U.S. Savings Bonds, long the Treasury securities of the "little guy," last week became the Treasury securities of the wired guy (and woman) as well.
And in some cases they may even come with frequent-flier miles.
In an effort to make the bonds even easier and more convenient to buy, the Treasury Department has begun allowing savers and investors to buy them over the Internet--and with a credit card.
"It never used to be possible to buy a savings bond at 2 in the morning. . . . Now it will be," Treasury Secretary Lawrence H. Summers said as he unveiled a new Web site last Tuesday.
The Bureau of the Public Debt, which runs the savings-bond program, will offer both traditional Series EE bonds and the newer, inflation-adjusted Series I bonds electronically.
The bonds have long been available through commercial banks and in person or by mail from Federal Reserve banks and the bureau. But that has meant paperwork or a trip downtown or somewhere that many people somehow can't get around to.
Now those with a credit card, a home computer and Internet access--more than half the households in the Washington area--can buy the bonds whenever they wish.
Right now, only credit-card payment is allowed for Internet purchases, and at this point only MasterCard or Visa. But bond purchases will look just like any other credit-card transaction. The amount charged--half the face value, in the case of EE bonds--will show up like any other merchandise purchase on the cardholder's statement.
Bond purchases will not be treated as cash advances, which generally carry higher costs, officials said.
Thus, any premiums generated by card activity, such as frequent-flier miles, should show up, too, they said.
Savings bonds have a number of advantages for savers, not the least of which is that they are paying very attractive interest rates at the moment.
With the I-bond, interest actually involves two rates. One is the underlying rate, set every six months and covering all I-bond solds during the next six months. This rate remains constant for 30 years, unless the bonds are redeemed. The other is the inflation adjustment, which is reset every six months and compensates the holder for the past six months' inflation. Currently, these rates work out to 6.98 percent for I-bonds.
EE-bonds, meanwhile, are paying 5.19 percent.
There are also tax advantages to savings bonds. Interest is exempt from state and local income taxes--a particular advantage for savers in high-tax jurisdictions such as the District--and federal taxes are deferred until the interest is actually paid when the bond is cashed.
And interest may be tax-free if used to pay higher-education expenses, though this benefit is subject to a variety of limitations, including income.
Many experts recommend savings bonds as one of the building blocks of a savings and investment portfolio. In addition to the tax benefits, they are safe, relatively liquid and available in very small denominations for beginners. EE bonds sell for as little as $25 for a bond with a $50 face value.
But they don't recommend buying bonds on a credit card if you are carrying a balance. If your credit cards are not paid off, use your money for those bills first. When you are able to pay off those bills each month, you can use a card to buy savings bonds.
In addition to the new Internet method, the Bureau of the Public Debt offers a couple of systematic savings mechanisms--the payroll savings plan, in which workers can buy bonds through automatic payroll deductions, and the newer Easy Saver plan, in which savers authorize automatic deductions from their bank accounts.
Easy Saver, which was started last year, already has 12,000 participants, of whom two-thirds are buying a bond a month, a bureau spokesman said.
To buy bonds over the Internet, you go to www.savingsbonds.gov and follow the instructions. (Choose the "buy bonds online" item on the menu at the left side of the screen.) It will walk you through the process, describing such things as the denominations available, ownership options and other points.
After an order is processed, the bonds will be mailed to the buyer.
This site also provides all sorts of information about bonds--earnings calculators, maturity information, details on the bonds-for-education program -- and it links to other areas, such as the Treasury Direct program for buying regular Treasury securities without going through a bank or broker.
Of particular interest to those who already own bonds are the maturity data and calculations, since thousands of people own bonds that have stopped paying interest.