Prior to World War I, the government financed their bankroll for participating in wars by borrowing money from other countries. However, in 1917, the international banks were closed and the basis for our savings bond system was launched.
Like other predecessor bonds, Patriot bonds are marketed as another tool allowing Americans to support our wars. The proceeds of this particular bond are applied towards funding anti-terrorism efforts. The profits are deposited into a general fund. Ultimately the money funds anti-terrorist causes and must follow legal guidelines before being spent.
Patriot bonds were introduced December 10, 2001. Except for the words “Patriot Bond” embossed on the top portion of the bond (between the Social Security Number and issue date) they are identical in payment, maturity, terms and interest structure to the paper EE Savings bond.
Patriot bonds are available for purchase in any amount of $25 or more (including penny increments). An individual can purchase up to $5,000 of any savings bond annually as that is the maximum amount per social security number.
According to the US Treasury, Patriot bonds earn interest as follows:
- Bonds issued after May 2005 earn a fixed rate of return.
- Variable rates for bonds bought from May 1997 through April 2005 are based on 90% of the 6-month averages of 5-year Treasury Securities yields
- Interest compounds semiannually for 30 years
Like the EE Series Savings bonds, Patriot bonds can benefit from certain tax benefits when they are cashed in. Patriot bonds are exempt from state and local income tax (but not federal tax). Participants in the savings bond program may be entitled to more tax benefits when the bonds are cashed out to pay for higher education costs.