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Last year, Bask Bank launched a new mileage-earning savings account 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.
Sign up for a Bask Savings Account
With interest rates on savings accounts sitting at historic lows, earning AAdvantage® miles on your savings has become a much more enticing option. If you keep your savings in a Bask Savings Account, by the end of the year you'll be ‘miles' ahead of holding your savings in a typical cash savings account.
How Many AAdvantage® Miles Can I Earn On My Savings?
Using the figures supplied by Bask Bank, if you deposited $50,000 into a new account, and maintained the $50,000 balance for a minimum of 12 months, you would earn 50,000 AAdvantage® miles.
At first glance, that’s a decent return for your money. You’re earning 50,000 AAdvantage® miles for parking $50,000 in a Bask Bank mileage-earning account for 12 months. How does that stack up against earning interest in a typical 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 0.5% interest.
But even at 1% 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 0.06% (effective as of May 17, 2021), we’ll use a 1% APY savings account as a hypothetical to show the potential value in earning AAdvantage® miles as opposed to interest. Parking $50,000 in a 1% savings account for 12 months is an achievable goal, so it makes for a great comparison.
If you deposited $50,000 dollars for 12 months, you would earn:
- 1% APY savings account — $500 in interest
- Bask Savings Account — 50,000 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 50,000 miles earned on your $50,000 deposit would be worth roughly $850.
Taxes are another important consideration. With a traditional savings account, your bank will issue a Form 1099 for the value of interest earned. At 1% APY on a $50,000 balance, you’d earn $500 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 50,000 AAdvantage® miles in your first year, you'd owe tax on $210 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.
1% APY at a 30% marginal tax rate:
- 1% interest on $50,000 is $500 (taxable income)
- 30% of $500 is $150 (the amount you owe the IRS)
- Your net gain is $350 ($500 – $150)
Bask Savings Account at a 30% marginal tax rate:
- 50,000 AAdvantage® miles is $210 (taxable income)
- 30% of $210 is $63 (the amount you owe the IRS)
- 50,000 AAdvantage® miles is worth $850 (using our 1.7¢ per mile valuation)
- Your net gain is $787 ($850 – $63)
Comparing the two options, we get:
- Bask Savings Account: $787 (value of miles after deducting taxes)
- 1% savings: $350 (value of miles after deducting taxes)
- Difference: $437
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. If you park a significant chunk of savings into your account for at least 12 months, 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.
Terms & Disclosures:
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.
The value of this offer will be reported to the IRS and the recipient is responsible for any federal, state or local taxes on this offer.
American Airlines reserves the right to change the AAdvantage® program and its terms and conditions at any time without notice, and to end the AAdvantage® program with six months notice. Any such changes may affect your ability to use the awards or mileage credits that you have accumulated. Unless specified, AAdvantage® miles earned through this promotion/offer do not count toward elite-status qualification or AAdvantage® Million MilerSM status. American Airlines is not responsible for products or services offered by other participating companies. For complete details about the AAdvantage® program, visit aa.com/aadvantage.
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