No more credit card US Bond purchases

[disneysteve]

I just read in Kiplinger that beginning 1/1/04 you will no longer be able to purchase US Savings Bonds online with a credit card. I don't know about anyone else, but that was how I really racked up the reward points on my credit card at basically no expense.

Does anyone else have any good scams like that for running up the cards without it costing anything (or very little)? I'm open to suggestions but I don't know how to replace the 30,000 points I earned last year buying, cashing in, and rebuying bonds. Figured that was too good to last. I was upset when they made the holding period a year instead of 6 months, but stopping it entirely really rots.

Steve

 

[sln88]

It looks like I have a few months left to get in on this-

How did you go about doing it?

 

[disneysteve]

Originally posted by sln88
It looks like I have a few months left to get in on this-

How did you go about doing it?

As of now, purchasing a bond online with a credit card is considered a purchase, so it earns reward points on your card. If you walk into a bank and buy a bond with a credit card it is considered a cash advance (no idea why this is, but that's how they worked it).

Anyway, when the holding period was only 6 months, if you timed your purchase right you really only had to hold the bond for 4 months after paying for it. Then you could redeem it and use the same money to buy another bond. In fact, you could overlap the purchases and take advantage of the grace period on your credit card so you could keep recycling the same money over and over, earning reward points each time. Sounds complicated but it was really easy. Just hard to explain.

To deter short term traders, they lengthened the minimum holding period to 12 months earlier this year (10 months in reality if you use your full grace period). The I-bonds have been paying pretty decent interest - 4.66% currently - plus you got the reward points on top of that. As long as you have some cash free to tie up for a little while, you could buy a bond, get the points and get the money back when you redeem the bond.

Couple of important tips - Bonds earn interest from the 1st of the month regardless of what day you buy them. So you'll earn just as much interest if you buy the bond on October 30th as if you bought it October 1st. Also, make the billing date on your card late in the month (your card company will adjust this for you), like the 25th. Then buy the bond on the 26th. Your payment won't be due until about the 7th of December. By then, you will have earned 2 months of interest on the bond before even paying for it. Finally, cash the bond in on the 1st of the month in which it becomes eligible for redemption. You get no additional interest until the following month.

Maximum bond purchase per transaction is $5,000 online. Max per year is $30,000 per person.
More info at: http://www.ussavingsbonds.gov/

Hope that is somewhat clear.

Steve