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Update: The refer-a-friend bonus discussed in this post has ended, but it's still possible to earn miles with your savings.
Bask Bank launched a new mileage-earning savings account earlier this year that earns American Airlines AAdvantage® miles as an alternative to earning interest. For every dollar you deposit into your Bask Savings Account, you earn one AAdvantage® mile annually, with no cap on the number of miles you can earn each year.
Plus, Bask Bank is offering some extra incentives to open a new account and refer friends to open a new account. However, Bask Bank has confirmed to AwardWallet that the refer-a-friend bonus will not be extended past the scheduled September 30, 2020 ending date.
Sign up for a Bask Savings Account
Here’s a quick recap of the new account bonus and refer-a-friend bonus currently available from Bask Bank:
New Account Sign-up Bonus
- Earn 1,000 AAdvantage® miles — Deposit $5,000 and maintain the balance for 90 consecutive days, within 120 days of opening your account. Valid through December 31, 2020.
Starting in June 2020, Bask Bank launched an offer to give account holders bonus miles for referring friends and family to a new Bask Savings Account. Each person that you refer — that meets the qualification requirements — will earn you 5,000 bonus AAdvantage® miles. You can earn up to 25,000 bonus miles for new referrals.
Getting started is easy, just log into your account and click the “Refer a Friend” section of your Bonus Dashboard to find your unique link and start sharing.
- Refer a friend and earn 5,000 AAdvantage® bonus miles
- Refer more friends and earn up to 25,000 AAdvantage® bonus miles
Refer-a-Friend Key Terms:
- The person that uses your referral link needs to deposit at least $10,000 into their new Bask Savings Account and maintain that balance for at least 90 days within the first 120 days of opening their account.
- New accounts must be opened between 6/17/2020 and 9/30/2020 to qualify for the refer-a-friend bonus.
- Referrers (you) must maintain a minimum balance of $10,000 for 90 days between 6/17/2020 and 12/31/2020.
The new account sign-up bonus and refer-a-friend bonus are in addition to the 1 mile per dollar you typically earn on each dollar saved. You’ll pay no account fees, there is no cap on the number of miles you can earn, and deposits are FDIC insured up to $250,000.
AAdvantage® bonus miles are awarded within 10 business days upon meeting offer qualifications and may take 6-8 weeks to post to your AAdvantage® account.
How to Maximize Your Bonus
If you don’t already have a Bask Savings Account, you can earn more AAdvantage® miles by signing up through a friend’s referral link. However, the deposit requirement is double what you'd need to take advantage of the non-referral, new-account bonus.
If you already have a Bask Bank account, this is a great offer, but you'll face a bit of uncertainty about how many bonuses you'll receive. If you refer a friend, you'll only earn the bonus if you and your friend both meet the requirements.
A Quick Earning Example
Using the figures above supplied by Bask Bank, if you deposited $50,000 into a new account, referred five friends (who met the qualification requirements), and maintained the $50,000 balance for a minimum of 12 months, you would earn:
- 1,000 miles — Sign-up Bonus
- 25,000 miles — Refer-a-Friend Bonus
- 50,000 miles — Miles earned maintaining a balance of $50K for 12 months
- 76,000 miles in total
At first glance, that’s a decent return for your money. You’re earning 76,000 AAdvantage® miles for parking $50,000 in a Bask Bank mileage-earning account for 12 months and referring five friends for new accounts. How does that stack up against earning interest in a high-yield savings account?
Is Earning AAdvantage® Miles on Savings Better Than Earning Interest?
Before we dig into the math, bear in mind that each person's state of affairs is different. There may be some situations where earning interest on a CD or on a high-yield savings account will make more sense than earning AAdvantage® miles. However, it's increasingly becoming difficult to find a CD or high-yield savings account paying more than 1% interest.
But even at 2% interest, we can make the case for earning miles over interest; we think there are plenty of opportunities to get outsized value from your AAdvantage® miles, and the bonuses on offer present a unique chance to bank a huge number of miles on your savings.
Although the FDIC calculated national average savings account APY is 0.05% (effective as of 9/28/20), we’ll use a 2% APY high-yield savings account as a hypothetical to show the potential value in earning AAdvantage® miles as opposed to interest. Parking $50,000 in a 2% savings account for 12 months used to be easily possible, so it makes for a great comparison.
If you deposited $50,000 dollars for 12 months and had five friends use your referral link, you would earn:
- 2% APY savings account — $1,000 in interest
- Bask Savings Account — 76,000 AAdvantage® miles
To get an accurate read on whether it’s better to earn AAdvantage® miles or interest, first we need to assign a value to AAdvantage® miles. AAdvantage® miles are commonly valued at between 1.4-1.6 cents per mile, but we see that as the base value you should be aiming for, rather than a set valuation.
As we show in the section below, it’s not hard to leverage AAdvantage®miles for better than 2¢ per mile in value, even with limited experience booking American awards. For calculation purposes, we’re going to value AAdvantage® miles at a conservative 1.7¢ each, meaning the 76,000 miles earned on your $50,000 deposit would be worth roughly $1,292.
Taxes are another important consideration. With a traditional savings account, your bank will issue a Form 1099 for the value of interest earned. At 2% APY on a $50,000 balance, you’d earn $1,000 of interest, which is subject to taxes.
Bask Bank will also issue a 1099 tax form for the value of AAdvantage® miles earned. According to Bask Bank's terms and conditions, “Miles are currently valued at 0.42 cents per mile, the equivalent of 0.42% annual percentage yield.” While this value is subject to change, we’ll use that number for our comparison to the cost of earning traditional interest.
If you earn 76,000 AAdvantage® miles in your first year, you'd owe tax on $319.20 in income. Remember, you still need to factor in your tax bracket to determine the amount you actually owe the IRS. The amount reported on your 1099 tax form is the additional income on which you owe tax, not the amount you will need to pay.
2% APY at a 30% marginal tax rate:
- 2% interest on $50,000 is $1,000 (taxable income)
- 30% of $1,000 is $300 (the amount you owe the IRS)
- Your net gain is $700 ($1,000 – $300)
Bask Savings Account at a 30% marginal tax rate:
- 76,000 AAdvantage® miles is $319.20 (taxable income)
- 30% of $319.20 is $95.76 (the amount you owe the IRS)
- 76,000 AAdvantage® miles is worth $1,292 (using our 1.7¢ per mile valuation)
- Your net gain is $1,196.24 ($1,292 – $95.76)
Comparing the two options, we get:
- Bask Savings Account: $1,196.24 (value of miles after deducting taxes)
- 2% savings: $700 (value of miles after deducting taxes)
- Difference: $496.24
If you are confident you can redeem AAdvantage® miles for anything over 1.7¢ each, the gap becomes skewed even more in favor of earning miles over interest. The caveat here is that if you are redeeming AAdvantage® miles for anything under 1.4¢ per mile, you may be better off with a high-interest savings account or CD earning cash.
Get Outsized Value From Your AAdvantage® Miles
There are plenty of redemption options fetching better than 2¢ per mile—even when redeeming economy awards. Back before the pandemic, we put together a few examples to demonstrate the kind of returns you can expect from your miles if you leverage American AAdvantage® Web Specials, Reduced Mileage Awards, or find the right routing and cabin class combinations.
Web Special: Round-Trip Detroit to Budapest in Economy (2.2¢ per mile)
Flying an AAdvantage® Web Special round-trip economy award from Detroit to Budapest will set you back 56,000 AAdvantage® miles, plus a very reasonable $61.35 in taxes. The cheapest cash alternative flight costs $1,285, returning a value of 2.2¢ per mile ($1,285 – $61.35 in taxes = $1,223.65 / 56,000 miles = 2.2¢ per mile). The travel time for both flights is similar, but the award flight is arguably the better option considering you have a one-stop ticket on the return flight.
Web Special: One-Way Sydney to Atlanta in Economy (2.1¢ per mile)
Provided you can find MileSAAver award space, American charge the same amount of miles for both the outbound and return legs of your journey. Unfortunately, the same can’t be said for revenue fares, with one-way flights often dramatically more expensive when you pay cash. In the example above, a web special in economy from Sydney to Atlanta will set you back 33,000 AAdvantage® miles, plus $84.05 in taxes. The cheapest cash alternative flight is $771, returning 2.1¢ per mile on an economy award ($771 – $84.05 in taxes = $686.95 / 33,000 miles = 2.1¢ per mile).
Reduced Mileage Award: Round-Trip Miami to Vail in Economy (2.3¢ per mile)
Reduced Mileage Awards offer an outstanding value, particularly on domestic awards where it can be harder to achieve the high returns so common with international itineraries. We’ve taken the above example from the latest list of AAdvantage® Reduced Mileage Awards, flying round-trip from Miami, Florida to Vail, Colorado for 17,500 miles plus $11.20 after the RMA discount is applied. The cheapest cash alternative flight (excluding basic economy) comes in at $419, giving you a return of 2.3¢ per mile ($419 – $11.20 in taxes = $407.80 / 17,500 miles = 2.3¢ per mile).
International Premium Award: One-Way Johannesburg to New York in Business (3.3¢ per mile)
We’ve saved this redemption for last, as we think it best highlights the benefits of earning miles over interest. Flying one-way from Johannesburg to New York in business class will cost you 75,000 miles plus $59.85 in taxes, almost the exact number of miles you will earn by maintaining a $50K balance in your Bask Bank account for the first 12 months and having five friends use your referral link.
To buy the same itinerary at the market rate would cost $2,534, providing a return of 3.3¢ per mile ($2,534 – $59.85 in taxes = $2,474.15 / 75,000 miles = 3.3¢ per mile).
As we illustrated above, if you earn 2% interest on your $50K deposit, your net gain after additional taxes would be around $700. If you booked a business class ticket similar to the Etihad example above, you’d pay $59.85 in taxes and fees on the flight plus an additional $95.76 to the IRS for a total out-of-pocket cost of $155.61.
Would you rather escape economy for nearly 22 hours of flight time and experience one of the top business-class products in the world for a total cost of $155.61, or would you take $700 cash?
How Much Do You Value Business Class?
If you’re comparing the retail value of Business Class, things can get out of hand pretty quickly—especially with long-haul international flights. In some cases, it makes sense to use the price that you might actually consider paying for Business or First Class, rather than the cash value of the ticket. For example, if a flight costs $6,000+ to purchase in Business Class, you might use a value closer to $2,500 if you would never consider paying that much to fly Business Class.
Opening a Bask Savings Account is a great way to supplement your primary miles earning strategies, even if only for the 1,000 miles you’ll earn from the initial $5,000 deposit. If you park a significant chunk of savings into your account for at least 12 months and have a few friends take you up on your refer-a-friend offer, you could potentially earn enough miles to fly long-haul international Business Class, a much better return on your funds than earning interest in our books.
Bask Bank and BankDirect are divisions of Texas Capital Bank, N.A. Member FDIC. The sum of your total deposits with (i) Bask Bank; (ii) BankDirect; and (iii) Texas Capital Bank, N.A. are insured up to $250,000. Additional coverage may be available depending on how your assets are held.
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