Can you earn 4.59% back on everyday spend with the new BOA Premium Rewards card?

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As we reported earlier today, Bank of America launched a new card this morning: the Bank of America Premium Rewards card. Greg even wrote a Bank of America Premium Rewards Card Complete Guide. I’m sure he will soon have more analysis and thoughts about this new offering, but in the meantime, I got digging through the terms of the Preferred Rewards program and found myself wondering: Can you earn 4.59% back on everyday spend with this new card? In short, I doubt it – but I’m also not convinced that it’s impossible. Here’s why.

Preferred Rewards

As noted in today’s Quick Deal and our Complete Guide, the signup bonus makes this card attractive from the get-go, but the long-term prospects for keeping this card rely on your relationship with Bank of America. This card really becomes interesting if you qualify for Bank of America’s Preferred Rewards program.

The Preferred Rewards program has 3 tiers based on the total amount of money you have on deposit or invested with Bank of America / Merrill Lynch. There are three tiers, but only the top tier is pertinent to this post: Platinum Honors. This tier requires you to have $100,000 on deposit/invested with BOA/Merrill Lynch. In fact, it requires that you maintain an average daily balance of $100K or more for 3 calendar months in order to enroll in Platinum Honors Preferred Rewards. Once you meet that requirement, you’ll earn 75% more points with a number of Bank of America cards, including the Premium Rewards credit card. Your earnings with the Premium Rewards card would look like this:

  • 2X on travel & dining + 75% bonus = 3.5 points per dollar back on travel & dining
  • 1.5X on everything else + 75% bonus = 2.625 points per dollar back on everything else

Considering the fact that those points can be deposited into your eligible BOA/Merrill Lynch bank account at 1 cent each, this card effectively earns 3.5% cash back on travel & dining and 2.625% cash back on everything else if you qualify for Platinum Honors Preferred Rewards. While the return on travel & dining is good but not amazing, the return on everyday spend is unmatched. Sure, there are cards with rotating categories or limited-time bonuses that are higher — but for long-term uncapped earnings, that can’t be beat. Or can it get even better?

Qualifying for Platinum Honors status

I decided to dig into the terms of Preferred Rewards a bit to see how it worked. I started out curious about how one qualifies for Platinum Honors status and how long that status would last. The answer to that turned out to be relatively easy. Bank of America publishes qualification guidelines here. Your eligibility for Preferred Rewards is determined by your three-month average combined balance. The key in understanding that is this blurb from that linked page:

Your Preferred Rewards program balance is calculated based on your combined average daily balance for a three calendar month period that you — as the primary or co-owner on the account — keep in your eligible Bank of America® banking and/or Merrill Edge® and Merrill Lynch® investment accounts. It is not a current total of your account balances.

So the key then is that you must maintain an average daily combined balance of $100K or more for 3 calendar months (and the accounts must be yours or you must be a co-owner; business accounts do not count). If you deposited $100K today, your average daily balance for September would not be $100K. You would have to leave the money there in October, November, and December. Then, presumably on or around January 1st, you would become eligible to enroll in Platinum Rewards.

If you initially qualify for a lower tier, the terms state that they will re-evaluate your status at the beginning of each month to see if you qualify to move up in tier. But what about the reverse — what if you earn Platinum Honors status in January and then your account balances drop below the $100K threshold? The terms don’t leave it ambiguous (bold is mine):

What happens if your balances drop?

Even if your eligible balances drop below the requirements for your tier (Gold, Platinum or Platinum Honors), you’ll maintain your Preferred Rewards status for 12 months following enrollment. If you no longer meet the balance requirements after 12 months, you’ll have a three-month grace period to increase your balances. After that, if you still don’t meet the balance requirements, you’ll be moved to a lower tier or lose your Preferred Rewards benefits.

In other words, once you get Platinum Honors status, you keep it for 15 months regardless of your ongoing balance. If you want to keep it beyond that, you’ll need to be sure you have at least $100K in combined balances for the final 3 calendar months of that period (or the final 3 calendar months of year to sort of “automatically renew”.

A look at the terms of the Platinum Honors 75% bonus

My next stop was a look at the terms for how the 75% bonus works. I assumed that someone with Platinum Honors Preferred Rewards status simply earns 75% more points as shown above with the Premium Rewards card. And with that card, it does indeed work that way. But it seems that Preferred Rewards are not applied uniformly to every type of card…..

From the bottom of the Preferred Rewards benefits page, point #2 (bold mine for emphasis):

Certain credit cards are eligible to receive the Preferred Rewards bonus. View a complete list of ineligible cards. Enrolled clients with eligible cards will receive the Preferred Rewards bonus based on Preferred Rewards tier and type of card. For example, the BankAmericard Cash Rewards™ credit card awards the Preferred Rewards bonus when you redeem cash rewards into a Bank of America® checking or savings account or an eligible Cash Management Account® with Merrill Lynch® or Merrill Edge®. That means a $100 cash rewards redemption becomes $125, $150 or $175, based on your tier when you redeem. All other eligible card types receive the Preferred Rewards bonus with each purchase. That means a purchase that earns 100 base points will actually earn 125, 150, or 175 points, based on your tier when the purchase posts to your account. The Preferred Rewards bonus will replace the 10% customer bonus you may receive with certain cards. Other terms and conditions apply. If you have an eligible card, please refer to your card’s Program Rules for details about how you will receive the Preferred Rewards bonus. Program Rules are mailed upon account opening and are accessible through the rewards redemption site via Online Banking or by calling the number on the back of your card.

To rephrase that:

  • The BankAmericard Cash Rewards card earns the 75% when you redeem the cash rewards
  • All other cards earn the bonus with each purchase

That’s interesting for a number of reasons. First, it means that if you open a BankAmericard Cash Rewards card, you can stretch the signup bonus with Preferred Rewards. The current signup bonus on that card is $150 on $500 spend. If you earned that today, but redeemed it in January when you reach Platinum Honors status, you could redeem that $150 for 75% more — or $262.50. In terms of bonus-to-spend ratio, that’s a monster. Of course, it’s still barely more than half the signup bonus on the Premium Rewards card. But what if…..

You can transfer points between some types of Bank of America accounts

There is not yet a complete set of program rules for the rewards that the Premium Rewards credit card will offer (the application page and associated terms state that complete program rules will be sent with your new card). Looking at the program rules for cards like the Cash Rewards or Travel Rewards cards, we see a clause in each that states something to this effect:

  •  Unless specifically authorized by us, Cash
    Rewards cannot be transferred between
    any credit card accounts issued by us.

or

  • Unless specifically authorized by us,
    Points and Rewards may not be combined:
    • With other discounts, special rates,
    promotions or other reward programs
    offered by us

That’s interesting because it says that points and rewards may not be combined “with other reward programs offered by us”. How do they define “other” rewards programs versus the same reward programs? Will the cash rewards and Premium Rewards programs be separate? After all, both programs earn points-per-dollar that are redeemable for 1 cent each. And we know that Bank of America does authorize some transfers — after all, it is possible to transfer points between some Bank of America rewards cards. This was something I didn’t know. I actually stopped my research on this fairly early on until Greg told me that you can indeed transfer points between some accounts….

In the name of science, Greg tried to transfer 0 points from a Travel Rewards card to a Better Balance card. After clicking “transfer points”, this is what he got:

After entering the Better Balance rewards card number, he got an error that stated, “There was a problem processing your request. Points cannot be transferred into this account”. So you definitely can not transfer points from the Travel Rewards card to a Better Balance card. Why does this all matter?

If you can transfer from Premium Rewards to Cash Rewards, you could earn the 75% bonus twice

Remember from above that the Cash Rewards card earns a 75% bonus on the redemption of cash rewards, whereas all other cards earn the bonus with each purchase. If it were possible to earn points at 2.625 points per dollar and then transfer those points to your Cash Rewards card, you could then redeem those points at a 75% bonus — an effective rate of 2.626 + 75% = 4.59X. In other words, if you made a $100 purchase with your Premium Rewards card and then transferred to your Cash Rewards card before redeeming, you would earn $4.59 as follows:

  • Use Premium Rewards card to make a $100 item, earn 1.5X (150 points) + 75% bonus = 262.5 points
  • Transfer points from Premium Rewards to Cash Rewards
  • Redeem 262.5 points from your Cash Rewards card account and earn a 75% bonus = 459.37 points
  • That’s a final rate of return of 4.59% or $4.59 on every $100

Is this likely to be possible?

As I stated at the outset, I don’t imagine it is very likely that you will be able to transfer points in this way. However, Bank of America has created the feature to transfer points and the Cash Rewards and Premium Rewards cards both earn rewards points that are redeemable for 1 cent each in the form of a statement credit / cash deposit. It’s not altogether impossible that this would work if you had Platinum Honors status and both credit card accounts.

Are you going to try this and be the data point you hope to see?

Honestly, I’m probably not going to test this. I am somewhat intrigued by the possibility of earning Platinum Honors status for 15 months by parking $100K in cash & investments at BOA for three months and this possibility does make it somewhat more intriguing. However, my main focus at this point continues to be miles & points. That said, I’ve certainly considered the benefits of a more cashback-centric approach. I can’t rule it out, but I certainly won’t move that kind of money to BOA expecting this to work. If we do go after Platinum Honors status, it will be to earn 2.625% back on everything…..though that sure wouldn’t stop me from trying this. I look forward to finding out, whether through my experience or someone else’s — because at this point, we just don’t know what might be possible with the new Bank of America Premium Rewards card.

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