My plan now, once I load up with my $20,000 quota early, is to keep those bonds for the rest of the year. Next January I'll buy and redeem $10,000, then in July I'll buy and redeem another $10,000. Keep doing this every six months, and I'll always have at least $10,000 of bonds I can redeem within six months.

burgerwars, if the holding period hasn't changed, you could/would have bought more than $20000 worth of bonds every January and July rather than $10000.

Just a little financial analysis: Assuming someone has $10000 to set aside for this bond-mileage scheme, and he/she is interested in maximizing my return by flipping the bond once it is redeemable...

Old: 6 month holding period.
i) Buy $10000 bonds in Jan and will pay CC bill in March. Redeem bonds in July to pay next CC bill.
ii) Buy $10100 bonds in May and will pay CC bill using proceed from step (i). Will redeem bonds in November.
iii) Continue flipping for 5 years.
(hint: If you time it well with the credit card billing cycle, your holding time is actually less than 4 months.)

New: 12 month holding period.
i) Buy $10000 bonds in Jan and will pay CC bill in March. Redeem bonds in next January to pay next CC bill.
ii) Buy $10300 bonds in November and will pay CC bill using proceed from step (i). Will redeem bonds in the following November.
iii) Continue flipping for 5 years.
(hint: If you time it well with the credit card billing cycle, your holding time will be just under 10 months.)

Under the old scenario, you will accumulate a total of 160500 miles (assuming no 2x/3x promotion) and $1605 in interest (assuming 4% rate) less penalty (already accounted for) over the 5-year span. I don't know what your valuation of mile is, but I use $0.013 for a mile. The annualized return is 6.49%. If you want to see the return based on your valuation or 2x/3x mile promotion, modify the following equation.

annual return = exp(ln(1+(1605+160500*0.013)/10000)/5) - 1

With 12-month holding period, you would have accumulated a total of 64500 miles and $1935 in interest less penalty over the same period. The annualized return would be 5.02%.

annual return = exp(ln(1+(1935+64500*0.013)/10000)/5) - 1

Somebody in the fed finally figured out the math...

[This message has been edited by FT wannabe (edited 01-16-2003).]

I just learned tonight that the Treasury is actually de-emphasizing the entire savings bond program (i.e., no longer promoting it). Apparently, the Fed pays much lower rates on other debt instruments to much larger institutional investors. No doubt the change in the holding period is another attempt to make the program less attractive.

What was a great deal has become average at best. Personally, I will only buy bonds if a mileage credit card runs a double miles promotion. The days of contributing/flipping monthly are over.

I KNOW that entities out there just hate it when we figure out how to actually get a mile-earning return on their gigs! Anyway, I have found the entire article on WSJ.com and here is the text of it all:

+++ Treasury Tightens Bond Rules, Curbing Savings-Bond Flipping

By RON LIEBER Staff Reporter of THE WALL STREET JOURNAL

It's about to get harder to pump up the return on a savings bond.

The U.S. Treasury Department doubled the amount of time that investors must hang on to their savings bonds to 12 months from six months. The move is designed to keep professional investors from piling into savings bonds instead of vehicles like short-term Treasury bills that throw off much less interest.

The practical effect of the move for individuals, however, will be to thwart a new breed of bond-flippers, who buy bonds with credit cards that earn frequent-flier miles or cash refunds, sell them six months later, then buy them again to earn more rewards. "To be honest, this will probably hurt some customers who are more short-term in their investment needs," says a spokeswoman for the department.

The new rules take effect for bonds dated Feb. 1 or later, so there are still about two weeks left for people who want to get in on the deal.

Bond-flipping is a new strategy, since it wasn't even possible to buy bonds with a credit card until 1999, when they went on sale at www.savingsbonds.gov. (http://www.savingsbonds.gov.) When the stock market hit the skids and interest rates plummeted, the rates on savings bonds became increasingly attractive. Eventually, people figured out that they could earn even more by buying bonds with their credit cards, redeeming them in six months, then buying some more, earning more rewards. This was true even though the government charges a penalty of three months of earned interest for redeeming bonds within five years of purchase.

For instance, the Series EE savings bond currently earns a 3.25% annual interest rate, while the I bond, which offers an inflation adjustment every six months plus a fixed return, earns 4.08%. Cash-back credit cards like the ones offered by Discover and American Express offer rebates of 1% or more. The rewards double for people who "flip" the bonds and buy more every six months.

The exact return will depend on which bonds you buy, what card you use, and exactly when you buy and sell your bonds. Still, it's almost certain to be better than the 2.50% annual return on a money-market account from GMAC Bank, the highest yield in the nation recently, according to Bankrate.com.

Finally, even if you have a sky-high credit limit, the Treasury already has its own caps in place. It allows individuals to buy only $15,000 in EE bonds during a calendar year and $30,000 in I bonds.

Write to Ron Lieber at ron.lieber@wsj.com

Updated January 16, 2003



------------------
If speed is not your thing, distance may as well be. Enjoy and embrace it all!

That's unfortunate FT Wannabe... but thanks for doing the math.

Just like everything else, it's getting tighter and more expensive. http://www.flyertalk.com/forum/frown.gif

Bad deal...are you all nutz?

Money market rates are, at best, 2.5%. Most are well below 2%. Plus you pay tax every year.

With the EE/I Bonds we get 3.25/4.00 interest (free of state tax, BTW). There is ZERO credit risk and ZERO principal risk, even better than the bank (which, in theory, can go belly up. remember, money market funds are not FDIC insured).

So we get virtually double the interest plus miles/points/cashback.

Sounds pretty crappy to me : http://www.flyertalk.com/forum/thumbsup.gif)

Manku

PS. It actually would be better to have just kept the old bonds (say issued a few years ago) at 5% plus. The higher interest rate plus lack of penalty (not to mention work involved with flipping) makes it much more desirable. Of course, you need the liquidity to do this.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by MeLike2Travel:
Do banks charge any kind of fee when you cash them in?</font>

No charge.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by toddpate:
I assume all bonds purchased through Jan 2003 will be grand-fathered under the 6-month holding period. But, making assumptions with regards to the federal government can be dangerous.

I just purcahsed $20K worth of bonds in December to take advantage of the Delta double miles promotion. I was counting on those funds being available in June.</font>

Your funds will be available in June. This change is effective for bonds purchased on/after Feb 1.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by NYBanker:
Your funds will be available in June. This change is effective for bonds purchased on/after Feb 1.</font>

Jan bonds available on July 1.Avail. on day 1 of 7th month

I for one am not the least bit bothered about the one-year instead of six-month period of illiquidity. I don't flip savings bonds anyway!

Previous posters have already pointed out the many advantages of US savings bonds over money market funds. (Higher interest rate, no state income taxes, deferred federal income taxes, greater safety, and....last but not least....free miles/points!!!) Bank CD's are good too, but usually don't offer free miles/points (though a few years back I managed to get some through the OLD Clickrewards & Capital One Bank) or any tax benefits.

Yes, some of us idiots still have a lot in money market funds and are chomping at the bit to move more of that money into savings bonds. I'm just waiting till January 22 (after close of my January credit card cycle) to start on another savings bond buying binge.


Kathy http://www.flyertalk.com/forum/smile.gif

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by KathyWdrf:
I for one am not the least bit bothered about the one-year instead of six-month period of illiquidity. I don't flip savings bonds anyway!

Previous posters have already pointed out the many advantages of US savings bonds over money market funds. (Higher interest rate, no state income taxes, deferred federal income taxes, greater safety, and....last but not least....free miles/points!!!) Bank CD's are good too, but usually don't offer free miles/points (though a few years back I managed to get some through the OLD Clickrewards & Capital One Bank) or any tax benefits.

Yes, some of us idiots still have a lot in money market funds and are chomping at the bit to move more of that money into savings bonds. I'm just waiting till January 22 (after close of my January credit card cycle) to start on another savings bond buying binge.


Kathy http://www.flyertalk.com/forum/smile.gif</font>

Ditto http://www.flyertalk.com/forum/smile.gif

Still, no professional money manager with large customer or institutional accounts would advocate bond flipping. The annual purchase limits for bonds (EE$15,000, I$30,000) are just too small for many customers to bother (usually more well-off clients). Plus, a broker won't get commission for buying savings bonds for someone.
That said, I'll be straddling my bond purchases where one set of bonds I'll always be able to negotiate within six months. With having to hold the bonds for a year, rather than six months, my yield should be greater, in that I'll be paying a three month penalty on one year held bonds, instead of losing half my interest on a six held month bond. One thing I wish is the Treasury let us deposit all savings bonds (EE and I) in a TreasuryDirect account. I have dozens of lower denomination bonds in my safe deposit box. In an account would be more convenient.
But I don't think this new longer holding period is part of a trend, where the next step may be the Treasury stop selling savings bonds because they can borrow elsewhere for cheaper. They still have a purpose, for stuff like gift giving, enabling people to invest in small quantities, letting people feel patriotic for investing in America, etc. One hardly feels patriotic having money in a U.S. Govt. money market fund at a brokerage. People hold on to these bonds for decades, and billions just never get redeemed. Market conditions may change in the future, where savings bonds become a traditional lousy investment again. So they'll be around.



[This message has been edited by burgerwars (edited 01-17-2003).]

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by burgerwars:
One thing I wish is the Treasury let us deposit all savings bonds (EE and I) in a TreasuryDirect account. I have dozens of lower denomination bonds in my safe deposit box. In an account would be more convenient.</font>
The Treasury Direct account would be more convenient, but you wouldn't get miles.

I started setting up an account and realized that purchases are deducted from a bank account. So if you want to charge purchases, you have to buy bonds through the regular Savings Bonds Direct. (http://www.savingsbond.gov/ols/olshome.htm)

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Family flyer:
Originally posted by burgerwars:
One thing I wish is the Treasury let us deposit all savings bonds (EE and I) in a TreasuryDirect account. I have dozens of lower denomination bonds in my safe deposit box. In an account would be more convenient.</font>
The Treasury Direct account would be more convenient, but you wouldn't get miles.

I started setting up an account and realized that purchases are deducted from a bank account. So if you want to charge purchases, you have to buy bonds through the regular Savings Bonds Direct. (http://www.savingsbond.gov/ols/olshome.htm)



My plan would be, if I could to it with all savings bonds, is buy the bonds through the website with the credit card, and once they arrive in the mail, deposit them into a Treasury Direct account. That way I would get miles, not buy them through electronic funds transfer, but could sell them that way.

While I don't bond flip, I did buy a just buy more bonds before the Jan 31 dealine. For me it's an issue of liquidity, I've always staggered my investments so that the majority of my money would be liquid, either in my bank or in "seasoned" bonds. While I have little intention of redeeming the bonds unless rates rise dramatically, I do want to count the bonds as part of my "liquid" portfolio. I always try to keep a certain amount of money "liquid" so that the rest can be in longer-term investments.

I'm just glad I can still use my credit card....

I flip bonds - I'm not rich and only travel a few times a years so this was a great way for me to get miles(85,000 last year = $5,000 a month x 12 + 25,000 total in bonus months) and earn more then I would have in a 6 month CD.

Does anyway have any other ideas what can be purchased and turned back in a short time??
Savings Bonds cost me NOTHING - I'd payoff the newly purchased bonds with the bonds I was redeeming from the previous 6 months - Now this really slows me down only having $25,000 to rotate - Now it's going to have to be $2500 a month instead of $5,000 -this is a bummer.

I have bought quite a lot of bonds and haven´t cashed any in yet. Might have to as we have a fire in our kitchen 3 days before I left for Spain. Anyway, Í like to sort of forget about it and pretend i don´t have the money any more. That is about to end. Anyway not everyone is flipping bonds, and I hope the govt. realizes this. I started when rates were really high, so I am getting a pretty good yield on those first I bonds. but I will probably make sure i buy more just as soon as i return home, as those might need to be cashed in???

------------------
Ms.DtG

Has anyone used their Hilton HH Amex to purchase bonds? If so, what was the point ratio $1 = 1 HH or $1 = 3 HH?

I haven't used my HH Amex to buy bonds, yet, but as I understand it, all purchases from this card get 3 pts. per dollar, except for Hilton hotel purchases, where $1=5 HH pts. I don't see how they could justify giving less than 3 pts. per dollar only for bond purchases.

Sep,

Thanks. I just had someone on the Hilton board confirm that it is in fact 3 HH / $1. I called Amex and the only downside is that you can get your credit limit raised based on normal credit ranking. This means you can't do a one time override like the standard Amex program will do. In October, before the rate change, I purchased the max. per SS in EE , $15k for 4 numbers, or $60k. No hassel with Amex. It looks like I'll split my purchase between the two and convert the MR points to CO at 1.25%.

I guess we'll see how many serious bond flippers we have by how many of us will be in the banks cashing bonds 7/1/03.
I cashed several bonds in on 1/2/03 that had been held for 8 months to 1.5 years to put my interest into 2003 and then needed to pay off some 0% cards this Jan. When I brought the bonds into the bank they wanted to bring me in the office to talk about some 'great investment options' for my funds... I said the money wouldn't be there long, I had to pay the credit cards http://www.flyertalk.com/forum/smile.gif

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by ddavis:
I guess we'll see how many serious bond flippers we have by how many of us will be in the banks cashing bonds 7/1/03.
I cashed several bonds in on 1/2/03 that had been held for 8 months to 1.5 years to put my interest into 2003 and then needed to pay off some 0% cards this Jan. When I brought the bonds into the bank they wanted to bring me in the office to talk about some 'great investment options' for my funds... I said the money wouldn't be there long, I had to pay the credit cards http://www.flyertalk.com/forum/smile.gif</font>

My solution to bank salespeople is when I deposit the bonds back into my checking account, I do it at one of Wells Fargo Bank's supermarket branches. No back office, just a couple of teller windows. There's usually nobody there to try and sell you anything, but can assist in opening up a bank account.

But my plan (which I'm currently doing), is I'm loading up on $15,000 this month of EE Bonds and $5,000 in I bonds (I've cashed some other EE bonds this month and I'll do the same next month). In July, I'll cash the I bonds and buy new I Bonds. Since I can't really buy any more EE bonds as an individual this year, I'll hang onto them until next January. Then I'll decide whether to sell and buy all of them, or part of them, depending on interest rates then.

Can someone confirm this scenario--Buy the maximum this month, sell in July, and buy more? I seem to have read about someone doing this in the past. Can anyone confirm whether this can be done still? Thanks.

I think the GM Card 5% is the way to buy bonds. 5% is a great return today. With the Feb. 1 change....it is time to buy all for your 2003 bonds....

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by ChaseTheMiles:
Can someone confirm this scenario--Buy the maximum this month, sell in July, and buy more? I seem to have read about someone doing this in the past. Can anyone confirm whether this can be done still? Thanks.</font>

You are correct. Bonds purchased and sold in the same year do not count towards the yearly limit on bond purchases.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">c) Bonds excluded from computation. In computing the purchases for
each person, the following are excluded:
...(3) Bonds that are purchased and redeemed within the same calendar
year. (http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=31&PART=360&SECTION=11&YEAR=1999&TYPE=TEXT)</font>




[This message has been edited by onedog (edited 01-21-2003).]

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by ChaseTheMiles:
Can someone confirm this scenario--Buy the maximum this month, sell in July, and buy more? I seem to have read about someone doing this in the past. Can anyone confirm whether this can be done still? Thanks.</font>

I don't have the pertinent IRS language at my fingertips but yes, this scenario would seem to work. Others have posted the applicable rule under one of the many threads on savings bonds and my CPA checked off on it. In 2002 I purchased the limit ($45k) in I/EE bonds twice each for my wife and myself by selling the first set prior to buying the second set. Won't be able to do that again after the 12 month hold goes into effect. Hopefully there will be better returns available again soon in the stock market.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by zz7777zz:
I think the GM Card 5% is the way to buy bonds. 5% is a great return today. With the Feb. 1 change....it is time to buy all for your 2003 bonds....</font>

Only good if you plan to purchase a GM car. If that is the case, then it does sound like a good deal - and it has a 0% intro rate.

[QUOTE]Originally posted by onedog:

c) Bonds excluded from computation. In computing the purchases for
each person, the following are excluded:
...(3) Bonds that are purchased and redeemed within the same calendar
year.

Can you provide a link to this information? I have an email from the Treasury Dept customer service that says just the opposite. And the only reference to purchase limits I can find on the bond site is http://www.savingsbonds.gov/mar/marsbombuy.htm#purchaseoptions

Thanks.

------------------
Free Frequent Flyer Miles (http://home.earthlink.net/~pgary/MilesFrame.html)

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by pgary:
Can you provide a link to this information?</font>

Regulation 31CFR360.11(c)(3) in the Code of Federal Regulations:
http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=31&PART=360&SECT ION=11&YEAR=2002&TYPE=TEXT (http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=31&PART=360&SECTION=11&YEAR=2002&TYPE=TEXT)


Edited to add: note that this becomes irrelevant 10 days from now. It will no longer be permissible to buy and redeem in the same calendar year.


--ss


[This message has been edited by ss (edited 01-22-2003).]

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by ss:
[B] Regulation 31CFR360.11(c)(3) in the Code of Federal Regulations:
http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=31&PART=360&SECT ION=11&YEAR=2002&TYPE=TEXT (http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=31&PART=360&SECTION=11&YEAR=2002&TYPE=TEXT)

Edited to add: note that this becomes irrelevant 10 days from now. It will no longer be permissible to buy and redeem in the same calendar year.
--ss
B]</font>

Actually, it will always be mathematically possible, even if the holding period is raised to 5 years. If one has a zillion dollars of bonds held for various long periods over a year, he or she can still redeem them (even all zillion of them) at any time, and use it to offset purchases, if the regulation that is posted I have interpreted correctly.

Burgerwars - but starting with bonds bought in February you can't redeem bonds bought in the current year and use the regulation to buy another bond issued in that same year.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by married 2 miles:
Burgerwars - but starting with bonds bought in February you can't redeem bonds bought in the current year and use the regulation to buy another bond issued in that same year.</font>

Now that I re-read it, I think you're right. But there may still be a rare case when the Government waives the holding period for people who need to redeem bonds early because of a major catastrophe. For example, they did allow this for people affected by 9/11.

Well I've been a bond flipper - recirculating $15,000 three times a year (that's all I could afford to tie up) yielding 56,250 miles annually (I used the SPG AMEX so $1 = 1.25 miles). But now I'm thinking to just leave it in my BankDirect account which would "earn" 100 miles monthly per $1,000 balance. Is there anyone out there with BankDirect who's figured out the pro's and con's of bonds vs. BankDirect?

Edited when realized I wasn't in the AA Forum - my post refers to AA miles and AA's partner BankDirect.

[This message has been edited by sk3 (edited 01-23-2003).]

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by sk3:
Well I've been a bond flipper - recirculating $15,000 three times a year (that's all I could afford to tie up) yielding 56,250 miles annually (I used the SPG AMEX so $1 = 1.25 miles). But now I'm thinking to just leave it in my BankDirect account which would "earn" 100 miles monthly per $1,000 balance. Is there anyone out there with BankDirect who's figured out the pro's and con's of bonds vs. BankDirect?

Edited when realized I wasn't in the AA Forum - my post refers to AA miles and AA's partner BankDirect.

[This message has been edited by sk3 (edited 01-23-2003).]</font>

Savings bonds have much better return, though the money is tied up for 10 months (assuming bought at end of month with credit card float).

Savings bonds - in 10 months, 1.25 miles (not taxed) and .03 (taxable at fed level but not at state level). Annually - 1.5 miles per dollar plus 3.6% (taxable at fed).

Annually, bankdirect is 1.2 miles per dollar plus 0.5% (taxable at fed and state).

Thanks PG! (And thanks for referring me to BankDirect last year and being the first one that told me about Savings Bonds in the first place!) http://www.flyertalk.com/forum/smile.gif

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by ss:
Regulation 31CFR360.11(c)(3) in the Code of Federal Regulations:
http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=31&PART=360&SECT ION=11&YEAR=2002&TYPE=TEXT (http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=31&PART=360&SECTION=11&YEAR=2002&TYPE=TEXT)

Thanks. That's just what I need.

Edited to add: note that this becomes irrelevant 10 days from now. It will no longer be permissible to buy and redeem in the same calendar year.


--ss


[This message has been edited by ss (edited 01-22-2003).]</font>



------------------
Free Frequent Flyer Miles (http://home.earthlink.net/~pgary/MilesFrame.html)

Questions: I have now maxed-out my EE bonds for the year ($15,000 in credit card purchases this month as of today).
What would happen if I "accidentally" bought more EE bonds, like $5,000.00? If they call me up a month from now and make me redeem it, it may still be worth my while, if they pay me back in cash and not as a credit to my credit card.
Also, what happens if I get a gift of an EE bond this year, since I'm at my limit? My employer sometimes just gives them to employees as bonuses, buying them for us without advanced knowledge.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by OldRope:
Questions: I have now maxed-out my EE bonds for the year ($15,000 in credit card purchases this month as of today).
What would happen if I "accidentally" bought more EE bonds, like $5,000.00? If they call me up a month from now and make me redeem it, it may still be worth my while, if they pay me back in cash and not as a credit to my credit card.
Also, what happens if I get a gift of an EE bond this year, since I'm at my limit? My employer sometimes just gives them to employees as bonuses, buying them for us without advanced knowledge.</font>

I believe you will be forced to drive east on Wilshire during rush hour every day http://www.flyertalk.com/forum/smile.gif

Actually there have been some posts saying that the gov will contact you if you go over the limit, but I don't recall the penalty.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by OldRope:
...What would happen if I "accidentally" bought more EE bonds, like $5,000...</font>

My dad did just that when buying for him and my mom and when he realized it, he called them and they basically just said "try not to do it again". (!)

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by OldRope:
Questions: I have now maxed-out my EE bonds for the year ($15,000 in credit card purchases this month as of today).
What would happen if I "accidentally" bought more EE bonds, like $5,000.00? If they call me up a month from now and make me redeem it, it may still be worth my while, if they pay me back in cash and not as a credit to my credit card.
Also, what happens if I get a gift of an EE bond this year, since I'm at my limit? My employer sometimes just gives them to employees as bonuses, buying them for us without advanced knowledge.</font>

Its fuzzy. The relevant regulation can be found at http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=31&PART=360&SECTION=12&YEAR=2002&TYPE=TEXT

------------------
Free Frequent Flyer Miles (http://home.earthlink.net/~pgary/MilesFrame.html)

Can someone confirm what the last day will be to purchase the savings bonds for this January? Looking at the official site I don't find mention of the last day to purchase savings bonds for January. I seem to rememeber it is not until the last day or two, but closes earlier. Can anyone confirm the last day for this month?

Thanks - Michael

The bond is dated on the day that Savings Bond Direct gets paid by your credit card company. That usually takes 1 day, maybe 2, but maybe it will or won't be more in any given case.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by Macken7:
Can someone confirm what the last day will be to purchase the savings bonds for this January? Looking at the official site I don't find mention of the last day to purchase savings bonds for January. I seem to rememeber it is not until the last day or two, but closes earlier. Can anyone confirm the last day for this month?

Thanks - Michael</font>

I went right to the savings bond page where the savings bond order form is and saw this at the top:

"The last day to purchase a bond with a January 2003 issue date is January 29th. The purchase date/time is based on Eastern Time."

So only a few days left!

I'm having problem buying on the government site today. None of my credit card (Amex, MC, Visa) went through. Pretty sure that it's not my credit line since I tried them at $250 amount after trying the maximum $5000. No go on any. Wonder does it has anything to do with the cyber attack today.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by burgerwars:
I went right to the savings bond page where the savings bond order form is and saw this at the top:

"The last day to purchase a bond with a January 2003 issue date is January 29th. The purchase date/time is based on Eastern Time."

So only a few days left!</font>

I see the information for January 29th now. Thanks.

Michael

I over boughta not knowing there was a limit and the govt called me and believed it was an accident, and reissued them under my daughter´s ss . There can be a penalty if they think you did it on purpose, and in any case they would credit it back to your credit card, so you won´t get the miles.

------------------
Ms.DtG

Is there any way around the $5,000 maximum per online purchase or do I really have to bang this out five times? I'd like to order the $30,000 max on I bonds in one shot with my credit card.

If you're good at it, you can do one every 1.5 minutes, even on a dial-up line. Hey, not too long ago the max bond was $1k. So count your blessings.

Yes, buying $5K at a time is a HUGE improvement over $1K!


Kathy

Yes, I remember when I first started and it was $1 limit. Now my limit has to do with my credit card which as a limit of $24 which means I have to pay before I even get the bill if I want to order more right away. The end of my billing period is Jan 28th.

------------------
Ms.DtG

I usually copy my credit card number and email address into cells in Excel. Then I can cut and paste when the time comes - much better than retyping everytime. I noticed that now it keeps the name and address so those can easily be put in each time. But, even though the 5K limit is much better than before, it would be nice if they just let you tell them how much you want.

I have three credit cards all cut off on the 30th or 31st of the month. What luck! Do they let you change the closing dates?

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by burgerwars:


"The last day to purchase a bond with a January 2003 issue date is January 29th. The purchase date/time is based on Eastern Time."

So only a few days left!</font>

Today it says January 30th.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by ChaseTheMiles:
I have three credit cards all cut off on the 30th or 31st of the month. What luck! Do they let you change the closing dates?</font>

Yes. I just did it, though I don't know whether I was in time to get the earlier date this month.

In my experience, if you prepay your account to a large negative balance, you can buy another set of bonds as soon as the first set posts, without regard to billing cycle.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by nsx:
...In my experience, if you prepay your account to a large negative balance, you can buy another set of bonds as soon as the first set posts, without regard to billing cycle.</font>

VISA/Mastercard http://www.flyertalk.com/forum/thumbsup.gif http://www.flyertalk.com/forum/biggrin.gif
AMEX http://www.flyertalk.com/forum/thumbsdown.gif http://www.flyertalk.com/forum/frown.gif

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by nsx:
In my experience, if you prepay your account to a large negative balance, you can buy another set of bonds as soon as the first set posts, without regard to billing cycle.

</font>

But one of the big advantages of having a "good" billing cycle (closes around the 24th of the month) is that you can buy your bonds on the 27th of Jan, and not have to pay until about the 15th of March. Since the effective date of the bonds is Jan 1 - getting 2.5 months of free interest (mostly negating the 3 month penalty for early redemption).

Prepaying negates this benefit.

I also see they changed the deadline for bonds with an issue date of 1/2003 to 1/30/03. I would, still though, try to enter any purchases earlier. Less of a risk or some sort of a delay on their end. If they give you an issue date of 2/2003 in error by waiting to the last month, that might be something hard to correct.

I've completed my purchases for the month. I'm working with a $10K limit on my Citibank AAdvantage World Gold MasterCard. The card does let you go over your credit limit, but I called them to make sure they know what I'm doing, and they had no problems. With the Citibank card, I'm allowed to make four online payments a month (electronic transfers from my checking account). This has avoided problems in the past for me, in that my payments are processed in one day, increasing my available credit.

Thanks to everyone for this great idea! I just locked in 45K miles (30K in I's and 15 in E's) and I wonder what the heck I was doing with Wells Fargo paying 0.25% anyway.

Just some advice - I'd call the credit card companies and alert them to large purchases - because sure enough mine had a security block on immediately. My call to them removed it!

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by burgerwars:
I also see they changed the deadline for bonds with an issue date of 1/2003 to 1/30/03. I would, still though, try to enter any purchases earlier. Less of a risk or some sort of a delay on their end. If they give you an issue date of 2/2003 in error by waiting to the last month, that might be something hard to correct.
</font>

I made several purchases in December 2001 and was delivered Jan 2002 bonds. When I brought it to their attention, they immediately offer to change the bonds. Mailing them back was an inconvenience but clearly worth it. The lessons are:

1) Always check your bonds.
2) They will correct their mistakes.

I just saw an ad that came in the LA Times, so it obviously isn't targetted. an ATT Mastercard with 0% on Balance Transfers until April 2004.
And in the fine print, it says there is a max $50 transaction fee, but it is waived if you respond to this offer. There is no annual fee. The phone number is 800-575-8651 - offer expires (it says) March 15.

Seems like a pretty good deal to buy bonds on a mileage earning card - then transfer to this card for 15 months and earn free interest during that time.

Here's a caveat that may have been issued before on FT, but is worth repeating:

Authorizations against credit cards can stick around long after the actual charge has posted. As long as three weeks! The result is, effectively, that every purchase counts DOUBLE against your credit limit, causing you to go "overlimit" without even realizing it.

A few days ago, I purchased a bunch of bonds with my Starwood Amex/Optima card: $22,500 worth ($4,000 less than my credit limit). There were no other outstanding charges except for the $30 annual fee.

So today, I tried to use the card to make a $41 purchase at a drugstore. Denied! Tried again, denied again. Had to use a different card.

Called Amex and the situation with the authorizations was explained to me. The CSR seemed sympathetic, but claimed to be unable to alter the situation, other than to put a note in my file (meaning that merchants would have to call for verbal card approval; auto-authorization would still fail). Finally, she passed me to a supervisor, who quickly removed the redundant authorizations (or so he said), restoring my available credit line to $3,970. (Of course, I'll have to test the card again in the next day or so to verify that this was really done!)

Moral of the story: When you do a big bond purchase, you might consider calling the cc company to make sure the authorizations go away as soon as the charges post, and you're not unwittingly "overlimit."


Kathy

This seems to be an Amex Optima problem - has happened to me several times. First, before you try to use your card after buying bonds, check online whether it shows you overlimit because of counting the authorizations and the charges. If it does, call Amex during the day and ask for a supervisor who can (1) understand the problem and (2) has the authority to fix it by reversing the authorizations. The night crew is usually hopeless.

There was no obvious indication online that I was "overlimit." When I look at my Starwood Amex/Optima account online, for "available credit line" it always says "N/A" with a footnote saying "This information is not currently available online."

However, I found you CAN check whether you are "overlimit" indirectly, by using the "will my card be approved?" feature. This permits you to enter a planned or hypothetical purchase to ascertain whether it would be approved or denied. In the future, after big bond purchases I will probe my account using this tool.


Kathy

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by KathyWdrf:
There was no obvious indication online that I was "overlimit." When I look at my Starwood Amex/Optima account online, for "available credit line" it always says "N/A" with a footnote saying "This information is not currently available online."

However, I found you CAN check whether you are "overlimit" indirectly, by using the "will my card be approved?" feature. This permits you to enter a planned or hypothetical purchase to ascertain whether it would be approved or denied. In the future, after big bond purchases I will probe my account using this tool.

Kathy</font>

I can't give you info on Amex, but with the AAdvantage World MasterCard from Citibank, last week when going to their website, my balance just showed $90 (cleared transactions) but my available credit was $0 (zero) for my $10,000 credit line. I had about $12,500 of unposted savings bond purchases. With the World MasterCard, you have a credit limit but no pre-set spending limit. In calling them, they said anything over your limit must be paid immediately when they bill you, but I use their online payment interface. So my overlimit purchases were approved (I did tell them what I was up to beforehand, to make sure).
I find with buying U.S. savings bonds, their authorization immediately reduces my credit limit for the exact amount of the purchase.
Staying at some hotels, is another story. I've had hotels check to see if I have $1,000 credit available, even if I'm just staying for one night at the Holiday Inn Express. Go figure.

Yes, my Citibank AAdvantage MC would certainly be easier to use for savings bonds purchases because of the "no fixed spending limit" provision.

However, I prefer the Starpoints "currency." It is usable for hotel stays, or convertible into about 25-30 different airlines' miles (with a 25% bonus for each 20,000 points converted). So I put up with the quirks of Amex/Optima.


Kathy

Savings Bond Direct site up an processing orders with 6 month min. hold, until 11:59 PM EST today. The site gives an instant bond number which will be dated today, per. email:

The last day to purchase bonds with a January 2003 issue date is January 30, at 11:59 p.m. The purchase date/time is Eastern Standard Time.

Janice
Savings Bonds Direct Customer Service

Buy now or bye, bye!

Thanks to all of you for the good post on Savings Bonds. I put my buy in for bonds on 1/26 and American Express paid the bill on 1/27.

I am frustrated with the US Govt for continuing a hold on my AMEX for charges already charged, so it looks like I am overlimit even though I have 10K available. I paid what was owed from last month before the bill came to make sure I would have available. Fortunately I was able to buy 30K I bonds before the new hold was set. Since what they are paying is so low, if rates go up, I WILL want to redeem.

------------------
Ms.DtG

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by dgordon:
I am frustrated with the US Govt for continuing a hold on my AMEX for charges already charged, so it looks like I am overlimit even though I have 10K available. I paid what was owed from last month before the bill came to make sure I would have available. Fortunately I was able to buy 30K I bonds before the new hold was set. Since what they are paying is so low, if rates go up, I WILL want to redeem.
</font>

Our government is populated by self-aggrandizing lunatics but this sounds like AMEX's problem not the U.S. Treasury's.

And the rate? You bought it; they told you what it was - you knew it was fixed for a period. Where's your beef? You can redeem after six months on old issues. That's the rule. They'll give you the money. Now Enron, Worldcom, UAL - if THEY owe you money - now there's the beef!

Seriously though, get a second or third card. If you can afford to drop 30K on bonds, a couple of annual fees won't break you and that's the cost of avoiding annoying hassles like having your credit line shut down.

I have four credit cards because one or more of my cards is always being put on hold because of the card company's worries about fraudulent charges. While I may ..... about it, they have removed at least 20 contested or fraudulent charges from my account in the last five years. Plus they zapped the shoe store, the FOOT LOCKER who gave my wife a hard time about returning a pair of $89 kid's shoes whose soles fell off in one day [my chance to publicy slam the FOOT LOCKER].

DGordon -

I called AMEX yesterday to complain and the rep told me to wait until the merchant dropped the hold. So I asked to speak to a supervisor. Wouldn't you know, the rep came back in 3 minutes and told me she "dropped the hold, did I still want to talk to a supervisor?" I said no, and (nastily) if she had done this in the first instance, I wouldn't have had to ask to speak to a supervisor. Why don't you give it a try.

Also - if rates go up (except for the fixed rate on I bonds, your bonds will automatically adjust up (on the 6 month anniversary - so you may want to redeem your bonds if rates go down, not up.

bump for those new to the boards and unaward of buying us savings bonds with a credit card. There are more threads but this might give a good overview.

------------------
Ms.DtG