Link: Apply now for the Bank of America® Premium Rewards® credit card with 60K bonus points
The Bank of America® Premium Rewards® credit card is one of the best cash back cards. As y’all know, I like to earn miles & points for my credit card spending. However, I’m seriously considering switching my everyday spending to this card, and in this post wanted to talk about that in a bit more detail, and crunch some numbers.
For us miles & points geeks who are able to move money to Bank of America or Merrill, the question essentially comes down to “would you buy transferable points for 1.3 cents each?” The answer to that isn’t necessarily as straightforward as you’d assume. Let’s first recap the basics of the card, and then I’ll discuss my thought process.
In this post:
BofA Premium Rewards Card basics
The Bank of America Premium Rewards Card has a $95 annual fee. Here’s the value proposition of the card, in a nutshell:
- The card is currently offering a best-ever welcome bonus of 60,000 points after spending $4,000 within the first 90 days; that’s worth $600 cash back
- The card offers 2x points on dining and travel and 1.5x points on all other purchases; points can be redeemed for one cent each
- What makes this card exceptional is that if you participate in the Bank of America Preferred Rewards program, you can receive up to a 75% bonus on your credit card rewards; you’ll then earn the equivalent of 3.5% cash back on dining and travel and the equivalent of 2.625% cash back on all other purchases
- The card offers a $100 annual airline incidental statement credit, which is quite easy to use
- The card offers a $100 statement credit toward TSA PreCheck or Global Entry once every four years
Essentially the value proposition here is that many may appreciate the bonus of 60,000 points, worth a $600 statement credit. On top of that, if you can have $100K or more in assets with Bank of America and/or Merrill (this could include a SEP-IRA or 401k), then this card offers an industry leading cash back return on everyday spending.
Read a full review of the Bank of America Premium Rewards Card here.
How I’m approaching the BofA Premium Rewards Card
I’m asking myself if I should be switching my everyday spending to the Bank of America Premium Rewards Card, earning 2.625% cash back on all my spending. Here are a couple of upfront considerations:
- While the card has a $95 annual fee, I’d consider this card to cost nothing to hold onto for mental accounting purposes, given that the $100 airline incidental statement credit is easy to use, based on all the data points I’ve seen (and that offsets the fee)
- I’m fortunate that I have a retirement account that I could move to Merrill without any opportunity cost, which would make me eligible for the Preferred Rewards Platinum Honors tier; I’d then be eligible for the 75% points bonus, and could earn 2.625% back on my everyday spending
When it comes to the best cards for everyday spending, my current go-to cards are the Capital One Venture X Rewards Credit Card (review) (Rates & Fees) and Citi Double Cash® Card (review), which offer the equivalent of 2x transferable points per dollar spent. So the question comes down to whether I’d rather earn 2.625% cash back or 2x transferable points on all of my spending.
Would I buy transferable points for ~1.3 cents each?
Some in the miles & points space like to talk about how they traveled somewhere for “free” by using points, or claim that they spent only $5.60 on a ticket (reflecting the taxes paid in cash). I’ve never viewed it this way, as there’s always a direct cost or an opportunity cost to the points you earn.
Points earned as part of credit card welcome bonuses probably have the lowest opportunity cost, but you also need to factor in any annual fees you’re paying. The highest opportunity cost for the points you earn is through credit card spending. And this is the prime example of that.
If you’re into maximizing rewards, and you’re eligible for the Bank of America Premium Rewards Card with the Preferred Rewards program Platinum Honors tier, the question comes down to whether you’d be willing to buy transferable points for 1.3125 cents each. And specifically, we’re talking about Amex, Capital One, or Citi points, since all of those issuers have some cards offering 2x points per dollar spent.
On the surface I value transferable points at 1.7 cents each. As I always say, this valuation is entirely subjective, and is just intended to provide a general framework for deciding when to redeem points.
However, when you’re faced with the question of whether you’d rather be rewarded with points or cash, you can’t help but perhaps frame it a bit differently. If you spend $10,000 on a credit card, would you rather receive 20,000 transferable points, or $262.50?
As another example, you can pay your taxes by credit card for a fee of 1.85%. It’s of course great to use that to acquire points inexpensively. But it’s also kind of nice to earn 2.625% cash back for a 1.85% fee, no?
I think the question of whether you’re better off earning cash back or transferable points at such a lucrative rate comes down to a few factors:
- What are your cash and points balances like? Are you more cash “rich” or points “rich?”
- What kind of travel do you like to do? For example, if you’re just looking to travel domestically, or if you want to earn rewards for non-points hotels, earning cash back leaves you much better positioned
- What’s the timeline with which you can redeem the points you earn? We’ve seen so many devaluations in recent years, so if I didn’t have an immediate use in mind, I’d much rather earn cash that I could either invest or put in a high interest savings account
I think that last point can’t be emphasized enough, especially given the combination of the current high interest rate environment, plus the number of loyalty program devaluations we’ve seen recently.
Would I buy transferable points for ~1.3 cents each if I had a short term use in mind, especially for an award ticket sweet spot? Absolutely! Would I buy transferable points for that price if I didn’t think I could redeem then in the next couple of years? No, probably not…
Bottom line
The Bank of America Premium Rewards Card is in a league of its own among cash back cards, assuming you qualify for the Platinum Honors tier in the Preferred Rewards program. This card can offer 2.625% cash back on everyday spending, which is unrivaled.
As someone who has historically almost exclusively earned points for my credit card spending, I’m finding myself conflicted. Would I rather earn 2x transferable points with the Capital One Venture X Card, or 2.625% cash back with the Bank of America Premium Rewards Card?
I’m curious to hear what OMAAT readers think. What do you think of the value proposition of earning 2x transferable points vs. earning 2.625% cash back? Would you buy transferable points for ~1.3 cents each?
AS a Preferred Rewards member this is my everyday usage card while working in the middle east. I've used the yearly $100 airline incidental fees often, very simple to use and receive credit.
Not sure if you want to also go for BoFa custom cash back card which gives ~5.2% on selected categories (travel / dining / gas), however $2500 limit every quarter. One could go for multiple ones to maximize.
The points not the best when you have a family to travel with, unless one is raking in tons, booking family travel using not enough points becomes bit of hassle. travel miles going to individual family...
Not sure if you want to also go for BoFa custom cash back card which gives ~5.2% on selected categories (travel / dining / gas), however $2500 limit every quarter. One could go for multiple ones to maximize.
The points not the best when you have a family to travel with, unless one is raking in tons, booking family travel using not enough points becomes bit of hassle. travel miles going to individual family members account with most airlines not doing any pooling, individual ticketing is pain (coordination of ticket booking, seating, increased security checks).
I think unless one is solo traveller or someone with lot of miles, points n miles may not be best for air travel (hotels might be bit different ball game due to 1 person accumulating the points).
Maximize cash including cashback on actual travel tickets (compared to redeeming points/miles which won’t get any)
Life simplification.
Solo adults can wrangle lots of cards if that’s your hobby. Maybe a couple, if your SO likes the game. Add a couple kids, forget it.
So much simpler to have one card to tell all the Doubts to use.
Yes, and it is his business to review cards and get the most return and he is paid to promote certain cards.
> And specifically, we’re talking about Amex, Capital One, or Chase points, since all of those issuers have some cards offering 2x points per dollar spent.
What's the Chase 2x card? Did you mean Citi (with the double cash)?
I think the others are Amex blue biz plus and Capital One Spark Miles and Venture/VentureX.
Ben, you're missing the most important two points here. #1 is the opportunity cost on the cashback and #2 is whether this spend is deductible or not. Re: 1, in today's high interest environment, 2.625 cents per dollar cashback gets to 3.4% of value after 5 years. If you hold points for 5 years before using them (assuming no devaluation), the 2.625% cashback = 3.4% on a return adjusted basis after 5 years of hold...
Ben, you're missing the most important two points here. #1 is the opportunity cost on the cashback and #2 is whether this spend is deductible or not. Re: 1, in today's high interest environment, 2.625 cents per dollar cashback gets to 3.4% of value after 5 years. If you hold points for 5 years before using them (assuming no devaluation), the 2.625% cashback = 3.4% on a return adjusted basis after 5 years of hold @ 5% annual compound interest. Re: 2, cashback is NOT taxable UNLESS you are receiving personal cashback for a business purchase. Put another way, if you spend $100 for your business and your business gets 2.625% cashback, no tax. If YOU personally receive the cashback, that's taxable. On the other side, if YOU personally get 2 miles per dollar spent on business expenses, that is NOT taxable.
By a strict accounting of value, your current valuation of C1 at 1.7 cpp means 2*1.7 = 3.4 > 2.625.
That being said, I would imagine someone with eight digit balances in transferrable point program,s who can pay for five star hotel rooms and first/business class tickets *in cash* and who's likely well into end game plays in credit cards, has different needs than someone who's just starting out, or even someone who's well into...
By a strict accounting of value, your current valuation of C1 at 1.7 cpp means 2*1.7 = 3.4 > 2.625.
That being said, I would imagine someone with eight digit balances in transferrable point program,s who can pay for five star hotel rooms and first/business class tickets *in cash* and who's likely well into end game plays in credit cards, has different needs than someone who's just starting out, or even someone who's well into the game but isn't generating six digit spends effortlessly.
It does mean you can offer more credit card offers though, if you start promoting cashback. Always be hustling. ;)
Disagree because those with that kind of money spend more on credit cards so their return would be much higher as a dollar figure and the difference between a couple of percentage could be a lot of money
BoA’s definition of travel is the broadest around. In addition to the usual airfare, hotels, etc., things like tours, attractions, campgrounds, and wineries all count as travel and earn 3.5% back. Plus, the penalty for mis-categorization is lower since all purchases earn at least 2.625% back.
If you're Platinum Honors, the Premium Rewards card is a decent 1-card setup (maybe even bump up to the Premium Rewards Elite card where for only a $100 effective annual fee, one can get added Visa Infinite benefits, Priority Passes, and have the ability to redeem cash back towards airfare on the Bank of America Travel Portal at a 25% bonus for 3.3% non-category cash back redemption value and 4.4% cash back redemption value on...
If you're Platinum Honors, the Premium Rewards card is a decent 1-card setup (maybe even bump up to the Premium Rewards Elite card where for only a $100 effective annual fee, one can get added Visa Infinite benefits, Priority Passes, and have the ability to redeem cash back towards airfare on the Bank of America Travel Portal at a 25% bonus for 3.3% non-category cash back redemption value and 4.4% cash back redemption value on Dining/Travel purchases).
But if you're Platinum Honors, you're probably going to have 1 or more Customized Cash Rewards card in addition to the Premium Rewards/Premium Rewards Elite/Ultimate Cash Rewards card for that sweet 5.25% cash back on categories like Online Shopping, not to mention Bank of America's definition for each category covers the broadest set of MCC codes in the entire credit card industry.
In addition, I don't think Bank of America has done any significant devaluation of the Preferred Rewards program since its inception in 2014.
The cheaper card for $95 is more beneficial than the more expensive card as most of the extra or added benefits of the more expensive card is offered on other cards. If you hold other cards that provide it the cheaper card gives the same return and therefore is sufficient.
Forgot that with Travel and Dinning spend, it's normally 2 points. With the Platinum Honors 75% bump, it ends up being 3.5% cash back in those categories.
3.5% cash back in Travel/Dinning
2.625% cash back in everything else
PLUS redeemed monthly with no limits. Makes it a nice card.
This is my card of choice for all default payments. The 6.125% return on travel is also huge for me when not using AmEx Platinum for flights. There is one more trick to this card which I believe is crucial. Rather than opening a Merrill of Bofa account, move your business account to US Trust. Their service is top notch, they’ll reverse fees if you incur them etc. The only downside to the card is the web interface is terrible.
how do you get 61.25% return on travel? lol
There is no 6.125% on Travel. It's 3.5% if you get the 75% bonus.
I'm with you on this. I got so tired of playing around with points that I switched to this program and couldn't be happier. You don't realize how stressful it is to perseverate about points.
As a corollary, my time off is extremely rigid and I refuse to connect when nonstop is an option, so I don't have the flexibility to mess around with time and miles.
Just give me my 2.625% and leave it at that.
And that is a decent return on everyday purchases compared to other cards that offer 1 point per dollar or less than 1%.