I’ve been a BankDirect customer since 2003, earning American AAdvantage miles for my checking account. These miles are a good part of how I originally earned lifetime elite status with AAdvantage over a decade ago.
BankDirect offers a 21,000 mile signup bonus:
- 1000 miles for account opening
- 10,000 miles for direct deposit (six consecutive statement cycles, totaling a minimum of $2000 per month)
- 5000 miles for online bill pay (at least three different payees totaling at least $500 a month for six consecutive statement cycles)
- 5000 miles for debit card (at least twelve transactions totaling at least $500 per month for six consecutive statement cycles)
In addition you can get 1000 miles for being referred by an existing customer. They’ll receive 1000 miles too. I no longer have referrals to offer, several years ago they started capping referral bonuses at 10,000 miles total.
The account pays out 100 miles per month for every $1000 average balance, up to $50,000 total (the earning cap started in 2013). This is good for large balances, bad for small balances, because there’s a $12 per month account fee (which they instituted in 2011).
- BankDirect no longer makes sense for those who keep low checking account balances. It takes an $8000 average balance to earn 800 miles per month, the number of miles I think is break-even considering the $12 a month fee for the account. In essence you’re buying miles at 1.5 cents apiece.
- However it can be a good deal for people with large checking account balances. In fact when interest rates on liquid cash were near zero BankDirect offered a nice rate of return.
Here’s the math on your return:
- $50,000 balance earns 5000 miles a month or 60,000 miles per year
- At a cost of $144 ($12 per month account fee)
- I value 60,000 miles at $900 (1.5 cents apiece)
- Your net return ($900 – $144) is $756
- That’s about 1.5% interest
- And there’s been no tax reporting of the miles.
You may be able to earn 2% or more now on a savings account or money market fund. Whether those higher rates are better than the miles depends on your marginal tax rate. When you earn 2% interest you really only pocket 2% minus the taxes on that 2%.
My own view is that this is not a good investment return but it remains a good return on a checking account for those who keep large balances (for instance I’ve long done a lot of reimbursable charges, and cash sits in the account for a few weeks before it’s used to pay off credit cards).
By the way I don’t know whether this still works but three years ago One Mile at a Time wrote that if you let your account become dormant – no activity at all for 6 months – BankDirect stops assessing the monthly $12 account fee. You’d just want to make sure your account gets re-activated before escheat laws kick in and Texas Capital Bank turns your money over to the state and you have to claim the money back from their unclaimed property site.