Treasury DirectThis afternoon, I redeemed some of the bonds I’d purchased from TreasuryDirect over the past couple of years — $853.55 worth to be exact.

According to Clark Howard, I jumped on the I-Bond and EE-Bond bandwagon much too late:

Series I-bonds come with two interest rates. The first is a fixed interest rate that stays the same for as long as you own your bond. The fixed rate is set when you buy your bond. The second is the floating rate, which is based on the inflation rate in the country. The government resets that rate each May and November.

Series I-bonds that were purchased from 1998 through October 2001 are the best to have. They earn great rates and should probably be held for a full 30 years. That is because they earn somewhere between 3 percent and 3.6 percent (the fixed rate), plus the current rate of inflation. Right now that total is between 6.15 percent and 6.76 percent. That is the best rate on savings anywhere. Remember that the total interest earned changes each six months and will reset again in May.

If you bought your Series I-bond between November 2001 and October 2002, you are currently earning 5.13 percent. A good deal and worth holding on to for now.

However, those who purchased from November 2002 to the present are earning much lower current rates — between 4.12 percent and 4.72 percent. Remember, the difference is based on when you originally bought your Series I-bond.

And looking at the rates I was earning, well, let’s just say that money would serve me better elsewhere. All of them were under 4%.

I’d have liked to cash out entirely, but I’ve got another 3 months to go until I can redeem the remaining funds (around $615) locked up. When the time comes, you can bet I’ll have a zero balance with the government. They’re just not competitive anymore.

As for what I’ll do with this “found” money, I haven’t made up my mind just yet.

I should throw it all into the ING Direct savings account, but I’m leaning more towards throwing around half of it at debt and the other half to my checking account to give myself more of a cash cushion — something I’ve been missing since the final siding payment cleared.

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