How Do I Purchase Savings Bonds With a Credit Card?

TreauryDirect offers no option for buying bonds with a credit card.

TreauryDirect offers no option for buying bonds with a credit card.

Some people want to use credit cards for almost every purchase, but trying to use a credit card to purchase a savings bond may be more trouble than it's worth. The U.S. Department of the Treasury once allowed the use of a credit card to buy savings bonds, but as of the date of publication it only accepts payments made by debit from a checking or savings account.

Savings Bonds

Savings bonds provide a safe way to earn a little bit of interest on your money. In the past you could buy paper bonds, but now all bonds are only available in digital form. Savings bonds are issued by the Treasury Department and are fully backed by the federal government, so they won't lose value if the market changes. The main downside is that the interest is usually not as high as other investment methods, and bonds can't be cashed in during the first 12 months. If you cash your bond within the first five years, you'll have to pay a penalty that equals the last three months of interest.

Savings Bonds Direct

The Treasury Department used to offer a method for purchasing savings bonds directly with a credit card via its Savings Bonds Direct program. Customers could get airline miles, cash back or other rewards with their purchase, depending on which credit card they used. The Treasury Department discontinued Savings Bonds Direct at the end of 2003 in order to save on merchant fees it had to pay when people bought bonds with credit. Customers now must purchase credit cards through the TreasuryDirect website.

Using TreasuryDirect

If you are buying a savings bond for someone else, you'll need that person's Social Security number in addition to your own. If the bond is for someone else, it will be kept in an electronic gift box on the website until the recipient creates his own TreasuryDirect account to redeem the bond. At that point, the bond will be deposited into his account and he can log in at any time to see its current value.

Alternative Credit Card Route

If you absolutely must purchase your savings bond with a credit card, there is a roundabout way to do so. You can request a cash advance check from your credit card company and deposit the check into your checking account. Then, you can purchase the savings bond from TreasuryDirect using the funds you already deposited into your checking account. This method has drawbacks. Credit card issuers usually charge a fee of 2 percent to 4 percent of the total check amount, and it may add a minimum transaction fee on top of that. Your cash advance will accumulate interest immediately, as opposed to the grace period you get when you make a regular credit card purchase and pay off the balance each month. In addition, your credit card company might charge a higher interest rate on a cash advance than on your regular purchases. If you are considering using this route, check all the fine print in your credit card's terms of use first and make sure the extra debt is worth it.

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