Last year, Bank of America started heavily marketing their “Preferred Rewards” program, whereby you can get increased rewards rates on credit card spending by holding certain balances with Bank of America and Merrily Edge. Doctor of Credit goes into all its gory detail (linked below), but roughly, you get bonuses of 10%/25%/50%/75% for having balances of $0/$20k/$50k/$100k.
This has been scrutinized pretty heavily because it’s a lot of money to park somewhere, and for the most part the conclusion is that as long as you don’t have a 401k or IRA or investment account that you can roll into Merrill Edge to hit the thresholds, it’s NOT worth pursuing the bonuses. Here’s a particularly scathing (though mathematically on point) perspective:
(Side note: I’m trying out a new link/embed format; let me know if you’d prefer them inline instead).
Given that I don’t have enough savings to hit any of these thresholds (whether or not I include investments), I decided to pass, but as I was poking around the Bank of America site, I noticed something interesting (emphasis mine):
You are eligible to enroll in the Preferred Rewards program if you have an active, eligible Bank of America® personal checking account and maintain a 3-month average combined balance in your qualifying Bank of America deposit accounts and/or your qualifying Merrill Edge® and Merrill Lynch® investment accounts of at least $20,000 for the Gold tier, $50,000 for the Platinum tier, or $100,000 for the Platinum Honors tier. The combined balance is calculated based on your average daily balance for a three calendar month period.
What this means is (and for the sake of simplicity, let’s align the year starting in January) that as long as you have $20,000 (or 50 or 100) in your account for the first three months of the year (through March), you will qualify for the bonuses through the following March even if you move the money somewhere else! That cuts down the “cost” from the Consumer Watchdog article down to $150 or less depending on what tier you’re gunning for.
Let’s have some more fun with this. What if you had $150,000 to move around (I know, wouldn’t we all like to be in that situation 😉 ). Then you could leave it in the account for just two months, at which point the average of your previous 3 (0, 150, 150) would be 100, qualifying you for the Platinum Honors tier! The same goes for lower tiers; after just one month of depositing $60,000, you’d qualify for Gold (since your previous 3 months would have balances of 0, 0, and 60, which average to 20).
This actually opens up a lot more possibilities (although the opportunity cost is the same in any case) since it’s far easier to cobble together money from CDs or various investments for a few months before moving it to other, more long-term places. So if you get a year-end bonus or have a particularly large tax return, consider parking it with BofA for a few months before moving it into savings.