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Author: KenAtPcs Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35400  
Subject: Re: Great way to buy I-Bonds Date: 6/6/2003 12:22 PM
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Certainly the fee the government pays for credit card usage is a big part of it. But obviously they must have known that they were going to pay that when they started the program. Another part of it was the fact that I Bonds were issued in paper form. So, someone buying them and turning them in 6 months later (now, 12 months) incurred the expense of printing, order processing, and mailing, all for very little benefit to the Treasury. IOW, they weren't able to make up the expenses with "volume". They'll be doing away with paper Bonds, too, so that extra expense will also be going away. What's left (book entry Bonds via ACH purchases) should have FAR less administrative costs.

I think the bottom line is, the Treasury probably thought that being able to buy Bonds with credit cards would be a convenience. They did not anticipate that credit cards would become (for some) the ONLY reason that people bought Bonds (and it is that group of people who have made the use of credit cards prohibitively expensive to the Treasury). Of course, I could be totally off-base here, and maybe the Treasury all along planned to yank credit card purchases away, using them initially only to popularize the Bonds.

Ken
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