The Fed continues to push interest rates higher – and it’s stunning the stock market. After all, who should take the risk of stocks if you can safely earn interest on an FDIC-insured bank account or on Treasury bills, which are IOUs directly from the government?
In recent years, savers have been penalized for keeping money in safe, short-term investments. Interest rates have been lower than “normal”, pushed down by Federal Reserve policies and by banks believing they need not pay higher rates to attract depositors seeking of security. It takes some time for banks to pass on these higher rates.
But finally, you can earn more on your “chicken money” – almost 4% – safely!
Your chance to get safer higher interest rates
And the good news is that you are now able to easily take advantage of these higher rates on the open market. You’ve probably opened an account at TreasuryDirect.gov to buy those attractive Series I Savings Bonds. Well, you can use it same account to buy treasury bills – short-term US government IOUs – the safest and best credit in the world.
Click this link to read my article on how to open a Treasury Direct account if you haven’t already. This is the same account you used to buy savings bonds.)
At the time of this writing, 6-month Treasury bills are yielding nearly 4%! The rate changes every week during the huge auction (read below). Here are the details.
Buy US Treasury Bonds through TreasuryDirect.gov
Yes, this is the same account you opened to buy savings bonds. Once you are logged into your TreasuryDirect account, click on the tab marked “Buy Direct”. Then click on “Treasury bills”. You’ll have a choice of maturities, so scroll down to 26 weeks – 6 months.
You will have the choice of the next weekly auction dates. Choose one, then scroll down to insert the dollar amount of your purchase. Your bank information will load automatically. Click “buy” – and you’re ready for the Treasury to debit your current account on auction day.
You get the rate set at auction, usually within a few basis points of the current 6-month Treasury bill rate you can find on CNBC. Interest is deposited directly into the same bank account. And the interest is exempt from state income tax!
You will also be asked if you would like your Treasury Bills to be automatically “rolled over” at maturity, accepting the interest rate then in effect. I suggest selecting at least two or three automatic rollovers. You can always access your TreasuryDirect account and change this direction, if you want the money returned to your bank account when the T-bill matures. But you can’t get the money back before the due date.
You can buy treasury bills with maturities ranging from 3 months to one year, as well as longer-term treasury bills. A tip: Buy every two or three weeks by staggering the deadlines. Then, if rates go up when you roll, you’ll enjoy higher rates as each matures. (And the reverse if rates drop in 6 months when your Treasury bonds mature.)
You don’t need to have a lot of money to get started. The minimum investment in treasury bills is only $100. And it’s easy to buy them. Simply go to www.TreasuryDirect.gov and follow the “guided tour” to learn how to open an account.
You will need your social security number, as well as your bank routing number and account number, which you will find on your checks. You’ll be setting up a password-protected account in minutes. It’s the same security that protects trillions of treasuries traded daily, so don’t worry about doing it online. Even a tech-savvy consumer can do this easily, I promise.
Your bank will be sorry to see that low-interest money disappear! But you’ll appreciate seeing the higher interest payments automatically deposited into your checking or savings account. It’s the wild truth!