I’ve been a BankDirect customer, earning American Airlines miles, since July 2003. In a low interest rate environment, the return to a mileage checking account turns out to be pretty good. I don’t use it as an alternative to investing but since I have fairly large business expenses that get reimbursed, I deposit those checks in my account and they sit for a month before I pay off my credit card — and I earn plenty of miles.
The Durbin Amendment made checking accounts less profitable for banks and BankDirect responded by instituting a $12 per month fee on all accounts, something you can’t avoid with direct deposits or minimum balances. So at $144 a year, the account makes the most sense for generous signup bonuses in the first year, and then only if you have big checking account balacnes as I do (short-term cash). But you have needed big balances to make the account work on an ongoing basis.
Unfortunately BankDirect will be further limiting the mileage-earning on these accounts.
BankDirect has awarded 100 miles for each $1000 in average balance each month. So a $5000 balance earned 500 miles per month.
Now, effective June 1, new rules (.pdf) will be in place.
Signup bonuses of up to 22,000 miles:
- 1000 AAdvantage miles for account opening
- 1000 AAdvantage miles for being referred by an existing accountholder
- 10,000 AAdvantage miles for direct deposit (6 consecutive months of $2000 minimum per statement cycle)
- 5000 AAdvantage miles for using billpay (3 different payees, at least $500 per month, for 6 consecutive statement cycles)
- 5000 AAdvantage miles for using Visa Checkcard (12 transactions totaling at least $500 per month for 6 consecutive statement cycles)
In addition you can earn up to 10,000 miles by referring new customers to BankDirect (1000 per new customer).
But the big changes are to ongoing mileage-earning.
- They will only award the 100 miles each month for every $1000 average balance up to the first $50,000 in balances.
- After that, earning is cut by 75% to 25 miles for every $1000 average balance above $50,000.
- There no longer appears to be a $200,000 average balance limit for earning miles.
Now, most customers don’t keep $50,000 miles in their checking account so it will be a non-event. But earning rates are being cut for folks earning more than 5000 miles per month currently. There’s no question that 5000 miles per month is still worth it at the $12 monthly fee. But keeping higher balances in the account will be more questionable.
Different rules and earn rates exist for money market accounts and for CDs which have been less popular in the mileage community.