Bask Bank is known for its Mileage Savings Account which awards American AAdvantage miles rather than interest – the math on this works out especially well in what’s still a low-interest rate environment.
They’ve also launched a Bask Interest Savings Account. It was initially restricted to existing customers, but it’s now open to ones as well.
- No monthly fees or minimum balance requirements
- Current interest is 1.25% annual percentage yield (APY)*, one of the top rates in the market today.
This is definitely above-average return and it’s a simple and straight-forward product, and Bask Bank accountholders can transfer money back and forth between mileage and interest accounts.
There are accounts where you can chase higher yields. Those are usually either limited-time higher rate offers, or the amounts on which you can earn high rates are capped. It’s a lot of work to scale, so this is a simple way to ‘toggle money’ back and forth between earning miles and earning interest.
But which one is better right now? I walked through the calculation in the past, with lower numbers. The sample basic idea holds.
- Let’s say you deposit $10,000 into a Mileage Savings Account. You’ll earn 10,000 miles in a year. And as long as you hold a minimum daily account balance of $5,000 for 90 consecutive days within 120 days of opening the account, you’ll earn the 1,000 AAdvantage® miles new account opening bonus – for a total of 11,000 miles.
- I value AAdvantage miles at 1.3 cents apiece, so those 11,000 miles are worth $143.
- Now let’s talk taxes. Bask Bank’s terms and conditions say “[m]iles are currently valued at 0.42 cents per mile, the equivalent of 0.42% APY” Assuming that doesn’t change over the next year, earning 11,000 miles would generate a 1099 tax reporting form showing a value of $46.20. If you pay taxes on those miles with a hypothetical income tax rate of 32% you’re paying $14.78 in taxes and netting $128.22.
- Let’s compare that to 1.25% APY. That’s $125, on which a 32% tax rate would be $40, for a net of $85
You don’t break even, where interest is worth more than miles, until you hit 1.89% APY in this scenario. Earning miles is about 50% better than earning interest in my view. That said, some might prefer to hit reward goals in their AAdvantage account and then shift to earning interest.
*Annual percentage yield (APY) as of MAY 5, 2022. APY may change at any time before or after account is opened.