MilesBuzz! - Savings Bond -- Buy Now or May 1st?

Any one has any learned opinion as to whether rates for I or EE bonds will go up or down come May 1st?

you've got to hold the bonds for one year, or five years to avoid the early redemption penalty. If you're redeeming in one year, buy the I bonds now, the rate is likely to be better for the second six months based on inflation so far for the next re-set period.

you get interest from the first of the month, so the question should be buy on April 29 or May 29? I have no guess on where interest rates will go.

P.S. you can buy on the 31st but that is cutting it close.

How does one get FF miles when buying Savings Bonds - use an affinity credit card? If so, where do you buy?

I'd recommend doing a search of this forum (click the search link in the upper right of the page, just beneath and to the right of the Post New Topic link) for "savings bonds"

I'd also recommend clicking the icon for 'FT Archives' and repeating that search in the archives of MilesBuzz.

You'll learn a whole lot about the subject!

Best,
Gary

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by xpacific:
How does one get FF miles when buying Savings Bonds - use an affinity credit card? If so, where do you buy?</font>

I explain it all in great detail on the Finance page of my web site below. You can get at least 45000 miles a year buying bonds, and more with double miles promos or using the Starwoods American Express credit card.

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

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by xpacific:
How does one get FF miles when buying Savings Bonds - use an affinity credit card? If so, where do you buy?</font>

There are many threads discussing purchasing bonds with credit cards. www.savingsbonds.gov (http://www.savingsbonds.gov)

Thanks, everyone for the links! http://www.flyertalk.com/forum/thumbsup.gif

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by LemonThrower:
you get interest from the first of the month, so the question should be buy on April 29 or May 29? I have no guess on where interest rates will go.

P.S. you can buy on the 31st but that is cutting it close.</font>

I would really say that the 31st would be cutting it very close - especially in April. http://www.flyertalk.com/forum/smile.gif

I would say to buy as soon after the closing date of your credit card statement - just to make sure you don't forget. Fortunately my Starwood Amex closes the 24th of the month.

For series I Bonds, it probably won't matter if you buy now or wait but there is some risk. Right now, the I bonds have a fixed rate of 1.6% for life + inflation. Based on recent inflation numbers (March isn't out yet) the I bonds will be around 4% (or higher if there is any inflation at all in the March CPI)if the fixed portion stays at 1.6%. If they decide to lower it again, you will regret waiting and if they raise it for some reason, you'll regret buying now. Nobody knows what they'll do but I would say it is a safe bet they won't raise it.

If you're looking at EE bonds, you should defintiely buy now. The new rate will probably be somewhere in the 2.6-2.7% range, much lower than current 3.25%.

An updapte from my post yesterday: The March CPI came out this morning and if the Govt leaves the fixed portion at 1.6%, the I bonds should be paying close to 5% after May 1st compared to 4.08% right now.

Which means that the 1.6% will almost certainly decrease to something like 1%. Better buy those I bonds now.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by nsx:
Which means that the 1.6% will almost certainly decrease to something like 1%. Better buy those I bonds now.</font>

If what you suspect turns out to be true - a decrease in the fixed portion from 1.6 to 1.0 - and it is also true that the yield (assuming 1.6% fixed) would be 5% - wouldn't the result still be above the 4.08%, meaning you should wait?

I'm not saying this is all the case, but really asking if I'm interpreting the info correctly.

Yes, if you only look at the yield over the first 6 months. But you have to hold these for 12 months, and the older bonds will be 0.6% better after 6 months. Unless, of course, inflation accelerates by another 0.6% or more in the meantime.

Are credit card companies not happy when you use their card to buy savings bond??

My father bought $90K worth of savings bond using CitiBank AAdvantage card a couple months ago, and he just told me CitiBank cancelled his card.

any similar experience?

_______
AirmileOffers.com (http://miles.hotdealz.com)


[This message has been edited by milehunter (edited 04-17-2003).]

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by milehunter:
Are credit card companies not happy when you use their card to buy savings bond??

My father bought $900K worth of savings bond using CitiBank AAdvantage card a couple months ago, and he just told me CitiBank cancelled his card.

any similar experience?

_______
AirmileOffers.com (http://miles.hotdealz.com)

[This message has been edited by milehunter (edited 04-17-2003).]</font>


$900k or $90k?

$90,000.. not $900,000, unfortunately, he is not that rich http://www.flyertalk.com/forum/smile.gif

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by nsx:
Yes, if you only look at the yield over the first 6 months. But you have to hold these for 12 months, and the older bonds will be 0.6% better after 6 months. Unless, of course, inflation accelerates by another 0.6% or more in the meantime.</font>

If you sell as soon as possible, you'll get 9 months' interest. Buy I-bonds this month, and you get 6 months at 4.08% and 3 months at 5.17%. Buy next month and you get 6 months at whatever rate they're advertising, then 3 months at some unknown rate. Since the fixed portion next month will probably be low, a run of low or negative inflation could even reduce the rate for those 3 unknown months down to 0.

Which choice will ultimately earn more interest? Nobody knows. Buying now does have the benefit of predictability.


--ss

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by ss:
If you sell as soon as possible, you'll get 9 months' interest. Buy I-bonds this month, and you get 6 months at 4.08% and 3 months at 5.17%. </font>

Hey this is wrong if you buy this month you will get 1 month as 4.08, 6 month as 5.17 and 5 month unknown %. But if you cash them on 1st april 2004 which 3 month's intrest will not be given, last 3 (unknown %) months?

hka_mm, ss is right. From the savingbond website
http://www.savingsbonds.gov/sav/sbirate2.htm

"An I bond's composite earnings rate changes every six months after its issue date. For example, the earnings rate for an I bond issued in March 1999 changes every March and September"

Futhermore, if you cash your bond before 5 years, you will lose the last 3 months of interest. So if you buy your bond this month, you will earn 6 months at 4.08% and 3 months at 5.17%.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by mkpkmp:
hka_mm, ss is right. From the savingbond website
http://www.savingsbonds.gov/sav/sbirate2.htm

</font>

hmmmmmmmmm..........I missed that composite rates changes after 6 months from the issue date.

[This message has been edited by hka_mm (edited 04-18-2003).]

You are correct that the rates are changed on May 1 and November 1. However, the rate in effect the month you buy the bond is your rate for the next six months. Therefore, if you buy a bond on Nov. 1 or April 30th, you will have 6 months of the same rate. At the end of that 6 month period, your rate changes to whatever the most recent change on May or Nov 1 was.

<font face="Verdana, Arial, Helvetica, sans-serif" size="2">Originally posted by samg23:
You are correct that the rates are changed on May 1 and November 1. However, the rate in effect the month you buy the bond is your rate for the next six months. Therefore, if you buy a bond on Nov. 1 or April 30th, you will have 6 months of the same rate. At the end of that 6 month period, your rate changes to whatever the most recent change on May or Nov 1 was. </font>


Yeah i got it when i chew each word carefully. Thanks for the explanation :-)