trafael, I wouldn't worry about paying taxes on Amazon GCs--they aren't income per se. And while it's a guess, I'd be very surprised if the fixed rate dropped below 1% or even 1.5%.

Thanks for a really good answer NOTaFool--before leaving on vacation no less. You're a class act

Here's another vote for credit unions. I use bofi.com as main bank, but all local-"in person" banking needs, I use Spokane Teacher's Credit Union for similiar reasons. I've never heard of "Switch & Save" program--sounds very interesting! Any links to more info on it?

<< They don't seem to want to let me do another 50K BT for some reason this year.. >>

LOL! Now why would that be?

<< Tell me you are going to base your personal financial decisions on what is best for the gov't >>

Actually, not saying this at all--if so, I wouldn't take all legal tax deductions, for example. I see this as a different kind of case. Now admittedly I haven't clarified exactly what I AM saying, but I sincerely doubt anyone cares to hear more at this point, LOL

<< For me, it is nice the country is providing this incentive to reward those who exhibit responsible financial behavior >>

Fair enough. And you're right that only those who do benefit from this strategy.

<< To conclude because the gov't might have to pump some extra money in this program is a bad thing would really require looking at some complex economic models. >>

Again, I agree. It would also require some sophisticated moral models.

<< Net cost to gov't is alot less than your simplified extimates. >>

I doubt this, precisely because of kinds the complexities you indicate. E.G., relatively little in corporate revenue actually ends up being double-taxed. Admittedly though, this factual question is complicated.

<< I have a feeling if I were one, we'd have some lively debates. >>

I'm sure your right about that. Believe me, students who can think and argue like you make my job fun--only wish there were more of them!

<< I fully comprehend your position on flipping and after due consideration, totally disagree! >>

I'm actually not sure I fully understand my own position on flipping, LOL--but I fully respect your disagreement. And I appreiciate your taking the time to engage with me on the issue.

Have a great break! I'll look forward to learning more from you when you get the chance to post again.

Vettemania, you're right about Amex (and discover) charging more. However, paypal wants 3% tho (actually 2.9% plus 30 cents), and billpoint more than that. And paypal is still loosing big money, despite ad revenue agreements, market tie-ins, etc.

you're right that they are a big buyer, and NotaFool and WSM are right that these are relatively safe transactions. But rarely does the gov't ever get a top-notch deal in situations like this.

Don't get me wrong, I'd love to hear that the gov't is getting away significantly less than 2.5-3% commissions on these. It would ease substantially my personal reservations over flipping. I just haven't seen any evidence of it yet.

<< Here I am in the beautiful Shenandoah Valley...my wife thinks I might be addicted?! >>

LOL! Now there's a man after my own heart! Sure it has a view, but baby, if she ain't got bandwidth, she ain't ready for prime time!

Thanks for the link. I didn't catch it was the Navy CU you were talking about above--that it was a more generic credit union like, like Nat Federation of CUs or something. My brother's an Army Captain, but I don't think I'd qualify.

<< I was PM'd to keep this flippin' strategy on the QT >>

Heh, that gave me a chuckle. With all due respect to the PMer, that's a pretty naive statement. This strategy has been discussed extensively, here and elsewhere, for close to a year. Your variation is particularly flexible and well conceived, IMHO, but it isn't like the idea of flipping is new.

If the PMer thought that my arguments were insincere, and just a way to keep the "deal" to myself, I can assure him/her that I'm entirely sincere. But in any case, I don't think I'm persuading anyone, as not one person has publicly or privately indicated that they agree with my position.

<< maybe I could explain it to you or am I actually wearing you down?! >>

As you're probably gathering by now, I'm too stubborn for that, LOL Seriously, though, let me clarify.

My personal ethical position RE justified i-bond strategies for my own case is pretty firm--though I hold out the possibilty that my mind could be changed. What I meant was that I haven't fully articulated, for myself, what the precise moral principles that support that position. I need to do some more thinking before I'd be comfortable with my defense of that. I stand by the claim in my Apr/28/2002 9:06 PM post above. To wit (sharpened slightly):

p1) If gov't looses notably more than I gain from this kind of enterprise, AND
p2) I have good reason to believe it runs counter to the intent of the progam, AND
p3) I have other choices* that benefit me nearly as much without the gov't loss, AND
p4) I'm not in a position where I NEED the extra gain (e.g. barely feeding kids), THEN

C) I conclude that I should not engage in the strategy.

If any of those premises are disproven or no longer hold, then my opinion would likely change.

To be totally honest, as long as the arguments are sharp and on-point, the philosopher and debater in me would LOVE to discuss this ad nausium--really! (Isn't that sick?) But I'm a little ambivalent about doing so here since I wonder if (1) I'm about as effective and interesting to others in the FW community as the guy ranting on atop his soapbox on some random street corner, and (2) this thread is reverting to the DaveH/NOTaFool show, with no one else feeling welcome or interested in chiming in. Then again, perhaps that's a little silly and precious...?

<< You don't have a big dog do you??? >>

LOL, you mean my icon? No, I just teach at Gonzaga University, home of the Bulldogs and their great basketball team (including some of my own students--really cool guys!) I actually have one very sweet goofy orange tabby, and that's about it.


*(in this case, holding the i-bonds longer, buying REITs, etc.)

Good post. These are myths you believed before trying them then, and now you know better?

I never wondered about myths 2-4 myself. I haven't redeemed any i-bonds yet though, and I'm not sure Myth 1 wouldn't be an issue in my case. I don't really don't do any banking locally, and I don't know if my CU will be as easy as yours given that. Hopefully so--in any event, I'm not worried about it.

As for Myth 5, I know you're probably half kidding, but I emphasize...I'm making a claim for myself here, and by extension, for those in situation analgous to mine in ALL relevant respects--NOT for everyone.

Your above answers suggest that you appreciate argument by analogy, NOTafool--let me try one here. Given MY various principles and beliefs, voting for George Bush would have been a mistake, even though my taxes are lower with him as president. AND, I think someone who shared my beliefs yet who still voted for Bush because he wanted a tax cut for himself was making a mistake on principle. BUT, lots of very moral people voted for Bush on principle, and they don't behave immorally in doing so. I disagree with them, but they aren't behaving immorally--they're voting their conscience just like me.

More broadly, I agree that bonds are very cool and unappreciated in any case...heck, that's why I started this thread and wrote the web page. I also bought $13K worth over the last 24 hours.

I am really confused and new to ibonds. I bought 1k in 9/01, for whatever THAT interest rate was (it was something high, I guesS). Am I no longer earning THAT higher interest rate? I am earning a lot less now? Can someone please explain flipping?


Thanks,
HUD

wow this thread has sparked quite a debate....

DH dont feel alone in that you are the only one who doesnt "support frequent flipping"....I agree that this costs the govt. a needless amount of money. I havent personally flipped even though I acknowledge it can be a good way to make a few thousand extra $$ per year...

However I am even more concerned that if THE MAJORITY OF PEOPLE WHO BUY BONDS ONLINE WILL DO SO IN LARGE AMOUNTS, AND THEN ONLY TO REDEEM 6 months later, Savingsbonds.gov will SIMPLY STOP OFFERING BONDS CHARGED AS A CC PURCHASE. This WILL happen, no doubt about it.

They will be changed to "cash advances", and the whole bond buying investment strategy will be shot to hell. Also, the average Joe who wants to buy a bond for someones birthday wont be able to do it online with a CC.

Now, the real only question is , knowing that the "deal" of being able to buy via CC WILL be killed sooner or later, do we take advantage of it before it goes away or just watch the others kill it? I'm all for taking advantage, and if I wasnt so damn LAZY I probably would have already flipped...

there are so many savings bonds threads going right now, i have pretty much stayed away from commenting on each...yes I do think this "deal" will definitely end...

Heres a question - HAS ANYONE ACTUALLY FLIPPED BONDS??? Most people have just bought their"first round", I doubt many have flipped already, and Im afraid a lot of people will be pissed to find out in 6 months to a year they wont be able to accomplish the "flipping strategy" they had envisioned, most likely due to the cancellation of free bond purchases via CC.

I see this is as a "deal" that will be expiring in the next few months, and I personally just dont feel like dealing with the hassle of buying and redemming bonds every month, given that I still need to apply for the FBB CC , the credit limit would probably require monthly purchases, etc...too much work for a few hundred dollars...

Good responses from two forum MVPs.

SIS, I'm glad you highlighted the hassle factor. As I argued earlier, it seems far from trival for most of us, especially if you don't have NOTaFool's helpful elements in place like two FBB lines and a credit union that does no-hassle redemptions on a limited number of bonds. For many of us, the time spent on this "deal" would be more profitably spent cherry-picking the best hot deals here and at AT, and re-selling selling the booty on eBay. In defense of the flipping strategy, you're not really out anything if the "deal" dies...you've still pocketed the CC rewards and interest on the transactions you've completed. It just might keep you holding on to the last round a little longer.

NOTaFool, good points. FWIW I agree with essentially your entire post. Given your reason, I want to know the answer to SIS's question about how many actually flip, here and generally. There is no question that this is happening, and little doubt that it has been increasing and will spike over the next 6-9 monoths due to i-bond rate plunges. But one still doesn't know (1) how big a percentage of overall bond sales flipping will amount to, and (2) whether the gov't will take the kind of actions conjectured above in lieu of ending the current CC purchasing system.

As I recall, The i-bond and EE bond rate calculation methods are mechanical, governed by formula--discretionary. To change the rates, the gov't would have to change the forumula. I think they DO need to change either the formula, or the purchase methods/redemption penalties, or both.

RagingBull, I think so, if you have a rewards CC. 4% + rewards and liquitity after 4-6 months ain't bad.