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Are 50,000 miles from a BankDirect or Fidelity account worth parking your cash?

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This article was last updated Apr 02, 2014, but some terms and conditions may have changed or are no longer available. For the most accurate and up to date information please consult the terms and conditions found on the issuer website.

If you’re fortunate enough to have extra cash lying around you’ve probably given some thought to offers out there to earn bonus miles by keeping your cash parked in a checking, savings, CD or brokerage account.

BankDirect offers American AAdvantage® miles for checking accounts and CDs at the following rates (click here for details):

Checking Accounts:

  • First $50,000: 100 miles per $1,000 per month (60,000 earned / year @ $50,000)
  • After $50,000: 25 miles per $1,000 per month (75,000 earned / year @ $100,000)

CDs:

  • First $50,000: 250 miles per $1,000 per 6 months (12,500 miles / 6 months @ $50,000)
  • After $50,000: 25 miles per $1,000 per 6 months (14,000 miles / 6 months @ $100,000)

Fidelity offers bonus American AAdvantage and United MileagePlus miles at the following levels when you add money to an account (click here for details (AA):

  • $100,000: 50,000 miles once after 9 months
  • $50,000: 25,000 miles once after 9 months
  • $25,000: 15,000 miles once after 9 months

These are tempting numbers, and in the Bank Direct case there is no limit to the number of CDs you can earn miles on, so you could open several $50,000 mile CDs every 6 months and accrue hundreds of thousands of miles a year. With Fidelity you can move funds in and out once per year to get the bonus.

But is this a good deal?

First, you should only do this with your short term cash. You’re always going to be better off investing longer term cash in a diversified investment portfolio (not that you didn’t already know that).

But compared to the paltry savings and CD rates on cash available today, how does earning miles compare given the Fidelity and Bank Direct CD options require you tie up your cash for 6-9 months?

We ran the numbers here based on the highest savings account rate we could find – about 0.89% at Ally Bank and the highest 1 year CD of 1.05% from GE Bank. For money in Fidelity accounts we assumed you chose a CD for 6 months.

The short answer. If you don’t value your miles at more than one cent each (30,000 miles = $300 ticket) don’t bother, you’re better off earning cash. You can see the results below valuing miles at one cent each, and even with the bonus miles you won’t earn much more than the 1% you can earn from a full cash account.

RegionAirlineWhere to check award space
AfricaEgyptairUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
AfricaEthiopianUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
AfricaSouth AfricanUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
AsiaAir ChinaUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
AsiaAir IndiaUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
AsiaANAUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
AsiaAsianaUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
AsiaEVAUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
AsiaSingaporeAeroplan.com, ANA.com, Award Flight Finder
AsiaShenzhenAeroplan.com, ANA.com, Award Flight Finder
AsiaThaiUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
EuropeAdriaUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
EuropeAegeanUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
EuropeAustrianUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
EuropeBrusselsUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
EuropeCroatiaUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
EuropeLOTUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
EuropeLufthansaUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
EuropeSASUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
EuropeSwissUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
EuropeTAP PortugalUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
EuropeTurkishUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
Latin AmericaAviancaUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
Latin AmericaCopaUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
North AmericaAir CanadaUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
North AmericaUnitedUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
PacificAir New ZealandUnited.com, Aeroplan.com, ANA.com, Award Flight Finder

But if you can make a case to value your miles at two cents or more (30,000 miles = $600) then you’re generally better off earning miles with BankDirect checking or the Fidelity new deposit bonus. You can typically justify that if you redeem for big international or business and first class trips. Here’s how the options stack up if you value miles at 2 cents each:

RegionAirlineWhere to check award space
AfricaEgyptairUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
AfricaEthiopianUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
AfricaSouth AfricanUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
AsiaAir ChinaUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
AsiaAir IndiaUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
AsiaANAUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
AsiaAsianaUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
AsiaEVAUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
AsiaSingaporeAeroplan.com, ANA.com, Award Flight Finder
AsiaShenzhenAeroplan.com, ANA.com, Award Flight Finder
AsiaThaiUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
EuropeAdriaUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
EuropeAegeanUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
EuropeAustrianUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
EuropeBrusselsUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
EuropeCroatiaUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
EuropeLOTUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
EuropeLufthansaUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
EuropeSASUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
EuropeSwissUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
EuropeTAP PortugalUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
EuropeTurkishUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
Latin AmericaAviancaUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
Latin AmericaCopaUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
North AmericaAir CanadaUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
North AmericaUnitedUnited.com, Aeroplan.com, ANA.com, Award Flight Finder
PacificAir New ZealandUnited.com, Aeroplan.com, ANA.com, Award Flight Finder

In this case the Fidelity bonuses and holding a Bank Direct checking account with $50,000 in it are good deals, about twice as good as the best cash rates. But going above $50,000 isn’t a great idea since you’ll only earn 1/4th the miles above that threshold, and the BankDirect CD mileage rates aren’t attractive enough to earn you much more than a 1% all-cash CD.

What about taxes?

The good news is BankDirect and Fidelity historically haven’t sent 1099 forms to the IRS for the ‘interest’ earned on miles. So that offers a 30-40% advantage for the value of miles over getting your interest in the form of cash, though everyone’s tax situation is different.

The conclusion is if you can put your miles to good use for something better than 1 cent each it’s pretty easy to make the case this is a good use of the cash you aren’t ready to invest. And if you travel frequently that’s worth considering.


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