Savings rates are falling and so too are CD rates. A lot of people are reaching out to BestCashCow to complain about falling interest rates, but unfortunately we just list these rates (some folks don’t understand that we don’t set them). It is disappointing and frustrating for savers.

This is the time of year when many also find their taxes to be frustrating. Unless you are a billionaire who lives in a state with no personal income tax (Florida, Texas, Washington, etc.), you are probably cutting checks for a whole lot of the interest that you earned last year as a result of Trump’s “tax cuts”.

These dual frustrations have contributed for more than a decade to asset price inflation and probably led many into the stock market who shouldn’t be there. We like to stay away from stock market prognostications on BestCashCow, but suffice it to say that I do not see the entire market advancing much from here. Under any circumstances, it seems like a bad time to allow yourself to be drawn so heavily into the market that your allocation to equities is well above your comfort level. It also seems like a bad time to be rushing hastily into bonds. Against the backdrop of tremendous uncertainties in 2020, holding cash in the form of savings accounts and CDs is critical.

I recently wrote about Bask Bank. A Bask Bank savings account is now offering 1 American Airlines AAdvantage® mile per dollar on deposit per year and offers bonuses for those depositors maintaining $25,000, $50,000 or $100,000 over time. It is unique in that it is the one savings offer in the market which can lessen the frustration caused by falling rates and higher taxes by enabling you to earn "interest" in an alternative currency in lieu of cash interest. By redeeming miles for international and/or business class travel, I have found that American Airlines AAdvantage® miles can be redeemed for well over 4 cents each. Hence, this is a currency that I will gladly take over cash interest when interest rates are low.

To boot, while these miles are going to be reported on a 1099 at the end of the year, they are going to be reported at only 42 basis points (or 42/100ths of a cent) per mile. With all the bonuses currently being offered, $250,000 deposited at Bask Bank will earn 296,000 AAdvantage® miles over the next twelve months and generate a tax liability of only $1,239.

$250,000 deposited in a savings account over the next year is going get you just over $4,250 in fully taxable interest over the next twelve months (assuming you are able to continue to get a 1.70% APY rate through the year). The low return and the high tax rates on the full amount could be very frustrating to you this time next year.

If you are at all inclined to travel, Bask Bank is definitely worth a look.

You will be less frustrated this time next year, and you could be planning a really neat spring or summer getaway.

Anyone who lived through 9-11 and the financial collapse in 2008 and 2009 remembers how extraordinarily painful were those periods for the airline industry and their employees. And, even the industry’s staunchest critics (hard core environmentalists, etc.) certainly recognize that a return to those difficult times is not in anyone’s interest. Yet, as a country, we are going to get through the Coronavirus and we are going to get through Trump, but somehow it is starting to seem that the three major airlines might not all get through 2020.

Without flying yourself, you can take steps to help the airlines out, and the easiest step is to accumulate frequent flier miles on those airlines that you will be inclined to fly in the future. This is a form of extending credit to the airlines, and it is a form of credit that has proven time and time again to survive bankruptcy.

If American Airlines is an airline that you fly, the easiest step you can take is to open a Bask Bank savings account. I’ve written about Bask Bank here. I believed in January that the prospect of getting AAdvantage® miles was very attractive in the low rate environment in January. I’ve noticed that many readers were engaging in a valuation exercise, valuing the miles they would receive against alternatives in the savings and CD market as if they were purchasing the miles (see the comments in this article). If that is your approach, the Fed’s most recent move makes the opportunity even more interesting.

Learn More About Bask Bank here.

If United is an airline that you fly, the easiest step you can take is to move your Chase Ultimate Rewards points to your United Mileage Plus account. Every time you convert your points, Chase is making a purchase of the miles from United.

And, if Delta is an airline that you fly, you can move your American Express Membership Rewards points to Delta Skymiles. Again, this action prompts a purchase of miles and a payment to Delta.

If you are not altruistic, you can even consider all of this to be completely in your self-interest. If history is any guide, when everything settles and people begin traveling again, you will find fantastic redemption values for your airline miles at all three of these airlines, especially for business class seats on long haul and international flights.

The Federal Reserve has left the Fed Funds rate at zero to 0.25%, and projected no plans to raise interest rates through 2022. The good news is that it is still not considering negative interest rates in the US.

It is projecting a 6.50% decline in US GDP in 2020.

The Fed sees inflation well below its 2% objective and it sees unemployment at extraordinarily high levels so there is no pressure whatsoever to raise rates. Meanwhile, it remains committed to using all sorts of tools involving its lending programs in order to avoid a collapse in the economy.

Against, this backdrop, it is very difficult to say that cash is exciting. It is safe, it is stable, and it is still going to be trading at face value plus interest if the market loses half of its value as this Coronavirus-induced economic crisis continues. But, compared with the performance of the stock market over the last several months, it is hard to make a compelling case for cash and holding large amounts of it carries the risk of a devaluation of your purchasing power. I suggested recently that folks might want to resist the temptation to go completely into cash, even as the economy deteriorates.

There is another temptation that I also suggest that folks resist and that is the temptation to give up on cash and accept zero returns. All major online banks are still offering yields of over 1%, and 1% is better than zero, especially when you factor in the value of compounding interest rates over time. We received notes from lots of folks who were excited about earning 2.50% instead of 2% this time last year, and while savings and money market accounts feel like trash now, it is just as important in this environment that your cash resources are earning as much they can. You can compare online savings rates here and you should also continue to check local savings rates where you live, here.

Savings alternatives that may preserve the value of your cash while giving you access to something else of value, instead of interest, could be particularly interesting to those whose primary goal is to preserve capital. Bask Bank is offering an account that pays interest in the form of American Airlines AAdvantage miles at 1 point per dollar on deposit per year. Bask Bank also offers bonuses that could total as much as 42,000 American AAdvantage points if you maintain a balance over $100,000 for over a year. Since these bonus are due to expire at the end of June, I think that this is a good time for anyone planning to travel again in the future to look at accumulating miles through this program. Learn more about Bask Bank's offer here.

While this remains a difficult time for savers, I’d encourage folks to look at remortgaging and home equity options, if they are at all inclined.