Earn Miles By Buying US Savings Bond
You can buy savings bonds using a Discover, MasterCard, Visa or American Express
credit card directly from the U.S. Treasury Department online at Savings Bonds
Direct. Since the transaction is posted as a purchase, not as a cash advance,
you can earn miles on your mileage credit card. This is one of the best
way to max out your mileage credit card during a double/triple bonus mile promotion.
That's exactly what people are doing during the current American Express Delta
SkyMiles double miles promotion(from May 15 to July 15, 2003).
Unfortunately, This Party Will End Soon
Because there has been so many people taking advantage of this, the Treasury
Department finally decided they can no longer keep on accepting credit cards
due to transaction fees they have to pay to the credit card companies. So, by
the end of this year, 2003, you will no longer be able to purchase US Savings
Bond with a credit card.
Requirements Limits
- You are required to hold the savings bond for at least 12 months.
After 12 months, you can redeem them for cash at any bank. There will
be a penalty equal to last 3 months' interests, unless you hold the
bond for more than 5 years.
- You may buy up to $30,000 of Series I Bonds in your own
name each calendar year.
You may buy up to $15,000 ($30,000 face value) of Series EE Savings
Bonds in your own name each calendar year
- Savings Bonds interest earnings are not subject to local
and state income taxes. The interest earnings are subject to federal
income taxes.
Interest Rates
First of all, you know if you hold the bond for less than 5 years, you
basically give up the last 3 months worth of interest.
Series EE and Series I bonds increase in value every month.
The bond's interest rate is compounded semiannually. The rate that Treasury
announces each May and November for these bonds is applied to a bond for the
6-month earning period. That means interest rate for Series EE and Series
I bonds only change on May 1st and in Nov 1st of each year.
Here is the interest rate that was set on May 1st, 2003:
Series I -- 4.66% (including 1.1% fixed)
Series EE -- 2.66%
- Case Study:
Bought Series I Bond in June, 2003, and plan to hold exactly one year.
The interest rate from 6/1/03 to 10/31/03 is 4.66% (5 months)
The interest rate from 11/1/03 to 2/28/04 is Unknown(to be announced
on 11/1/03) (4 months)
The interest rate from 3/1/04 to 5/31/04 is 0% (since you give up last 3 month's
interest earnings).
In addition, hopefully you earned 2 miles/dollar. At 1.5cents per mile, those
miles alone are worth 3%!
Which Bond is Better?
This question is a little harder to answer, especially if you want to hold those
bond long term. This is because the interest rate of Series I and the Series
EE bonds changes a lot. In 2002, Series EE bonds' yields were higher than Series
I bonds' yields. However, if you only want to hold the bonds for exactly
one year, it is probably better to go with the one offering higher yield. So,
I would buy the Series I bonds now, if I plan to cash it next year this time.
If you are interested in hold these bond long term, you probably should read
the Savings
Bonds Owner's Manual found online more carefully. Take
a look this page which list the major differences between Series I bonds and
Series EE bonds.
Hopefully, this answers most of the question one may have about this. Please
feel free to use the comment area to ask any additonal questions you may have.
Follow the link below to purchase US Savings Bond at Savings Bond Direct:
Savings
Bond Direct at www.SavingsBonds.gov
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