New Mileage Earning Restrictions on BankDirect Checking Accounts

I’ve been a BankDirect customer, earning American Airlines miles, since July 2003. In a low interest rate environment, the return to a mileage checking account turns out to be pretty good. I don’t use it as an alternative to investing but since I have fairly large business expenses that get reimbursed, I deposit those checks in my account and they sit for a month before I pay off my credit card — and I earn plenty of miles.

The Durbin Amendment made checking accounts less profitable for banks and BankDirect responded by instituting a $12 per month fee on all accounts, something you can’t avoid with direct deposits or minimum balances. So at $144 a year, the account makes the most sense for generous signup bonuses in the first year, and then only if you have big checking account balacnes as I do (short-term cash). But you have needed big balances to make the account work on an ongoing basis.

Unfortunately BankDirect will be further limiting the mileage-earning on these accounts.

BankDirect has awarded 100 miles for each $1000 in average balance each month. So a $5000 balance earned 500 miles per month.

Two years ago they limited mileage-earning to the first $200,000 average balance in an account each month.

Now, effective June 1, new rules (.pdf) will be in place.

Signup bonuses of up to 22,000 miles:

  • 1000 AAdvantage miles for account opening
  • 1000 AAdvantage miles for being referred by an existing accountholder
  • 10,000 AAdvantage miles for direct deposit (6 consecutive months of $2000 minimum per statement cycle)
  • 5000 AAdvantage miles for using billpay (3 different payees, at least $500 per month, for 6 consecutive statement cycles)
  • 5000 AAdvantage miles for using Visa Checkcard (12 transactions totaling at least $500 per month for 6 consecutive statement cycles)

In addition you can earn up to 10,000 miles by referring new customers to BankDirect (1000 per new customer).

But the big changes are to ongoing mileage-earning.

  • They will only award the 100 miles each month for every $1000 average balance up to the first $50,000 in balances.

  • After that, earning is cut by 75% to 25 miles for every $1000 average balance above $50,000.

  • There no longer appears to be a $200,000 average balance limit for earning miles.

Now, most customers don’t keep $50,000 miles in their checking account so it will be a non-event. But earning rates are being cut for folks earning more than 5000 miles per month currently. There’s no question that 5000 miles per month is still worth it at the $12 monthly fee. But keeping higher balances in the account will be more questionable.

Different rules and earn rates exist for money market accounts and for CDs which have been less popular in the mileage community.

(HT: OceanBreezes on Milepoint)

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. Just as I had almost convinced my dad to move his money there from an zero-interest checking account with Wells Fargo. I’ll be interested to see what you recommend as a replacement.

  2. I just opened my account with $50k and I was going to put more. I’ll probably put more into it and let it sit until I need to use it.

  3. @Scottrick – I think the account is still good for folks who hold $10k – $50k in their checking account. For larger amounts, I’d say grab Fidelity bonuses (eg 50k miles with several airlines for 100k deposit, repeatable each year).

  4. I won’t be keeping more than $50k in BankDirect. At least interest rates are starting to move up slightly from zero…

  5. Dam, those were some great miles coming in each month. Guess I’ll need to scale back and hit up Fidelity more.

  6. Aw this blows. Perhaps its time for an updated post on current Fidelity offers or other alternatives?

  7. I keep 100k there…I wonder if I can withdraw 50k and have my husband set up an account. We’d both earn 5k into each of our accts instead of 10k into mine. Still getting the 10k overall though.

  8. Damn, that really stinks. I’ve kept a $200k balance in there for about 2 years. It was definitely one of the best deals out there if you had the available cash. Oh well. I agree with MW – would you be up for an update post on available Fidelity offers? Either way I guess it’s time to move out anything above $50k starting June 1st. Booo.

  9. Ummm….carrying a balance on your mortgage means you’re paying the extra interest there, too. Seems quite unlikely that you’re getting a better value earning the points than not paying interest to the bank on the mortgage.

  10. In terms of mitigating the damage if you have more than 50K in the checking account it seems like the money market account offers 50 miles per $1000 up to 50K. Does anybody have one of these and is it FDIC insured?

  11. Maybe i’m not good at the maths but i agree with Seth, wouldn’t everyone be better off investing an an high divided-yielding index fund? Assuming no other debt, of course.

  12. If I am reading the charts correctly, it looks like the 1st $100K should be split between checking and MMS with $50K in each. That way you get 100 miles per $1,000. After that, go with MMS since the rate is higher and the miles are the same.

  13. Seth: The argument typically is that a BD checking account is purely liquid, while paying off your mortgage is not. So while you might get a better return from paying the mortgage today (as opposed to earning AA miles), if / when interest rates rise, you will get a better return from [something else] rather than paying off the mortgage.

    Now of course, we’ve been waiting for, oh, 5 years, for interest rates to rise. And it appears we might wait another 5-10-30 years! So maybe it’s time to throw in the towel and pay off the mortgage. It’s an interesting question, and will get even more interesting if mortgage interest is no longer deductible (which seems to be threatened every time tax code reform comes up!)

  14. @Andrew

    the way i read it is if you split $100k between checking and MMS you’ll average 75 miler per $1k.

  15. Welp, just cut my BD account down to the $50k. Oh well. I suppose maybe it’s a sign that bank de-leveraging is working if they aren’t so desperate for deposits. So, good news?

  16. I’m another one of the people with more than $50K in Bank Direct. With interest rates at zero, it was a great place to earn and keep your cash liquid. Is Fidelity worth it for those with less than $100K?

  17. @Lantean

    You are correct.
    Checking = 100 per $1,000 for first $50k
    MMS = 50 per $1,000 for first $50k

    Both = 25 per $1,000 on amount over $50k

    So the 1st $50k goes to checking, the next $50k to MMS then the miles are a wash after that so go for the higher rate

  18. Ok, looks like it’s time to open a MMS account too. If I signup through a referral code, will someone else get the credit? We can start a conga line. 🙂

  19. I need to open a MMS account also. Since I probably can’t refer myself, I’ll join the conga line.

  20. OK I think my heart just missed a beat, I was reading this thread and decided to do some math…. So let me get this correct, lets say I deposit 30K into m checking account and I’m to get 100 miles/dollar that means I’m to get 3 Million miles? I just want to be able to make sure I am understanding this… How long do I have to keep the money in the account to get those miles?

  21. I have like 30,000 in one of my accounts and I was planning to move to BankDirect ( that is like 3000 miles a month free, I guess). Does BD run a hard pull on your credit report?

  22. @Tony, your math is a bit off – unfortunately! It’s 100 miles per every $1000 on deposit, so $30,000 dollars would get you 3000 miles per month, and you have to pay the $12/month fee.

  23. @DaVe OK now that makes sense… Ok for me doesn’t make much sense to move some money around, now if I were to get the 3 Million miles it would be worth it…

  24. Like Nic above I’m going to open a second checking account and keep 50k in each. It will mean double fees but $288 for 120,000 miles still seems worth it to me.

  25. @Julie and Nic Hopefully you can get that to work, but just want to give you the heads up that BD T/C say only one mileage earning checking account per household. If you do get that to work, please post here to let us know.

    Just called BankDirect, and the goods news is yes, the Money Market account is FDIC insured. And while there is still the $12 fee for the checking account, there is no monthly fee for the Money Market account.

    The bad news is that I now to have open a Fidelity brokerage account by June 1st, and another in 6 months for my wife, just to get close to the amount of miles I was getting simply for having my BD checking account. And that means splitting those miles between our accounts, which is less convenient for booking awards.

    Good news from Fidelity is they no longer have the once in a lifetime limit for the brokerage bonus. You do have to leave the full $ amount in your account for a full 6 months. And you can only do this once a year. But unlike BD, there is no one per household clause. So you can move $100k into a brokerage account for six months, then move it to the spouses account for 6 months, then back to your account. Rinse and repeat, at least for now….

    Coming right on the heels of the gutting of the HHonors award chart {yes, I know some Hampton Inns went down 10K per night, but some of the Hiltons I favor went up 40K a night} the BD devaluation is really depressing. 🙁

  26. What about the lost .9% (taxable) you can get from Ally Bank – that’s not zero interest rate. So these AA miles are costing quite a bit now.

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