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Update 10/4/22: Bask Mileage Savings Accounts now earn even more miles: 1.5 AAdvantage® miles for every dollar saved annually.
Update 12/1/22: Bask Bank Mileage Savings Accounts now offer 2 American AAdvantage® miles per $1 saved annually.
Effective today Bask Bank is now awarding 1.2 American AAdvantage miles per dollar on its Bask Mileage Savings Accounts, an increase of 20%. Rising interest rates aren’t just good for high yield savings accounts that pay out in cash (Bask Bank has a good Interest Savings Account, too). They are good, it seems, for your mileage account as well.
I value American Airlines AAdvantage® miles at 1.3 cents apiece so earning 1.2 miles per dollar on deposit per year is equivalent in my view to a 1.56% APR. And of course I can get a lot more value out of the miles than that. American Airlines AAdvantage® miles are the currency I’ve redeemed the most, for premium cabin awards on Etihad; Qantas; Cathay Pacific; Japan Airlines; British Airways and more.
It’s even better on a tax-adjusted basis. Bask Bank did a good job determining how they should be reporting the miles earned as a return on accounts. Bask Bank’s terms and conditions say “[m]iles are currently valued at 0.42 cents per mile, the equivalent of 0.42% annual percentage yield.” So for every 10,000 miles earned on deposits they report a value of $42.
Here’s a simple illustration of how I view the return on a mileage savings account. I see the new mileage earn rate as equivalent to 2.18% interest. However many people value AAdvantage miles more highly than I do, which would make it equivalent to a higher rate of interest than even this. And miles that put you over the top for a specific award are even more valuable still.
|Tax @ 35% Rate||76.13||17.64|
The results aren’t just sensitive to your valuation of miles, they are sensitive to your tax rate – for instance if you have a high income, in a high tax state, the mileage account looks relatively even more attractive.
- Taking The Points Guy website’s 1.77 cents per mile for AAdvantage miles
- And a 51% marginal federal + state + city tax rate
- The new Bask Mileage Savings Account would generate an after-tax return in miles equivalent to a 3.39% APY interest savings account.
I use this account myself as a place to park short-term funds I need for taxes, like for the property taxes on my home. I’m already using the account, so a 20% increase in mileage-earning is especially appreciated. I’ll earn more miles for doing exactly what I already do.
TPG’s valuation is way way too high. And we live in Texas so none of that city & state tax crap. Your valuations make more sense, although top tax bracket is 37%.
Although Bask Bank interest is paying 2.02% now, I expect it to move up as well.
Gary, you’ve talked in the past about the “value of points at the margin”, that “once you have more points than you’ll redeem in the near-term the value of additional points falls since you may not ever use them, or may not use them under current award charts.”
How does your recent multi-million mile purchase affect your personal valuation of AA miles and your usage of Bask?
Is there a comparison of the interest you would earn on the Savings account and how many miles that would purchase? Vs the miles you earn via the milieage account?
@ Gary — Assuming taxable value = 12,000 miles earned x $.0042, the taxable value under the mileage column is $50.40 and 35% tax is $17.64, not $14.70.
Meanwhile back at the American Airlines Funny Farm they will soon devalue AA points again by 30%. thereby wiping out any gains from Bask Bank.
@Gene that’s because I did taxable value on 10,000 miles – thanks, fixed
@swag – I am still using bask, i have very high mileage drawdown plans so I am replenishing some smaller mileage uses – i’ve written that i bought such a large sum to use them in the fairly near-term [4 rt’s in business to australia for a family of 3 at peak pricing] so i’m an outlier here where i don’t really have ‘a surplus of points’ such that i value them much less at the margin the way i think most should and would
Lol, I just did the math yesterday and found that the miles just barely still made more sense for me. So I was getting myself ready to move my whole balance over the next time that interest rates move up. Looks like this buys me some more time – or means I won’t have to move it at all if they keep increasing the earning rate.
@Gary: Why not Flagshit First? Yeah, trolling, but not as surly as AA FA’s.
I think I have the unicorn Qantas first seat. After flying first, even business seems like economy
Do the AA miles earn loyalty points, or just redeemable miles?
Just redeemable @rob