Now That Bask Bank Offers 1.25%, Should You Choose Miles Or Interest For Your Savings?

Update 12/1/22: Bask Bank Mileage Savings Accounts now offer 2 American AAdvantage® miles per $1 saved annually.

Update 11/30/22: The Annual Percentage Yield (APY) on the Bank Interest Savings Account has increased from 3.60% to 3.85%.

Update 11/2/22: The Annual Percentage Yield (APY) on the Bank Interest Savings Account has increased from 3.05% to 3.60%.

Update 10/13/22: The Annual Percentage Yield (APY) on the Bank Interest Savings Account has increased from 2.75% to 3.05%.

Update 9/26/22: The Annual Percentage Yield (APY) on the Bank Interest Savings Account has increased from 2.53% to 2.75%.

Update 9/12/22: The Annual Percentage Yield (APY) on the Bank Interest Savings Account has increased from 2.20% to 2.53%.

Update: 8/16/22: Bask Bank has increased the yield on its Bask Interest Savings Account to 2.2%

Update 7/20/22: Bask Bank has increased the yield on its Bask Interest Savings Account to 2.02%

Update 6/22/22: Bask Bank has increased the yield on its Bask Interest Savings Account to 1.61%.



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.

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 InsideFlyer.com, 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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Comments

  1. Gary,

    Screw Bask Bank! I see the US Gov’t is offering i-bonds that you can purchase on line for 9.6% interest, far better than what any banks, ( including Bask ), are offering! However, you ARE limited to no more than 50,000 dollars in i bond purchases per calendar year, and the i-bonds will have to be held to maturity to get the full interest amount. However, the only penalty for early withdrawal and cashing in a US i-bond is forfeiting the last ninety days interest. Not to shabby a deal at all, and I think its gonna take a few more years to get the banks up to paying between 9 and 10 % interest!

  2. Rising interest rates might motivate Bask to offer loyalty points. As interest rates go up, and savers begin to opt for the cash interest, loyalty points might become the lower cost option for the bank. I have never seen anything that reveals what a financial institution has to pay for loyalty points, but at some level, it has to become a viable option.

  3. I hope you’re right Bill. With that said, I’d like to see Bask offer today the OPTION of earning loyalty points in lieu of AA miles and maybe with a kicker to start offering AA miles AND AA loyalty points if their interest rate increases to some threshold (maybe 2%)…

  4. @ Rob Perreten

    Annual purchase limit for i-Bonds is $10,000 plus an additional $5,000 can be bought but only through your tax refund. (Possibly good idea to over withhold or make a large prepayment)

  5. To the comment about ibonds, you are limited to $10000 per person plus up to 5000 in paper bonds for tax refunds. They must be held for a year minimum. Yes, much better than 1.25% but once you hit the limit, a safe place for funds with a good return is important.

    Also, miles aren’t always worth what they seem. For example, if AA revenue ticket is $200 and the miles is 10000 miles, you might think it’s worth 2 cents per mile, But you aren’t earning miles as if you paid cash for the ticket, and if another airline has a flight for $100, then the miles still are only worth 1 cent each. Cash is much more flexible.
    Plus, I’m more in the 22% or 24% tax bracket, so less tax than the estimate.

  6. iBonds are limited to 10k per person per year
    (plus an additional 5k – ONLY if in the form of an individuals tax refund dollars)

    If you are shielding cash from the volatility of the markets, Bask is a higher payer right now.

  7. I’m finding Bask takes 2 days to answer a secure message with a “call CS to discuss your issue”.
    When you call CS you then wait a few days to find out why they haven’t issued a sign up bonus that was supposed to be issued a month ago.
    Not a real bank from a CS perspective or perhaps that is what banking is like in Texas.

  8. more about i-bonds – have to hold at least 12 months to get any interest – after that if you cash out before 5 years you get penalized 90 days interest.

  9. The $50,000 figure on I bonds as noted by Rob Perreten is actually not incorrect. If a couple each contributes $10,000 in 2022 they can then contribute another $10,000 at the beginning of 2023 which would be a total of $40,000 within 365 days. If the couple has a trust, the trust can contribute $10,000 so that would be another $20,000 within a 365 day period…and if the couple files income tax separately each can request their refund in a paper bond up to $5000. The trust can
    have the same social security number as the individual who may be purchasing the I bond.

  10. @Jason. True in terms of potential value. But if I cancel an expensive flight and I pay cash, I have to scramble to use the credit in a year. With miles it’s a costless redeposit

  11. @Johhny: Bingo!! AA points are typically undervalued by travel writers because they fail to acknowledge that the purchaser is getting the equivalent of a fully refundable ticket. This level of flexibility has value.

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