This subject has come up a lot. The answer I am about to give has been provided in the past, but is due to be retold.

Not for everyone, but great for some.

Once you get an affinity card, don't forget the investment opportunity of US Gov't Bonds. A retirement account, a college account, or just a nice safe way to diversifly. You can buy up to $30,000 worth a year. If married, your spouse can do the same. I bonds are about to reset their rates (May 1, they will drop). If purchased before then they pay 3.40 fixed plus a formula for inflation, bring the current payment to 6.49%. These earnings are state and local tax free and the federal tax may be deferred until you cash them if you choose to do so. Naturally the inflation adjustment is ever changeing and can go up or down, but these protect some real returns, net of inflation. There is also a 3 month interest penalty if cashed before 5 years.

The bonus is that you can buy them with a credit card! This can be done on the web site. www.savingsbonds.gov One $1000 worth can be purchased at a time with a credit card (but can be repeated endlessly without loging out), but you soon get the flow of imputing the modest amount of data required. They say this is to prevent fraud.

The site also provides easy to understand and useful data on EE bonds.

Given this is the Government I am amazed at how easy to use this site is.

A couple of notes. I bonds are sold at face value. EE's at a discount to face. Be aware of the limits on your credit card. Also note that the limit is the "outstanding", which includes amounts from the prior billing period if your payment has not been posted.

Note I bonds are sold at face. EE's are sold at a discount.

This is a easy way to get those extra thousands of miles necessary to get that flight or to get the total flight on points!

How do you defer the Federal tax on I bonds? I thought that both the interest AND the inflation adjustment to the face amount were taxable currently, unless they are owned by a qualified retirement plan.

Bruce

I Bond Tax Reporting


I Bonds are bought at their face amount (par value). Any increase above the par
value is interest and may be taxable.

State and Local Taxes
I Bonds are exempt from state and local income taxes. They are, however, subject
to state and local estate, inheritance, gift, and other excise taxes.

Federal Taxes
I Bonds are subject to all federal taxes imposed under the Internal Revenue Code
of 1986, as amended.

Reporting Basis
You may use either the cash basis or accrual basis for reporting interest for federal
income tax purposes. Under the cash basis method, federal tax is deferred until the
year of final maturity, redemption, or other taxable disposition, whichever is earlier.
Under the accrual basis, you report interest each year as it accrues.

In deciding which method to use, you should consider two factors:

First, if you use the cash basis, you must use this method for all I Bonds you
own or may later purchase, as well as for any other Treasury obligations purchased on a discount basis, such as Series E or EE Savings Bonds.

Second, if you elect the accrual basis method, you may only switch to the
cash basis method with the permission of the Internal Revenue Service (IRS). However, if you use the cash basis method, you may switch to the accrual basis method without IRS permission. If you don't choose a method, you'll be treated as if you had chosen the cash basis method.

Finding where to buy them on the web site took me awhile. First go to http://www.savingsbonds.gov/sav/sbiinvst.htm , then click on Where to Buy, then Online With Savings Bonds Direct, then Savings Bonds Direct.

What I don't find at the site is any mention of a fee for credit-card use, like the IRS charges for tax payments. Is there such a fee?

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Middle Seat

[This message has been edited by Middle_Seat (edited 04-22-2001).]

Since I don't like putting my SS# out over the internet, where can I buy I Bonds? Can I buy them at a bank like the E Bonds? What is the maturity on these bonds? When can I cash out, if needed, without a lose?

middleseat, I believe there is no charge to use your cc. The IRS is the only one I know who does that.

Iorra,



Where to Buy I Bonds

From Banks and Other Financial Institutions:

You can buy I Bonds from most banks, credit unions, or savings institutions. These
institutions accept funds and purchase orders and forward the order to a Federal Reserve Bank where the bonds are issued and mailed according to your instructions. You should receive your bonds within 15 business days and the bonds begin earning interest from the first day of the month in which you buy the bond.

Time is short to lock in this rate!

I'm not certain that you can lock in a rate. Doesn't it change for everyone every 6 months (or is it 3 months?), no matter when they purchased their bonds?


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Middle Seat

There's no fee for using a credit card. I've purchased my annual maximum using my AA credit card.

There's a penalty for cashing in I bonds prior to 5 years ownership. You can't cash them in for six months. I believe you lose 50% of earned interest if cashed in from 6 months to 5 years.

I also buy my nephews savings bonds as birthday and christmas presents, to be used for college. I get the airlines points

The I bonds were at over 7% prior to the current 6-month cycle. 6.49% is still a very good rate.

The penalty isn't that bad, it's the loss of 3 month's interest. This is about 1.5%, so it is roughly the value of the FF miles you got. Therefore, you would not gain much (if anything) by buying and selling bonds over and over with the same money.

But, if you've got money in a bank savings account this is a great deal...just make certain you retain enough to cover any emergency.

Ref: http://www.savingsbonds.gov/sav/sbifaq.htm




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Middle Seat

Just a question on using the credit card. Does the card charge this as a cash advance with the up to 3% fee or as a purchase? I remember eons ago the guy who was buying travelers checks at AAA with a card for the miles and suddenly the fees began on the credit cards. Please advise which type card and issuer if you are getting this without a CA fee, as this sounds like a great way to get miles and save for a rainy day as well. I think alot of us used to get bonds with the spare cash when you could just get them at the bank and quot when it was changed.

The charge appears on your credit card as a purchase, not as a cash advance.

Brought this back up to give less frequent users a chance to get in on the last six month fixed portion of the rate, if they find it works for them.

Last day to get the old rate!!!

College, retirement or just some secure investment diversification.

Use cc and get miles...NO COST for transaction

You can buy them at a bank, but then you can't use your credit card, thus no miles, thus why bother (this is FlyerTalk after all).


Mac


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Via con Dios!

I think you mean "�Vaya con Dios!" or "Go with God"

Maybe you mean "�Viva con Dios!" or "Live with God"

But "Via con Dios!" "Road with God!"?