Since BankDirect announced reduced mileage-earning for checking accounts that hold over $50,000, I’ve gotten several questions about other banks that will reward you with miles.
I’ve been a BankDirect checking account customer since July 2003, and I use it as a checking account. It is not an investment account that pays a rate of return in miles rather than money (and which doesn’t report earnings to the IRS).
Sure, in a very low interest rate environment that can appear attractive. BankDirect awards 100 American Airlines miles per every $1000 average balance every month. Depositing $50,000 at the bank generates 60,000 miles per year. If you value those miles at 1.5 cents apiece that’s a $900 return which isn’t reported to the IRS. If your rate of return on that cash would otherwise be somewhere less than 3% you’re probably coming out ahead.
But I’ve never justified it that way, and the account has still made sense. I have business expenses that get reimbursed, they sit in my checking account for a few weeks before getting shipped over to my credit card company. So the cash has to remain liquid, and it’s easiest to pay the bill from a checking account. Parking cash in BankDirect has been lucrative for me, much more lucrative than big balances with any other checking account would have been.
With declining profits to banks for holding checking account cash, they instituted a $12 per month fee — that you can not get out of with minimum account balances or with payroll direct deposit. And so I no longer think the account makes sense for people that don’t carry ~ $5000+ average balances.
Squeezing the value at the low end through fees and at the high end by only awarding 25 miles per $1000 on balances over $50,000 has caused folks to go looking at alternatives. And the bottom line is that there really is no direct replacement for BankDirect, although there are several options for earning miles through your banking and brokerage relationships.
Miles for Checking Accounts
Other checking account products earn miles for signup, but I don’t know any others that reward you on an ongoing basis for the balances you keep in your account. Two banks that offer mileage signup bonuses for checking accounts are:
- UFB Direct offers 1000 American Airlies miles for direct deposit and they offer an American Airlines mileage-earning debit card that gives 1 mile per $2 in spending, not to exceed 120,000 miles per year.
- Citibank often offers American Airlines bonuses for new checking accounts – these offers usually include a requirement of spending on their debit card and also direct deposits. I wouldn’t take their 30,000 mile offers, though, since Citi sends out 1099 forms reporting the miles awarded on their banking products to the IRS. If you’re paying taxes on those miles you’re not really coming out ahead, as the reported values tend to be rather inflated.
Mileage-earning Debit Cards
There are also still mileage-earning debit cards, and not only the one above from UFB Direct.
Now those products have mostly gone extinct, since the Durbin Amendment made checking accounts less profitable and capped the interchange fees charged on debit transactions such that it’s no longer profitable to reward debit charges.
But Suntrust Bank offers a Delta miles debit card that earns 1 mile per dollar spent. Through the end of June they’re offering up to 10,000 Delta miles for a new debit card: 5000 miles after first purchase to also include 5000 additional miles $1,000 in purchases within 90 days of account opening. The usual offer is just that 5000 miles after first purchase. The card comes with a $75 fee.
I find the Suntrust debit card especially useful for paying taxes. Because while the fees for paying taxes by credit card are quite high, at the lowest nearly 2%, and so I don’t find that attractive… PayUSATax.com offers $3.49 debit transactions, regardless of amount. Paying a $5000 tax bill earns 5000 miles with the card, for a $3.49 fee. (Suntrust tells me they cap debit transactions at $35,000.)
The biggest challenge some face with Suntrust is that they seem to allow anyone to open an account online, but there are plenty of reports of account closures for people who do not list an address in one of the states they operate in.
There’s also still an Alaska Airlines mileage earning debit card from Bank of America. I didn’t realize that was the card, since they don’t seem to promote it, but I got the link to request one from Free Frequent Flyer Miles. It earns 1 mile per $2 in spending, but Bank of America doesn’t award points for tax payments.
Miles for Investing
Years ago I opened a TD Ameritrade account and earned Starwood points for my initial deposit, though it appears TD Ameritrade no longer has any mileage offers that I can find.
Sharebuilder offers small signup bonuses of 2000 miles with US Airways (I used this as a ‘Grand Slam’ hit a couple of years ago), with United, and with Delta (Skymiles elites actually earn 3500 points). These Sharebuilder links are courtesy of Free Frequent Flyer Miles as well.
But the big mileage earning comes from Fidelity.
Fidelity offers up to 50,000 miles from your choice of American, United, or Delta with a deposit of $100,000. You used to be able to ‘cycle’ the same money in and out to get up to that $100,000 mile threshold, but it no longer seems to be possible.
With each of these offers, Fidelity will give you up to 50,000 miles based on the amount you deposit into your account within 90 days of opening.
- 15,000 miles for a $25,000 deposit
- 25,000 miles for a $50,000 deposit
- 50,000 miles for a $100,000 deposit
And while Fidelity doesn’t give you an ongoing bonus for your balance the way that BankDirect does, you can earn one bonus per 12 month period. So get the 50,000 American miles if you can park that much cash or move in that big an investment, wait 12 months, and get a bonus through another airline offer. And these three mileage-earning bonus offers have not, to date, been 1099’d.