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Savings bonds are a super way to invest extra funds that do not need to be accessed for at 1 year--particularly if you would like the option of liquidating them after that.

The official government website, which allows purchasing of these bonds, is at http://savingsbonds.gov

I have a web page that provides basic information about how these bonds work. It is at http://www.dhanson.net/ibonds.htm. If something becomes obsolete or a description is unclear, please let me know and I'll fix the page.

There have also been several useful threads in this forum discussing savings bonds.

Savings bonds are unique (or nearly so) in that they can be purchaed with credit cards and are coded AS PURCHASES by uncle sam, NOT as cash advances. That means that unless a credit card issuer specifically exempts them from rewards (as FBB did for a brief period last year and others have reportedly done also), they WILL earn rewards just as any other purchase would. This feature has attracted particular interest in FW finance forums.

In particular, many have discussed the high relative returns of "flipping" savings bonds: buying them with a credit card, holding them for the minimum possible period (formerly into the 6th month after purchase, now the 12th month as of 2/03), then redeeming them for cash and using the proceeds to buy more, repeating this practice as rapdily as feasible.

The oldest active thread on bonds concerns this strategy. It's at http://www.fatwallet.com/forums/forum.php?catid=52&threadid=53217.

A more straightforward discussion of using bonds as a "buy and hold investment is contained at http://www.fatwallet.com/forums/forum.php?catid=52&threadid=82737. Later down in the thread, there is also discussion of why certain posters (including this FAQ author) have reservations about the flipping strategy.

A newer thread focusing on the timing of bond purchases and the hedging of the various types of bonds (i-bonds vs. EE bonds) is at http://fatwallet.com/forums/forum.php?catid=52&threadid=173886

For the time being, Please post comments or questions about flipping vs. investing to these respective threads. If you have any questions or suggestions concerning this FAQ, please do reply and I'll update this post.

From what I have read in a SIS comment, at least some Advanta rewards cards code as Cash Advance

Yes. In the terms of my Advanta cashback BUSINESS Mastercard, it states savings bonds purchases will be considered cash advances. It also says items such as insurance payments will be considered cash advances (which are typically treated as purchases with other CCs)...

I have not tried charging Savingsbonds to the card, so I dont know if, in reality, they "catch" these charges and recode them as cash advances.

DaveHanson said:

<< In particular, many have discussed the high relative returns of "flipping" savings bonds: buying them with a credit card, holding them for the minimum possible period (formerly into the 6th month after purchase, now the 12th month as of 3/03... >>

Dave, didn't the new 12-month holding guidelines go into effect with Feb. 2003 issue date bonds?

Thanks zender, typo fixed. If it seems useful I'll add a list of cards not counting SB's as purchases in this thread, unless there are enough cards or is enough interest to warrant its own thread...

Added the good discussion on timing, hedging to the FAQ.

Do any financial institutions accommodate IRA (Individual Retirement Account) investments in U.S. Savings Bonds?

SeattleNative said:

<< Do any financial institutions accommodate IRA (Individual Retirement Account) investments in U.S. Savings Bonds? >>


Bankrate article on your question.
Personally, I don't see the advantages of putting savings bonds in IRAs. They are already tax-deffered vehicles and their exemption from state and local income tax would be lost in an IRA.

Anybody bought SB with MBNA Quantom cards?. I want to make sure they treat this as purchase and not cash advance. I called MBNA and they didn't know about it. Atleast, that is what they said. I called 2nd time and spoke to a different CSR. She didn't know either. Infact she took all the details for her own use. She said, she will goto the site and check it out herself if she can buy. I thought that was strange. Any one who bought Ibonds with MBNA Quantom, please post. TIA

RJSachs said:

<< SeattleNative said:

<< Do any financial institutions accommodate IRA (Individual Retirement Account) investments in U.S. Savings Bonds? >>


Bankrate article on your question.
Personally, I don't see the advantages of putting savings bonds in IRAs. They are already tax-deffered vehicles and their exemption from state and local income tax would be lost in an IRA.
>>


...in WA (incl. Seattle), there's no state income tax... <img src="i/expressions/face-icon-small-wink.gif"border=0>

DeGlass said:

<< ...in WA (incl. Seattle), there's no state income tax... <img src="i/expressions/face-icon-small-wink.gif"border=0> >>


Well not today, but who knows in 10 or 20 years. Plus you may choose to retire in another state.

Regardless of the state tax issue, you would be wasting the tax-deferring capability of the IRA by putting a tax-deferred vehicle in it.

Bump for relevancy and interest



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