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Bask Bank offers a mileage-earning savings account that earns American Airlines AAdvantage® miles as an alternative to earning cash interest. For every dollar you deposit into your Bask Mileage Savings Account, you now earn 2.5 AAdvantage® miles annually, with no cap on the number of miles you can earn each year.
Sign up for a Bask Mileage Savings Account
During the low-interest rate periods of 2020 and 2021, earning AAdvantage® miles on your savings was a no-brainer. However, even with interest rates rising, earning miles instead of cash remains an enticing option. Depending on your situation, keeping your savings in a Bask Mileage Savings Account can be “miles” ahead of holding your savings in a typical cash savings account.
How Many AAdvantage® Miles Can I Earn On My Savings?
Bask Mileage Savings Account accountholders earn 2.5 AAdvantage® miles per dollar saved annually. And there's no cap on how many AAdvantage® miles you can earn. At current earning rates, you would earn 125,000 AAdvantage® miles annually if you deposit $50,000 into a Bask Mileage Savings Account account.
But how does that stack up against earning interest in a typical savings account? Let's take a look.
Is Earning AAdvantage® Miles on Savings Better Than Earning Interest?
Before we dig into the math, remember 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.
Even with interest rates rising, many banks still aren't paying more than 4% interest. And even at 4% 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 0.42% (effective as of June 20, 2023), we’ll use a 4% APY savings account as a hypothetical to show the potential value in earning AAdvantage® miles as opposed to a high-interest rate account.
If you deposited $50,000 dollars for 12 months, you would earn:
- 4% APY savings account: $2,000 in interest
- Bask Mileage Savings Account: 125,000 AAdvantage® miles
Valuing AAdvantage® miles
To get an accurate read on whether it’s better to earn AAdvantage® miles or interest, we need to assign a value to AAdvantage® miles. AAdvantage® miles are commonly valued at between 1.4-1.6 cents per mile. However, we see that as the base value you should aim 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. But, for calculation purposes, we’re going to value AAdvantage® miles at 1.6¢ each, meaning the 125,000 miles earned on your $50,000 deposit would be worth roughly $2,000.
The tax impact
Taxes are another important consideration. With a traditional savings account, your bank will issue a Form 1099 for the value of interest earned. At 4% APY on a $50,000 balance, you’d earn $2,000 in interest — which is fully subject to taxes.
Bask Bank will also issue a 1099 tax form for the value of AAdvantage® miles earned. According to Bask Bank: “Miles are currently valued at 0.42 cents per mile.”
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 125,000 AAdvantage® miles in your first year, you'd owe tax on $525 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 Form 1099-INT tax form is the additional income on which you owe tax — not the amount you will need to pay.
Running the numbers
Now that we have the pieces, let's walk through the after-tax value of earning cash interest vs. AAdvantage® miles for this example.
4% APY at a 30% marginal tax rate:
- 4% interest on $50,000 is $2,000 (taxable income)
- 30% of $2,000 is $600 (the amount you owe the IRS)
- Your net gain is $1,400 ($2,000 – $600)
Bask Mileage Savings Account at a 30% marginal tax rate:
- 125,000 AAdvantage® miles are valued at $525 (taxable income)
- 30% of $525 is $157.50 (the amount you owe the IRS)
- 125,000 AAdvantage® miles are worth $2,000 (using our 1.6¢ per mile valuation)
- Your net gain is $1,842.50 ($2,000 – $157.50)
Comparing the two options, we get:
- Bask Mileage Savings Account: $1,842.50 (value of miles after deducting taxes)
- 4% savings: $1,400 (value of earnings minus taxes paid)
- Difference: $442.50 more after-tax value by earning AAdvantage® miles
The argument for earning AAdvantage® miles is even stronger if you can redeem AAdvantage® miles for more than 1.6¢ each or if you have a marginal tax rate of more than 30%.
On the other hand, you may prefer to earn cash interest if your tax rate is much lower or you aren't confident that you can redeem AAdvantage® miles for much value.
Here's a comparison of earning AAdvantage® miles vs. cash interest for a variety of mileage valuations and tax rate combinations.
Get Outsized Value From Your AAdvantage® Miles
There are plenty of redemption options fetching better than 2¢ per mile — even when redeeming economy awards. Here are a few examples to demonstrate the kind of returns you can expect from your miles if you leverage American Airlines sweet spots, deals, or find the right routing and cabin class combinations.
Round-trip Los Angeles to Buenos Aires in economy (2.15¢ per mile)
Using American Airlines' calendar function, you can find round-trip economy awards from Los Angeles (LAX) to Buenos Aires (EZE) for 40,000 AAdvantage® miles, plus a reasonable $104.95 in taxes. The cheapest cash alternative on these dates costs $966, returning a value of 2.15¢ per mile ($966 – $104.95 in taxes = $825.45; $825.45 / 40,000 miles = 2.15¢ per mile).
Lest you worry that this discounted award ticket will book you into American Airlines Basic Economy, which comes with numerous restrictions, it won't. You'll be in Main Cabin, which offers the regular perks of choosing a seat and getting one free checked bag per passenger. Since American Airlines permanently eliminated fees to redeposit miles when canceling an AAdvantage award, it makes more sense to book award tickets.
One-way Sydney to Atlanta in economy (3.03¢ per mile)
American typically charges the same miles for both the outbound and return legs of your journey, but there are times when booking a round-trip flight might (not always) provide a discount. 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, flying from from Sydney to Atlanta will set you back 40,000 AAdvantage® miles, plus $85.45 in taxes. The cheapest cash alternative flight is $1,296, returning 2.8¢ per mile on an economy award ($1,296 – $85.45 in taxes = $1,210.55; $1,210.55 / 40,000 miles = 3.03¢ per mile).
Round-trip Miami to Vail in economy (4.19¢ per mile)
You can find fantastic value with AA miles, even on domestic awards. The example above shows a round-trip from Miami, Florida (MIA) to Vail, Colorado (EGE) for 15,000 miles plus $11.20 round-trip. This is during the middle of ski season, and the cheapest cash flight costs $639, giving you a return of 2.9¢ per mile ($639 – $11.20 in taxes = $627.80; $628.80 / 15,000 miles = 4.19¢ per mile). And this hot deal is during ski season.
International premium award: One-way Tokyo to Los Angeles in business class (7.1¢ 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 Tokyo to Los Angeles in business class could cost you 60,000 miles plus $45.25 in taxes. That's the exact number of miles you will earn by maintaining a $24,000 balance in your Bask Mileage Savings Account for 12 months — assuming no further changes to the earning rate.
To buy the same itinerary at the market rate would cost $4,295 or $4,401, depending on which of Tokyo's airports you fly from. Assuming the lower price ($4,295), this award booking provides a return of 7.35¢ per mile ($4,295 – $45.25 in taxes = $4,249.75; $4,249.75 / 60,000 miles = 7.1¢ per mile).
If you earn 4% interest on your $24K deposit, your net gain after taxes would be around $672. Would you rather escape economy for nearly 10 hours of flight time and experience one of the top business-class products in the world, or would you rather earn $672 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 that's what you would actually consider paying to fly business class. Or consider the cost of an economy flight on that route if you wouldn't actually pay for a business-class ticket in cash.
Opening a Bask Mileage Savings Account is a great way to supplement your primary miles-earning strategies. If you park a significant chunk of savings into a mileage-earning account, you could potentially earn enough miles to fly long-haul international business class. That's much better return on your funds than earning interest in our books.
Terms & Disclosures:
Bask Bank is a division of Texas Capital Bank. Member FDIC. The sum of your total deposits with (i) Bask Bank and (ii) Texas Capital Bank are insured up to $250,000. Additional coverage may be available depending on how your assets are held.
The annual percentage yield is effective as of Monday, June 12, 2023. Rate is variable and subject to change after account opening. There are no monthly account fees. If an account remains unfunded for fifteen (15) days, we reserve the right to close that account. Read Terms and Disclosures here.
AAdvantage® bonus miles are awarded within 10 business days upon meeting offer qualifications and may take 6 to 8 weeks to post to your AAdvantage® account. The value of this bonus 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 Miler™ 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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