I think we're safe for the time being. Still, as mentioned, the Government probably pays much less in a commission to M/C and Visa than a regular merchant. Reasons for the best rate are all transactions are electronic, the average purchase is larger than most merchants, very little credit card fraud (I couldn't imagine a criminal using a stolen credit card to buy bonds in their own name) and all sales are final (no refunds). High return rates are probably the biggest reasons why M/C, Visa and American Express will charge merchants more. Discover Card is known as the card that is most likely to drop a merchant for high return rates.

I also can't see the Government issuing different types of EE and I bonds, based how someone paid for the purchase, with credit card purchases having a one-year holding period instead of six months. Something like that might require an act of Congress to change the rules. And is the Government going to penalize an average purchaser who is buying a bond on a credit card as a gift, or for themself, just because some bond buyers might churn them? Unlikely. The Government already enjoys lower costs in issuing them directly via their automated web site using credit cards, than having a local bank manually help complete a purchase. Plus there is also the built in three month interest penalty for cashing bonds before five years.

That said, there is nothing to stop a credit card issuer from treating certain classes of purchases (like savings bonds) not eligible for bonus points, rebates or miles.

What probably irritated the Farm Bureau Bank was they had a high rebate offer, and the percent they got to keep from bond purchases might not have been enough to offset the rebates they were paying. If a customer was buying $35,000 worth of stuff at WalMart with their card to earn rebates, instead of $35,000 in U.S. Savings Bonds, FBB would be smiling all the way to the "bank." But I hope FBB behavior is an abberation. So far, I haven't heard anything about Amex or Citibank treating these purchases different from others.

As far as this being a "secret." Hardly. Not widely known, but far from any secret. I read in the WSJ article that Savings Bond purchases via credit cards are up something like 68% in one year to $600 million. I doubt the Treasury looks at this as a bunch of churning. Maybe a small percent is, but the lion's share of this increase is probably a shift from people buying bonds at the bank to buying them online. Such a shift saves the Treasury money. If there is some churning there too, it's probably not anywhere near enough to offset the savings the Treasury enjoys issuing more bonds via their web site.