Bank of America Preferred Rewards: A 75% bonus but watch the rates

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Updated on Wednesday, December 10, 2014

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Bank of America recently launched a new rewards and benefit program for its best customers, called Bank of America Preferred Rewards. We think it’s a reminder of why you should do your homework when you’re offered something extra for being loyal.

The most enticing feature is this:

Up to a 75% bonus on all credit card rewards you earn.

You Earn unlimited 1.5 points per $1 spent on all purchases with the Bank of America® Travel Rewards Credit Card which means you can earn 2.6% in cash travel rewards back on all your purchases with no limits or caps.

So let’s say you spend $2,000 a month on the card.

You’ll earn $360 + a $270 bonus = $630 in travel rewards each year thanks to the 75% bonus.

No other option can give you that kind of no hassle reward value from your spending.

Sound tempting?

To qualify for the 75% bonus level you need to keep at least $100,000 in Bank of America checking, savings, or investment accounts (via Merrill Lynch).

Let’s think about what you could be trading off here.

Bank of America’s best savings accounts earn only around 0.10% interest, and that’s including a special 20% interest rate boost.

So on $100,000 you earn just $100 a year in interest.

In contrast, it’s easy to earn 1% or more with an online savings / checking combo. That would earn you $1,000 a year in interest.

So to earn an extra $270 in cash back a year, you could be sacrificing $900 a year in interest.

Is that a good deal?

Sure, you have to pay taxes on interest, but not on credit card rewards. So call it $600 a year sacrificed.

Unless you manage to spend over $50,000 a year on your card it’s just not worth the lost interest. That’s over $4,000 a month in card spending.

And even then you’re doing barely better than a good double cash back card like the Citi® Double Cash Card – 18 month BT offer, which doesn’t have a requirement to lock up hundreds of thousands of dollars at a bank that offers terrible rates. With the Citi® Double Cash Card – 18 month BT offer, you earn 2% on every purchase with unlimited 1% cash back when you buy, plus an additional 1% as you pay for those purchases.

What about the rest of the benefits?

These are the rewards you get with other deposit levels…

Gold ($20,000 in accounts)

  • A 5% interest rate boost on Money Market Savings
  • A 25% bonus on credit card rewards
  • No monthly maintenance fees
  • No fees for check orders, cashier’s checks, stop payments

Platinum ($50,000 in accounts)

  • A 10% interest rate boost on Money Market Savings
  • A 50% bonus on credit card rewards
  • Up to 12 out of network ATM withdrawals per year with fees refunded
  • No monthly maintenance fees
  • No fees for check orders, cashier’s checks, stop payments

Platinum Honors ($100,000 in accounts)

  • A 20% interest rate boost on Money Market Savings
  • A 75% bonus on credit card rewards
  • Unlimited out of network ATM fees refunded
  • No monthly maintenance fees
  • No fees for check orders, cashier’s checks, stop payments

When are you better off?

One way Preferred Rewards makes sense with high balances is if you have your IRA or brokerage account with Merrill Lynch, as those balances count toward the minimum balances for Preferred Rewards.

If you use a ‘Merrill Edge‘ account you get monthly fee free trades and you can keep your money in low cost index funds, so you can get a fair market return on your money with no unnecessary fees.

That makes Preferred Rewards a great deal.

Otherwise, get an online only bank account with no checking or ATM fees, and a high rate on savings.

Then get a cash back card that earns 2%. You won’t miss the extra 0.6% cash back because of all the interest you’re earning on your savings.

The information related to Bank of America® Travel Rewards Credit Card and Citi® Double Cash Card – 18 month BT offer has been independently collected by MagnifyMoney and has not been reviewed or provided by the issuer of this card prior to publication. These offers and/or promotions may have since changed, expired, or are no longer available.

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