Why I Moved All of My Savings to Bask Bank

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In January 2020, Bask Bank launched a new savings account offering the ability to earn American Airlines AAdvantage® miles from your savings. Unlike previous AAdvantage® mile-earning savings accounts, Bask Bank doesn’t charge monthly fees or have balance limits.

When Bask Bank launched in January 2020, I held most of my cash savings in a high-yield savings account. Since I’ve already tapped out my AAdvantage®-earning credit card options, I jumped on the opportunity to start earning miles from my savings. But, I wasn’t ready to go all-in on Bask Bank quite yet.

That’s changed over the past 8 months. Incrementally, I have moved all of my cash savings to my Bask Savings Account. Here are the reasons why I’m choosing to earn AAdvantage® miles rather than cash from my savings.

Lower Comparative Savings Rates

The primary reason that I moved my cash savings to Bask Bank was the drastic change in interest rates this year. At the time I opened my Bask Savings Account, most other banks were offering around 1.6% annual percentage yield (APY) on high-yield savings accounts. Now, many banks have lowered those rates even further—offering a return of around 0.6% APY.

As rates dropped, Bask Bank has continued to offer account holders a steady earning rate of 1 AAdvantage® mile per dollar saved per year. When given the choice between earning 0.6 cents of cash interest or 1 AAdvantage® mile, the choice is clear to me. I’m earning miles.

I personally value AAdvantage® miles at 1.6 cents each. Although I’ve gotten much higher value from some redemptions, this is the base value that I use when valuing the miles I’d earn from a promotion, shopping portal, or a mileage run. So, cash interest was competitive when I could earn 1.6% cash interest.

However, once cash interest rates plummeted, it became a much better deal to earn AAdvantage® miles instead. Thus, I have transitioned all of my cash savings to Bask Bank.

Tax Benefits of Earning Miles Instead of Cash

It’s important to note that 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.

However, the choice between earning traditional interest or miles is even easier when you factor in the after-tax return.

Although I value AAdvantage® miles at 1.6 cents each, Bask Bank currently uses a 0.42 cents per mile valuation for tax purposes. Bask Bank doesn’t explain why this is the value used for tax purposes. However, that happens to be the approximate redemption rate AAdvantage® members previously got when cashing out their miles for gift cards through Points.com.

This treatment makes the after-tax value of earning miles even better when you compare it to earning cash interest. Let’s use an example of putting $10,000 into a high-yield savings account, assuming a 25% tax rate and a 0.6% cash interest savings rate. Let’s compare the after-tax return after one year.

Cash savings account:

  • Interest: $60
  • Tax on income: $15 ($60 x 25% tax rate)
  • Net earnings: $45

Bask Savings Account:

  • Interest: 10,000 AAdvantage® miles
  • Tax on income: $10.50 (10,000 miles x 0.0042 value = $42 income x 25% tax rate)

Even if you value AAdvantage® miles at just 1 cent each, you’re earning $100 worth of miles and paying $10.50 in taxes. That’s much better than the $45 after-tax earnings on the cash savings account. And, the gap only grows as your tax rate and the value you assign to your AAdvantage® miles increases.

Valuable Uses of AAdvantage® Miles

AAdvantage® miles are only as valuable as what you use them for. While travel is on hold for many of us, now’s a great time to save up for award travel in the future.

5,000-mile Economy Web Specials

As we’ve highlighted here on AwardWallet, American Airlines sometimes offers domestic economy award flights for as little as 5,000 miles each.

To earn enough miles for one of these 5,000-mile domestic Web Special awards, you’ll need to save $10,000 in a Bask Savings Account for six months.

That might sound like a lot of savings to get a free flight. However, if you put that same $10,000 in a savings account earning 0.6% interest, you’d earn just $30 in interest in six months. While we have seen some cheap flights recently, there aren’t many that you can book for just $30!

Reduced Mileage Awards

5,000-mile Web Special awards are great when you can find them. But, there’s a much more reliable way to save on American Airlines awards: Reduced Mileage Awards.

This mileage discount program is one of the benefits on most AAdvantage® credit cards. Eligible cardholders can save 7,500 miles on a round-trip domestic award as long as you’re traveling to or from eligible cities. We go into all of the details of how to book a Reduced Mileage Awards in this post.

In short, the Reduced Mileage Award discount knocks 3,750 miles off of domestic one-way economy MileSAAver awards that typically cost 12,500 miles. That means it costs just 8,750 miles each way to book one of these awards.

To earn 8,750 AAdvantage® miles through Bask Bank, you’d need to save $17,500 for six months. If you put this amount in a savings account earning 0.6% APY instead, you’d earn around $53 in interest in six months. So again, you’d easily come out ahead by earning miles.

Fly to Hawaii

If you have enough savings and/or a long enough time frame, you can save up for a trip to Hawaii. During “off peak” dates in the fall, winter, and spring, AAdvantage® charges just 20,000 miles each way for MileSAAver awards between the continental U.S. and Hawaii. And, if you start saving with Bask Bank now, you can save up enough miles for an award next fall.

By holding $60,000 in a Bask Savings Account for eight months, you’d accumulate 40,000 AAdvantage® miles. That’s enough for a round-trip award to Hawaii during off-peak dates:

Pay just 40,000 AAdvantage miles for a round-trip from New York City to Hawaii

These same flights currently cost almost $800 round-trip to buy with cash:

Get almost 2 cents per AAdvantage mile in value from this flight to Hawaii

If you chose to put the $60,000 savings in a savings account earning 0.6% interest for eight months, you’d earn around $240 of interest.

Just Keeping Your Account Active

Not everyone has $60k in cash savings to save in a Bask Savings Account to earn enough miles to fly to Hawaii. But, that doesn’t mean that Bask Bank can’t be useful for your situation.

Bask Bank doesn’t require a minimum account balance. So, you can save just $120 in a Bask Savings Account to earn around 10 AAdvantage® miles each month. That’s not going to be enough to build up toward an award anytime soon. However, it will be enough to keep your AAdvantage® account active.

While other airlines have eliminated mileage expiration, AAdvantage® miles still expire if you don’t earn or redeem miles in an 18-month period. There are plenty of ways to keep your AAdvantage® account active. But, by having a balance in a Bask Savings Account, you don’t have to worry about your miles expiring.

No Limits on Earning Miles

In addition to having no minimum account-balance requirements, there’s no limit to the number of miles you can earn through a Bask Savings Account. If you have a substantial amount of cash savings, you can rack up the AAdvantage® miles quickly for even more lucrative redemptions.

For example, if you were able to deposit $180,000 into a Bask Savings Account, you’d earn around 15,000 AAdvantage® miles per month. After just five months, you’d have around 75,000 miles. That’s enough for an AAdvantage® business class award to Africa.

Use 75,000 AAdvantage miles for a business class flight to South Africa

Perhaps you maximize this by flying Qatar Qsuite from Los Angeles (LAX) all the way to Cape Town (CPT) for under $16 out-of-pocket. That sure beats earning interest!

That said, remember that the Federal Deposit Insurance Corporation (FDIC) only covers the first $250,000 you have saved in each insured bank. So, there’s a slight risk to having more than $250k in a Bask Savings Account at one time.

Saving with an Established Bank

Just because Bask Savings Accounts earn AAdvantage® miles instead of cash doesn’t mean that it’s any less safe than a traditional savings account. Bask Bank is a division of Texas Capital Bank, N.A. Member FDIC—a Dallas Texas-based bank with around $36 billion in assets. That makes it one of the 100 largest FDIC-insured banks in the U.S. by asset size.

So yes, Bask Savings Accounts are FDIC insured for up to $250,000 in total deposits between Bask Bank, BankDirect, and Texas Capital Bank, N.A. In the remote chance that Bask Bank was to fail, FDIC would reimburse you for any deposits you lose. And, since Bask Bank deposits mileage earnings into your AAdvantage® account monthly, your “interest” would be safe as well.

Bottom Line

When Bask Bank launched earlier this year, I was intrigued by the possibility of earning AAdvantage® miles instead of cash interest. But, I only dipped my toe into the water at the time.

Now, I’m all in on Bask Bank. With cash interest rates well under 1%, I have made the decision to move all of my cash savings into Bask Bank.

While you may not feel comfortable doing the same, it is still worth considering opening a Bask Savings Account—whether you’re looking for a way to keep your AAdvantage® account active or are building up toward a future award trip.

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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Comments

  • Avatar

    Easy way to figure out miles. Put $36,500 into the account on day 1 and let it sit for one year. Each day, you will earn 100 miles. Multiply 100 by the number of days in that month (Jan x 31, Feb x28, Apr x 30) and that will be the mileage deposit five days after the month ends.

    Anyone know how easy it is to remove your money and close your account?

  • Avatar

    Is there any bonus to get referred for this account? Is there a military, government employee or veteran bonuses?

    Thanks for the information.

    Mario

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    I don’t believe in savings accounts, much better return in an index fund in the stock market!

  • Avatar

    Wow I wish I knew about this earlier! I put my emergency fund in an online savings bank with only 0.5% APY now. Seems a great idea to move them to earn a few more AA miles.

  • Avatar

    I still think cash is better personally

  • Avatar

    That’s really a good idea to get new customers. I think I will move to bask bank too … miles are always welcome. 🙂

  • Avatar

    Are these related to UFB Direct?
    They used to have an AA savings account…

    • Avatar

      It doesn’t seem so. Bask Bank is a branch of Texas Capital Bank, which also has BankDirect as a subsidiary. UFB Direct is part of Axos Bank.

  • Avatar

    Great idea, but I hope there will someday be an equivalent that gives hotel points. With no business travel in 2020 and retirement in the future, I’m going to miss my free hotel stays. I may have to get a hotel based credit card.

    • Avatar

      To be honest, a hotel card is probably a good idea anyway – so long as you’d stay at said chain if you didn’t have the card. Otherwise a generic travel card will probably be more valuable.

  • Avatar

    I got in on the Bask Bank account in the summer too. I had forgotten to add more of my funds there though.

  • Avatar
    Ana Maria Valencia says:

    I wonder whether bonus miles will be offered time and again, but the initial bonus is seductive. I use to get miles through my Santander Bank account, but their agreement with the AAdvantage program was terminated. I have already discussed with my husband moving our US savings here (he agreed…).

    • Avatar

      Bask does currently offer 1,000 miles when you sign up. I think it probably isn’t likely we’ll see bigger bonuses any time soon considering the low interest rates at the moment.

  • Avatar

    Well, the bank is for you if you prefer miles to capital growth and meaningful dividends offered by other solid investment options out there.

    • Avatar

      I would certainly imagine the author would recommend and practices diversification, pursuing both miles and capital growth. They would likely make a distinction between savings and investment, with this analysis about cash savings.

  • Avatar

    How does 1 mile/dollar/year work? Cash interest is compounded daily so I understand the math. I’m not wrapping my head around this though.

    And are there any signup bonuses?

    • Avatar

      Bask Bank offered a sign-up bonus when they first started. But the interest rate environment was much different then. So, unfortunately (but understandably) there’s no sign-up bonus now.

      Based on my experience, AA miles are deposited according to this formula: account balance / 365 days x days in the month. So, a $25,000 average balance would earn 2,123 miles in December – which is then deposited in early January (usually the 2nd or the 3rd based on my AAdvantage account activity)

      • Avatar

        Thanks for this. So essentially average daily balance paid out at the end of the year? I’ll have to look into it. All my high yield accounts have dropped to 0.5% so… blah.

        • Avatar

          Ah sorry, bad example. Bask awards miles each month based on the average daily balance for that month. The miles are rewarded monthly around the 2nd-3rd of the next month.

          • Avatar

            Ah, ok. So truly just like a traditional bank but instead of pennies, you’re given miles. I WILL have to look into this. Have their “rates” dropped at all? Is that something to be aware of if they start cutting the miles just like interest rates?

          • Avatar

            That’s right! No, Bask’s rates have held steady at 1 mile per $1 per year – which is why it’s gotten to be so much better of a deal as interest rates have dropped.

  • Avatar
    David Miller says:

    Yeah but… Yes, I’ve been using miles for decades. I don’t know how many free business class flights I’ve had to Europe and Asia. But – since we’ve seen that airlines devalue miles anytime they want, at what point are cash-strapped airlines going to start closing their mileage programs entirely, leaving us with empty accounts? I’m still earning miles on purchases, but I don’t know about moving actual dollars to a new bank just to get miles. Time will tell.

    • Avatar

      I understand where you come from here. Part of my assumption is certainly that airlines (specifically AA in this case) won’t massively devalue their program. And, I feel they have very little incentive to do so.

      The AAdvantage program is massively profitable for AA. In fact, AA struggled to make money from its core business of flying flights even before the pandemic. It was thanks to selling miles to banks and partners that it was able to be so profitable. During the pandemic, mortgaging the AAdvantage program has given the airline a cash flow lifeline. Meanwhile, airlines are reversing devaluations (Qatar) and eliminating fees (AA and many others). So, I believe that airlines are going to look to make their mileage programs better – not worse – in the next few years.

  • Avatar

    The more I read on this, the better it seems to get. Do you think they will offer a 5000 point sign up bonus once again or was that a one off?

    • Avatar

      It’s hard say for the long term. I think it’s a pretty safe bet we won’t see it any time soon. Right now they’re being a lot more generous than other banks with the miles earning rate, so I wouldn’t count on a new account bonus.

  • Avatar

    This is very interesting and worth considering. Thanks for the write up on this!

  • Avatar

    Interesting business model offering.

  • Avatar

    It seems worth mentioning that there’s a bonus of 1,000 miles after 90 days with $5,000 — not huge, but a little extra boost.