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What's the Difference Between EE and I Savings Bonds?

written by: M Lambert•edited by: Laurie Patsalides•updated: 6/17/2009

The difference between EE and I Savings bonds is the way that the rates are determined for each type of savings bond. There are specific guidelines around purchasing and redeeming each savings bond. These regulations also show the difference between EE and I savings bonds.

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    What Is the Difference Between EE and I Savings Bonds?

    The difference between EE and I savings bonds is a distinct one. Although the United States Treasury issues both bonds there are different rules and regulations attached to each bond. The biggest difference between EE and I savings bonds is the way that the interest is calculated over time.

    EE bonds can be purchased electronically or at a bank. You can purchase these bonds as a gift for others. When you purchase the bonds at a bank, you will pay for the half of the value of the bond. The bond will take twenty years to reach maturity, which means that it will not be worth its face value until then. If you purchase them online you can buy them at face value for any amount with a minimum purchase of $25.00. The bonds earn a fixed rate of return, which is determined by the date of purchase of the bond. EE bonds are commonly used to pay for education expenses.

    I bonds are issued at face value. This means that you pay the entire amount when you originally purchase the bonds. The bonds then earn a fixed interest rate that is determined by the time when you purchase the bond. It also earns an inflation rate that is changed every six months according to the current rate of inflation. These rates are changed on May 1 and November 1 each year. You cannot redeem an I bond until it is one year old. You must hold the bond for five years before redeeming them to avoid receiving a penalty.

    Although there is a difference between EE and I savings bonds, they do have some things in common. For example they are both state and local income tax free. There is a limit to the amount you can purchase is $5000.00 per each year. Both of these bonds have tax benefits when used for education expenses. You are required to pay taxes on the interest earned when you redeem these savings bonds. Choosing the best savings bond for your circumstances will help you protect your money and earn interest.

    For an overview of everything related to savings bonds, check out: All you Need to Know about Savings Bonds.