Bank of America Preferred Rewards: Do the Math Before Considering It as a Better Financial Option

When Bank of America rolled out their Bank of America Preferred Rewards program they were doing something that not many banks have done before. They were actually offering some real rewards for the people who make up the majority of the money that they are holding. The program is for customers who are able to place a minimum of $20,000 in select accounts at a Bank of America Bank. By doing so, you are able to reap the benefits of extra rewards that range from increased interest rates on savings, higher rewards from your Bank of America credit card, reduced maintenance fees on mortgage costs, lower interest on loans, and more.  Looking from the outside in, this program looks like a no brainer. What you don’t realize, is that there is an alternative option that can save you a lot more money, with a lot less work. 

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First, lets look at all of the details for the Bank of America Preferred Rewards Program

If you average a balance of $20,000 – $49,999 over a 3 month period in a qualifying Bank of America or Merrill Lynch account you will qualify for the Gold Tier of the Bank of America Rewards Program. 

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The Gold Tier Includes

  • 5% interest rate booster for money in a Rewards Money Market Savings Account
  • 25% rewards bonus on eligible Bank of America credit cards when your rewards are deposited into a BOA checking or savings account
  • You will not be available for refunded ATM fees at non Bank of America ATM’s
  • You will not be available for $0 online equity and ETF trades from your Merrill Lynch account
  • Priority Service through the Bank of America Preferred Rewards Center
  • A $200 reduction in the orientation fee on a new home purchase or loan refinance
  • A 0.25% reduction on any Bank of America auto loan
  • Various fees will be waived on select Bank of America checking and savings accounts

 

If you average a balance of $50,000 – $99,999 over a 3 month period in a qualifying Bank of America or Merrill Lynch account you will qualify for the Platinum Tier of the Bank of America Rewards Program.

The Platinum Tier Includes

  • 10% interest rate booster for money in a Rewards Money Market Savings Account
  • 50% rewards bonus on eligible Bank of America credit cards when your rewards are deposited into a BOA checking or savings account
  • Up to 12 refunded ATM fees from non Bank of America ATM’s (1 per billing cycle)
  • $0 online equity and ETF trades from your Merrill Lynch account on up to 30 trades per month
  • Priority Service through the Bank of America Preferred Rewards Center
  • A $400 reduction in the orientation fee on a new home purchase or loan refinance
  • A 0.35% reduction on any Bank of America auto loan
  • Various fees will be waived on select Bank of America checking and savings accounts

If you average a balance of $100,000+ over a 3 month period in a qualifying Bank of America or Merrill Lynch account you will qualify for the Platinum Honors Tier of this Bank of America Rewards Program. 

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The Platinum Honors Tier Includes

  • 20% interest rate booster for money in a Rewards Money Market Savings Account
  • 75% rewards bonus on eligible Bank of America credit cards when your rewards are deposited into a BOA checking or savings account
  • Unlimited refunded ATM fees from non Bank of America ATM’s (1 per billing cycle)
  • $0 online equity and ETF trades from your Merrill Lynch account on up to 100 trades per month
  • Priority Service through the Bank of America Preferred Rewards Center
  • A $600 reduction in the orientation fee on a new home purchase or loan refinance
  • A 0.50% reduction on any Bank of America auto loan
  • Various fees will be waived on select Bank of America checking and savings accounts

Anyone with this amount of money in any bank should come to expect treatment like this, but as this is not normally the case, it is refreshing that Bank of America is offering benefits of this kind. 

With all of the rewards and benefits laid out, lets see what the savings are when actual numbers are figured into the equation. We will use the absolute base level of this program, which is $20,000, and determine how much money you could actually save. 

For this situation, we will use the Bank of America Cash Rewards credit card as our example for the bonus credit card rewards. The Bank of America Cash Rewards Credit Card offers 3% cash back on gas, 2% cash back on groceries, and 1% cash back on everything else. Everyone also qualifies for a 10% cash back bonus when you redeem your rewards into a BOA checking or savings account. This Bank of America card caps your combined gas a grocery cash back bonus at $1,500 per quarter. For our equation we will assume $750 is spent on gas per quarter, $750 is spend on groceries, and $750 is spent on other purchases. 

We will add in the reduction in mortgage fees and also assume that an auto loan of $20,000 has been taken out at 1.99% APR over 36 months.  

The only amount that could really change is the amount that the auto loan is for. As said before, we will assume a $20,000 loan for our example and at the end will get a grand total of savings for each tier in the Bank of America Preferred Rewards Program. 

Gold Tier 

Rewards Money Market Savings Account

  • Standard APY is 0.03% APY resulting in $6 earned interest on $20,000 over 12 months or a total of $20,006. 
  • Added booster brings the interest rate to 0.05% resulting in $10 earned interest on $20,000 over 12 months or a total of $20,010. 
  • Total Added Bonus is $4 after 1 year. 

Bank of America Cash Rewards Credit Card

  • Normal 3% cash back rewards on $750 spent on gas per quarter after 1 year with added 10% bonus is $99.
  • Bonus with 25% added to original cash back earned on spending $750 on gas each quarter after 1 year is $112.50. 
  • Total added bonus of $13.50 after 1 year. 
  • Normal 2% cash back rewards on $750 spent on groceries per quarter after 1 year with added 10% bonus is $66. 
  • Bonus with 25% added to original cash back earned on spending $750 on groceries each quarter after 1 year is $75.
  • Total added bonus of $9 after 1 year. 
  • Normal 1% cash back rewards on $750 spent on all other purchases per quarter after 1 year with added 10% bonus is $33.
  • Bonus with 25% added to original cash back earned on spending $750 on groceries each quarter after 1 year is $37.50.
  • Total added bonus of $4.50 after 1 year. 
Overall Added Bonus is $27. 

Bank of America Mortgage

  • Gold Tier reduction of $200 in orientation fee
  • Overall Added Bonus is $200

Bank of America Auto Loan

  • Amount total per year paid on $20,000 auto loan spanned over 36 months at 1.99% APR is $6,876.
  • Gold Tier reduction is 0.25% APR reducing the rate to 1.74% APR resulting in the amount paid over 1 year of $6,852. 
  • Total Savings is $24 per year
Total Savings for $20,000 in deposits Gold Tier Members: $255
Total Savings for $50,000 in deposits Platinum Tier Members: $518
Total Savings for $100,000 in deposits Platinum Honors Tier Members: $871

If you are an active trader and/or utilize non Bank of America ATM’s, then, your savings will increase even more. Also, as you see, if you are able to put even more cash away to qualify for the Platinum and Platinum Preferred Tiers, you will see even more savings. 

Now, the easier way to possibly save/earn a lot more money is with an online savings account. How is this possible? The answer is simple. Online banks do not have the overhead that traditional banks do because they do not have to staff and support hundreds of buildings all over the country. In turn, they pass these savings onto their customers in the form of interest.

Here is a list of online banks and the current interest rate they offer on their savings products. 

Ally 0.99%
Capital One 360 0.75%
EverBank 1.01% for the first year
Average APY
0.92%

Total after interest with $20,000 in an online savings account: $20,184

Total after interest with $50,000 in an online savings account: $50,460

Total after interest with $100,000 in an online savings account: $100,920

Here is the break down of the Bank of American Preferred Rewards Program vs. an online savings account after 1 year:

$20,000 Gold Tier Added Bonus: $255 $20,000 Online Savings Account Bonus: $184
BOA Preferred Rewards is better by $71.
$50,000 Platinum Tier Added Bonus: $518 $50,000 Online Savings Account Bonus: $460
BOA Preferred Rewards is better by $58.
$100,000 Platinum Honors Added Bonus: $871 $100,000 Online Savings Account Bonus: $920
Online Savings Account is better by $49. 

Considering the amount of money that you have invested, these differences may seem minimal. Remember, the Bank Of America Preferred Reward numbers include the reduced mortgage orientation fees and the reduced APR on the auto loan. Both of these items will not be a part of everyone’s portfolio, especially the mortgage, which you will hopefully only be signing up for once or twice in your life. 

Now, we will compare the Preferred Rewards Bank of America savings (including the interest rate booster on your money market savings account and the Bank of America Rewards card while removing the mortgage fee savings and the auto loan APR reduction) to that of an online savings account over the course of one year. 

$20,000 Gold Tier w/o Mortgage and Auto Loan Savings: $31 $20,000 Online Savings Account Bonus: $184
Online Savings Account is better by $153.
$50,000 Platinum Tier w/o Mortgage and Auto Loan Savings: $82 $50,000 Online Savings Account Bonus: $460
Online Savings Account is better by $378.
$100,000 Platinum Honors Tier w/o Mortgage and Auto Loan Savings: $211 $100,000 Online Savings Account Bonus: $920
Online Savings Account is better by $709. 

With the mortgage and auto loan APR reduction removed, the online savings account comes out way ahead. There is also the fact that you can deposit your money into an online savings account today and immediately begin to reap the benefits. With the Bank of America Preferred program, you have to wait a minimum of 3 months from the time of your deposit, and then apply for the program. While it is nice to see a bank offering a program like this to its best customers, an online savings account is much easier to establish and has the potential to save you hundreds of dollars more each year.