Ordinarily, it is BestCashCow’s view that consumers, young and old, should keep a certain part of their assets in the highest yielding online savings and online CD accounts that they can find. We also encourage folks to have a look at local savings and local CD rates before they jump into online accounts and those rates can be competitive in certain markets.
It is almost unprecedented that we would provide advice that runs contrary to that recommendation, but this is one of those times.
The basics of a Bask Bank Account
Bask Bank, a new subsidiary of Texas Capital Bank, is offering depositors 1 American Airlines AAdvantage® mile for every dollar kept on deposit for one year. If your account has an average balance of $100,000 in month 1, you will earn 8,300 AAdvantage® miles in that month. If you maintain the same balance in month 2, you will earn 8,300 AAdvantage® miles in that month. And, if you hold that average balance for a full year, you will get 100,000 AAdvantage® miles over the course of the year. The account has no fees and no minimum balances.
The bonuses in a Bask Bank Account
Bask bank is currently giving a 5,000 AAdvantage® mile sign-up bonus for funding an account with $1,000 for 30 days. They will also give you a 1,000 AAdvantage® miles “feedback bonus” for rating the account opening process on their website or mobile app. While that is an easy 6,000 AAdvantage® miles on top of the base miles you earn, it the “Balance Bonuses” that make Bask Bank especially compelling. They are as follows:
- $25,000 held on deposit for one year earns a 10,000 mile bonus,
- $50,000 held on deposit for one year earns a 20,000 mile bonus,
- $100,000 held on deposit for one year earns a 40,000 mile bonus.
According to the terms and conditions, these Balance Bonus are paid semi-annually.
With all bonuses factored in, $50,000 held in Bask Bank for one-year will earn 76,000 AAdvantage® miles and $100,000 held in Bask Bank for one-year will earn 146,000 AAdvantage® miles.
5 Reasons Why this is Attractive
First, the savings rates among well-known online banks is currently between 1.70% and 1.85%. In the best case, $50,000 deposited at 1.85% and held there for one-year (if the rate does not decline further) will generate $925 in fully taxable income. But, we suspect that the Fed may lower rates again in 2020 and you may not even be able to generate the full $925.
Second, even if you get the $925, there is nothing too exciting about $925, especially when that money is fully taxable. It is important not to lose principal, but the interest that you are going to make is $925. $925 on $50,000 just isn’t sexy. By contrast, the 76,000 AAdvantage® miles (or 146,000 AAdvantage® miles if you deposit $100,000) that you could be earning with a Bask Bank account can literally get you places.
Third, American Airlines AAdvantage® miles have real value. In its credit card section, BestCashCow values AAdvantage® miles as easily being worth 1.80 cents each when redeemed for travel on American Airlines. Applying that value, the 76,000 miles are worth $1,368. (We should note here that the IRS too puts a value on these miles, but that value is lower than BestCashCow’s and Bask Bank is going to send you a 1099-INT each year that values the miles at 0.42 cents each).
Fourth, American Airlines AAdvantage® miles have aspirational value. I personally have redeemed American Airlines miles at over a 5 or 6 cent per mile valuation on Business Class seats to Hawaii, London and Madrid. Some friends and family members have found even more valuable redemptions when redeeming AAdvantage® miles on some of American Airlines’ OneWorld partners. While I might not necessarily have taken these trips without the miles, there is real value in the fact that these miles have taken me to places that I might not have gone and in a class of service that I might not have flown.
Fifth, airline miles and loyalty points from major airlines like American are the ultimate “alternative” currency. It is worth noting that American AAdvantage® miles have largely held their value for decades. Management at American (and United and Hyatt for that matter) have realized real value in their loyalty programs, and created an ecosystem in which credit card companies have flourished through offering their currencies. Due to the dependence on these programs, devaluations are likely to be small and incremental. Unlike bitcoin or gold or some other alternative currency, these reserves can make sense. I’ve also redeemed American AAdvantage® miles to avoid the high cost of last minute tickets when personal or business travel has required me to travel immediately, and now that American has removed its $75 close-in ticket fee, this miles are even more valuable for this.
For many years, BestCashCow has strongly encouraged folks who are at all inclined to travel to opt for credit cards with travel rewards programs over cash-back programs. Rather than just be frustrated by falling savings rates, 2020 might be the year to also take airline miles over interest.