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BankDirect’s AAdvantage Mileage Deal Not Quite as Good as It Looks

Texas-based BankDirect offers an account where you can earn American AAdvantage miles for keeping your money in a checking account with them.  The short version (the long version is here at View from the Wing) is you get a signup bonus approaching 22,000 miles for opening a checking or money market account, and then you’ll earn 100 miles for every $1,000 you keep in the account.

The quick math:  $50,000 in the account for a year earns you the signup bonus plus 60,000 miles.  Sounds great.

Except this:  it pays .05% interest.

Sure, interest rates are terrible everywhere now.  But I’ve got a savings account with Zions Bank that pays 1.05%.    Taking advantage of this deal would mean I’m giving up the 1% annual interest.

In the example above, I’m giving up $500 in interest (minus taxes) for 82,000 miles (in year one, 60,000 miles in future years).  Now, that’s not a bad deal, but it’s not a great deal either, especially if interest rates rise.

Just something to keep in mind as you look around for “free” ways to get frequent flyer miles.  There are TONS of great deals out there (especially with the recent batch of credit card signup bonuses); just make sure you’re taking into account what you’re giving up to get those miles for free.

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  1. 1. I don’t suggest this in lieu of an investment. I just think it’s a pretty good checking account. I wouldn’t keep $50k in the account.

    2. For folks who keep $2500 on average in their checking account, this is a pretty good deal. How many checking accounts are better? I wind up with a pretty decent average checking balance just as a result of float, I get reimbursed for business expenses (eg travel etc) before by credit card statement is due. I don’t move the $ out for a few days then move it back to pay bills.

    3. But even in your example it’s a pretty kickin’ deal. $500 in interest is taxable, assume you net $350 (say 25% marginal federal rate and 5% state). You’re giving up $350 in incremental after tax interest for 60k American miles. That’s less than 3/5ths of a penny per mile. I’d buy American miles at that price, every day.

    4. Anyone with an airline credit card is buying miles at a penny or two a day anyway, since they’re forgoing a cash back card’s rewards. Implicitly anyone with a co-branded airline card believes this is a pretty sweet deal relative to a savings account!

  2. I’m not really disagreeing…My point wasn’t that this was a bad deal (that’s why I said this “wasn’t a bad deal”), it’s more that for lots of people this isn’t the best option out there. Lots of the credit card bonuses required little spend for lots of miles.

    We’ve both read comments on blogs and certainly in Flyertalk when a credit card deal comes up, people writing that they’re overextended, or they’ve got a ton of credit cards and bad credit, or other difficult financial situations, yet they are still considering applying for a card.

    For many people, they are better off with the cash than with points (even if points are being “bought” at a good exchange rate). I count both of us as lucky that we can play around with all this stuff – there are plenty who are on less sure financial footing (which was really my point – make sure you read and understand the fine print, more than suggesting anything bad about this particular deal.)…

  3. This deal is frigid cold now that Bank Direct has started charging $12 PER MONTH on all balances for their mileage checking accounts. In addition I never received any notice in the mail that they were going to start charging this monthly fee. I called to have this waived and was told curtly that they weren’t waiving fees for ANYONE!

    This bank is definitely shady and I closed my account – I can’t trust a bank to keep my money if they are going to be liberal with withdrawing my money from it without giving me fair warning.

    Additionally, I had made a request to have them resend me a pin for my bank card and they never did it. I had to call them a second time to do it. Their customer service reps promise to call me back with status updates and never do.

    Their online banking website is also miserable. It looks and functions like a website from when the Internet first was born. Nowadays, a smart kid can build a website better than what they have.

    I filed a complaint with the BBB and would warn any and everyone against opening up accounts with this unscrupulous bank.

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