Earning American Miles Through BankDirect

Last week, I discussed the end of the mileage bonuses at Fidelity Investments. In that post, I referenced BankDirect, a Texas-based internet bank that offers miles instead of interest (Technically, it’s in addition to interest, which is currently a whopping 0.01% for balances greater than $2,500.).

BankDirect: Your New Mileage Bank


It’s not quite a pile of miles anymore, but it does the job

Several years ago, BankDirect, the FDIC insured internet division of Texas National Bank, hit upon a way to gain depositors: Instead of offering big interest rates, they’d offer their customers frequent flyer miles from American AAdvantage. Since banks make their money off the spread between lending and deposits, the decade’s declining interest rates have cause the bank to lower its rewards. Nevertheless, BankDirect remains one of the best ways to earn American Airlines Miles.


Mileage Checking with Interest and Money Market

There are several types of accounts that will earn interest, which you can find on their rate chart, but I’m going to concentrate on the Mileage Checking with Interest (CWI), which is where most people get the best return.

At one point, you received 100 miles per month for every $1,000 you had in the bank. So if you had an account with $10,000, you would receive 1,000 AA miles every month. That was one of the best deals in the market.

Lower interest rates have meant that the bank’s rewards aren’t quite as good, but they’re still better than you can get elsewhere. For the first $50,000, you still earn 100 miles for every $1,000 in your CWI. Above $50,000, the reward is only 25 miles for every $1,000. Less good.

For example, if you have $100,000 in your BankDirect, account, you would receive 6,250 miles every month, or 75,000 per year. It breaks down as such:

The first $50,000 gets you 100 miles per $1,000, or 5,000 miles per month.
The next $50,000 gets you 25 miles per $1,000, or 1,250 miles per month.

The value of that ticket could be worth a pretty penny if you use it for an international business class ticket.

The bank offers other products that pay miles, but none is quite as generous as the CWI. If you collect AA miles and are looking for a place to store your cash, you need to look at BankDirect.

The Caveats

Nothing is perfect, even miles. Here are a few things to watch out for:

  • They recently redesigned the website, but it is still one of the worst that I have ever seen.
  • The rate chart indicates that there is a $12 per month fee. That’s an exorbitant number, but the miles are still more than worth with higher balances. On the plus side, they haven’t actually charged me the fee for the past several months.
  • Interest rates have begun to rise recently. If they continue to rise and BankDirect doesn’t adjust its earnings, it may be worthwhile to go elsewhere for the cash, even after paying taxes.
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