Posted by William Charles on January 15, 2015
Credit Cards

Published on January 15th, 2015 | by William Charles

59

Bank of America Preferred Rewards Program: 5.25% Cash Back On Gas, 3.75% Travel, 2.625% All Purchases

Bank of America offers something known as the “Preferred Rewards Program” which they’ve been advertising heavily. The idea is that you get rewarded for having money in a Bank of America (BofA) account or Merrill Edge (ME) investment account. There are three levels of status you can achieve “Gold, Platinum & Platinum Honors” and various bonuses/benefits you can receive:

  • Increased interest rate on your money market savings account
  • Customer service priority and extended hours
  • Discount/removal of certain banking fees
  • Free Merril Edge trades
  • Relationship credit when you close a mortgage
  • Increase on credit card rewards

The only real one of interest to me is this increase on the credit card rewards you can receive. So we will focus on that for the rest of the article.

Status Levels

As mentioned earlier, there are three levels of status that you can achieve. The more money you have with BofA/ME, the higher your status and the bigger the increase on your rewards. They calculate the amount you have with them on a 3-month average, so it’s not possible to just add funds quickly and then withdraw them to qualify. Update: A reader informs me that you actually keep your status for one year and three months even after withdrawing funds.

You also need to have Bank of America personal checking account to qualify, they often having sign up bonuses for these accounts so click here to see if they have any currently. Below are the different levels and how much you need invested to qualify for that status level.

  • No status: $19,999 or less
  • Preferred Rewards Gold: $20,000 – $50,000
  • Preferred Rewards Platinum: $50,000-$100,000
  • Preferred Rewards Platinum Honors: $100,000+

bank of america preferred rewards

Credit Card Bonus

The bonus that you’ll receive on your credit card rewards increases as your status does. It’s important to note that this bonus replaces any other customer bonus you might receive from Bank of America (e.g the standard 10% bonus you get if you redeem into a Bank of America checking or savings account. Note: some people are reporting that they are still receiving BOTH bonuses).

  • No status: 10% bonus as long as you have a Bank of America checking account
  • Preferred Rewards Gold: 25% bonus
  • Preferred Rewards Platinum: 50% bonus
  • Preferred Rewards Platinum Honors: 75% bonus

credit card bonus

Ineligible Cards

  • Non-rewards credit cards
  • Business purpose credit cards
  • BankAmericard Privileges® (except Cash Rewards customers in the Platinum Honors tier)
  • Bank of America Accolades®
  • BankAmericard® Better Balance Rewards™
  • Merrill Lynch branded (including Merrill Accolades®, MERRILL+®, Total Merrill® Cash Back, Total Merrill Match® and Merrill Lynch®Octave™)
  • U.S. Trust branded (including Bank of America Accolades and U.S. Trust® Octave™)
  • AAA Dollars® Visa credit card
  • AAA® Gas Rebate
  • Alaska Airlines®
  • Amway™
  • Asiana Airlines®
  • Azamara Club Cruises®
  • Bass Pro Shops®
  • Celebrity Cruises®
  • Elite Rewards®
  • MelaleucaSM
  • Royal Caribbean International®
  • Spirit Airlines®
  • US Airways®
  • Virgin Atlantic Airways®

Eligible Cards

Bank of America does not provide a list of cards that are eligible, but they do provide a list of cards that are not eligible. When you view all of their credit cards, it is possible to click “preferred rewards” in the side bar to see which cards qualify. The following cards do qualify:

  • BankAmericard Cash Rewards (there are also a bunch of other co-branded cards with the same rewards)
    • $100 cash sign up bonus after $500 in purchases within the first 90 days of account opening
    • 3% cash back on gas, 2% cash back on grocery in the first $1,500 purchases each quarter
    • 1% cash back on all other purchases
    • No annual fee
  • BankAmericard Travel Reward
    • 10,000 points after $500 in spend within 90 days
    • 1.5 points for every $1 in spend
    • No annual fee or foreign transaction fee
  • AAA Member Rewards
    • 3 points per $1 in spend on qualifying AAA & travel purchases
    • 2 points per $1 on gas, grocery & drug store purchases
    • 1 point on all other purchases
    • No annual fee
  • Norwegian Cruise Line
    • 10,000 Bonus WorldPoints after first purchase
    • 2 points per $1 on Norwegian Cruise Line purchases
    • No annual fee

Interesting Credit Cards

A number of these cards become particularly interesting when you add the customer relationship bonuses that Bank of America is offering. Let’s have a look at them.

BankAmericard Travel Reward

This card is interesting because it earns 1.5x points on all purchases. Points are worth 1¢ a piece when redeeming them against travel expenses, but only 0.6¢ when redeeming them for cash. Normally this card isn’t of interest as it’s possible to earn 2% cash back on all purchases with other cards. Let’s look at how this card pans out if you’re part of preferred rewards:

  • Gold: 1.875x points on all purchases
  • Platinum: 2.25x points on all purchases
  • Platinum Honors: 2.625x points on all purchases

As you can see this card doesn’t really make sense unless you have Platinum Honors (you can get 2.22% already on the Barclaycard Arrival Plus with is only slightly lower than the regular Platinum rate). The main problem with this is that it’s only really a 2.625% cash back card if you have enough travel expenses to redeem against, if you actually redeem it for cash you’re only going to get a maximum of 1.575% cash back.

BankAmericard Cash Rewards

This card is interesting for it’s bonus categories in gas and grocery stores (the regular 1% rate isn’t of interest because at most you’ll get 1.75% cash back). Let’s have a look at the the gas rates first:

Gas

  • Gold: 3.75% cash back on gas station purchases
  • Platinum: 4.5% cash back on gas station purchases
  • Platinum Honors: 5.25% back on gas station purchases

There are quite a few credit cards that offer 5% cash back at gas stations, so this is only a very slight improvement of 0.25% cash back.

Grocery stores & Wholesale Clubs

  • Gold: 2.5% cash back on grocery store purchases
  • Platinum: 3% cash back on grocery store purchases
  • Platinum Honors: 3.5% back on grocery store purchases

This is a bit more interesting now that American Express added the $50,000 spending limit on their Old Blue Cash card which earns 5% cash back at grocery stores. But there are a few cards that offer 3% cash back with much higher monthly/quarterly/annual limits than this BofA card.

The main problem is that you can only spend $1,500 per quarter combined in these categories, which means it can’t really be used for scaleable manufactured spending. [Update: now up to $2,500]

AAA Member Rewards

This is the card I was most excited about researching. Points are worth 1¢ a piece. Update: It looks like you only earn the Bank of America Preferred Rewards bonus on the 1 base points and not on the category bonuses as well, this makes it significantly less attractive of an option. We’ve updated the post accordingly, thanks to reader, Tyler for pointing this out.

AAA Purchases

  • Gold: 3.25x points on AAA purchases
  • Platinum: 3.5x points on AAA purchases
  • Platinum Honors: 3.75x points on AAA purchases

The fine print states that AAA must be the merchant of record for purchases to qualify. This is particularly interesting because AAA sells Visa gift cards and they often have a promotion where you don’t have to pay the purchase fee. These purchases do qualify for the 3x points (plus any relationship bonus you have) but this is not very scaleable.

When you make a purchase at an AAA location, the cards are registered to you and if you purchase too many then MetaBank will ban you. In addition to this, some AAA locations will not sell the gift cards at all or will restrict how many you can purchase. You can read more about this on this Freequent Flyer post or in this Flyertalk thread.

Travel purchases

The following purchases are considered travel by Bank of America, along with their merchant category codes. Remember this is a Visa card so you can use the Visa lookup tool to see how a business will code.

  • Airlines (MCC 3000-3299-representing individual major airline carriers, and 4511- Airlines/Air Carriers)
  • Car Rental Agencies (MCC 3351- 3441-representing individual major agencies; and 7512- Automobile Rental Agency)
  • Hotels, Motels, Inns and Resorts (MCC 3501-3999-representing individual major hotel/motel chains and 7011-Hotels/Motels/Resorts)
  • Steamship/Cruise Lines (MCC 4411)
  • Travel Agencies (MCC 4722)

You will earn at the following rates depending on your status

  • Gold: 3.25x points on travel purchases
  • Platinum: 3.5x points on travel purchases
  • Platinum Honors: 3.75 points on travel purchases

In terms of pure cash by this is by far the best card for travel purchases if you have Platinum Honors, although a lot of people will prefer to earn flexible points. Personally I find that hard to justify when you could get 5.25% cash back on all travel expenses. The best hotel credit card will only get 3% cash back on hotels for example, plus it has a quarterly limit.

Gas, Grocery & Drug Store (GGD) Purchases

  • Gold: 2.25x points on GGD purchases
  • Platinum: 2.5x points on GGD purchases
  • Platinum Honors: 2.75x points on GGD purchases

As mentioned earlier there are plenty of cards that give 5% cash back on gas, so it’s not that useful for that. There are cards that earn more than 3.5% cash back at grocery stores, but all of these have spending limits (the U.S Bank Flexperks has a potential maximum of 4% but it can only be redeemed for flights and it’s difficult to get the maximum rate of 2¢ per point) so this card would be useful for those that spend over those limits.

For drugstores it’s the same case, the Old American Express Blue is 5% back (after your first $6,500 in purchases) but it has the $50,000 annual limit.

Overall I think this card is the most interesting, although the 2.625% everywhere is pretty attractive as well. Both cards only really make sense if you’re doing a lot of spending (although you should be able to downgrade other Bank of America cards to these easily).

Qualifying For Status

Let me preface this by saying that you shouldn’t make an investment decisions without your own serious research and you shouldn’t make these decisions based on how they will affect your credit card rewards. Having said that, let’s take a look at your options.

  • Bank of America deposit account. This is a terrible option, the interest rates are 0.03% APY normally and 0.10% with Platinum Preferred Status. At very minimum you should be getting 1% (although you could get a lot more with a rewards checking account), if you had $100,000 invested with Bank of America you’d be missing out on $900 in interest per year compared to a 1% account.
  • Merrill EDGE self-directed investment account.
    • There are a couple of good things about these accounts
      • As part of your status you can get a number of free online trades.
        • up to 30 per month with Platinum
        • up to 100 per month with Platinum honors
      • You can get a cash bonus for adding a qualifying deposit of assets (note: this has been as high as $1,000 in the past)
        • $100 bonus: $20,000 in assets
        • $150 bonus: $50,000 in assets
        • $250 bonus: $100,000 in assets
        • $600 bonus: $200,000+ in assets
      • You should be able to purchase Vanguard ETFs

Final Thoughts

I have a rule where I don’t make any investment decisions based on bonuses offered by banks, I’ve done some before and the hassle hasn’t been worth it. That being said, I am strongly reconsidering this hard line stance because of this program. I already have a lot of Bank of America cards which could quickly be converted to the interesting cards and I could keep my investment portfolio and make a small profit on the switch, whilst getting free trades.

I’m not going to make any rash decisions and won’t make this one until I’ve done a lot more research, I don’t think this program is really worth considering unless you have enough funds for the Platinum Honors which will be unreachable for a lot of my readers.

I don’t think Bank of America will devalue this program in the short term as they’ve obviously put a lot of time and money putting it together and advertising it. That being said, if enough switched on people sign up and put a lot of spend through their cards then BofA will be hemorrhaging money.

What are your thoughts of this program? Are you already enrolled in preferred rewards? If so please share your experiences in the comments. I’m also sure I’ve made some errors, so feel free to correct me so I can update this post.



59 Responses to Bank of America Preferred Rewards Program: 5.25% Cash Back On Gas, 3.75% Travel, 2.625% All Purchases

  1. Michael B says:

    I love this program because, as far as I can tell, it’s the only way to get a card that has >3% Visa/MC grocery store rewards sustainably (ie. for Walmart/Target), even if it is capped. As you mention, most probably won’t be able to qualify for the bonus level unless they’re in their 40s and have substantial cash in their IRA. I also think you should mention your prediction in one of your earlier posts that more companies will start offering programs like this.

  2. JB says:

    Thanks for the very nice roundup. However, I have been looking into this program quite intensively (until the day I found out that ME doesn’t open IRA’s for non-permanent residents that is). I actually think that the Better Balance Rewards cards is eligible for the bonus. Also there’s a crux with the free trades you get. You need a certain (very high) amount in CASH sitting in your brokerage accounts – invested funds don’t count. But even without the cash in the account you get the CC bonus. This is a very confusing setup and I hope they tweak it a little. Having $20k or more in cash earning nothing kinda negates the effect of the bonus…

    • Steve says:

      BBR does not get a bonus from this.

    • eakens says:

      this is not true. As long as you have the balances, regardless of whether it is invested or not, you can attain plat awards status.

      And if you have money markets at other institutions earning ~1%, you can get about the same return just holding MINT etf.

  3. Greg says:

    You don’t need to have your money in cash to get the free trades. Money invested counts towards the balance requirements for preferred rewards.

    And yes you can trade Vanguard ETFs within Merrill Edge for free if you qualify for platinum or platinum honors status. 80%+ of my holdings at Merrill Edge are Vanguard ETFs.

    • I don’t think my post indicates you do need the money in cash though?

      • Greg says:

        No it doesn’t, but the poster above me suggested you need to have the money in cash.

        • Apologies, thought you were referring to my article. Thanks for letting us know that invested money counts. What happens if the value of an investment dips below the threshold? Any ideas?

          • Greg says:

            From the BofA website:

            Even if your balance dips, you’ll maintain your Preferred Rewards status for 12 months. If after 12 months you no longer meet the balance requirement, you’ll have a 3-month grace period. If you haven’t met the balance requirement after 3 months, you’ll be moved to a lower tier or lose your Preferred Rewards benefits.

            We’ll reinstate your Preferred Rewards status automatically if you meet the requirements at a later date.

  4. stvr says:

    I can’t figure out the Trip Cancellation Insurance on the AAA Card. My SO has significant health problems, so this matters.

  5. A random dude says:

    Does contributions to my 401k qualify towards the amount or just IRA and general investment accounts?

  6. TPE says:

    Unfortunately, the AAA Rewards card carries a 2% FOREX fee, so not great for travel outside US.

  7. Parkerthon says:

    Would a rollover IRA count?

      • Jonathan says:

        I got my preferred Platinum Honors status almost solely by my rollover IRA. You does need a checking account. I directly deposit 2 * 2K just for checking account sign on bonus. Now my checking account only have $50 daily balance now. No monthly fee charge thank to the preferred status.

        I got $100 sign-on bonus from checking account, $100 sign-on for BoA travel, and $1200 from Merrill lynch when Merrill lynch had a promotion last fall.

  8. Tyler says:

    I’m able to only get to the Platinum level, but I’m still thinking it’s worth it due to the rates being just a bit higher and the free trades.

    I haven’t seen any other article mention the AAA credit card, interesting find. Two questions about it:

    1) Does the AAA card require AAA membership? If so, looking at their website, that’s $59/year that one would need to spend (though you would get the AAA membership benefits, like roadside assistance)

    2) Would you be able to transfer points between the Travel Rewards card and the AAA card? They both appear to use Worldpoints. While the points on the Travel Rewards card can only be used for statement credits towards travel, it appears the points on the AAA card can be used for straight cash back (into your BoA checking account). This could make the two a good combo.

    • 1. Not sure, can anybody else comment on this? I don’t think so, but might be wrong.
      2. This is a very good point, would be a good combo.

    • Parkerthon says:

      Per number 1, worth noting there are mailer deals that are pretty common for $39 a year. Not sure if this a publicly available you can call in and request. Triple A has been really pushing it’s discount and branded network here recently making it a little easier to justify the annual fee even if you likely won’t use it. Around my area they put in a full service car wash and a auto service center with nice AAA member discounts.

    • Tyler says:

      I was looking into it more, and I am still unsure about the points I raised above, but I realized something disappointing about the AAA card. The cash back percentages are not as good as you (or I) believed. According to the webpage for the card: “Bank of America Preferred Rewards clients earn an additional 25% to 75% rewards bonus on every purchase, applied to the base earn of 1 point per $1.” It looks like 3x on travel, for instance, is actually 1 base point + 2 bonus points. This means that the cash back for a Platinum Rewards member would be 3.75% for travel/AAA and 2.75% for gas/grocery/drug stores. 3.75% for travel is still pretty good, but not nearly as good as 5.25%!

  9. GFM says:

    It appears that Bank of America only applies the reward bonus for Preferred Rewards clients to “base” cash rewards/points on its credit cards.

    If this is correct, then your calculations above for the BankAmericard Cash Rewards are overstated too since only 1 base point is earned in the gas and grocery bonus categories with the remainder labelled as “bonus” cash rewards/points.

    See below for an explanation for how base and bonus cash rewards/points are awarded for the BankAmericard Cash Rewards card from the Terms & Conditions.

    BankAmericard Cash Rewards™ Program Information. Earn base cash rewards of 1% of all new Net Purchases (qualifying purchases less credits, returns, and adjustments) charged to the card each billing cycle. You will earn total cash rewards of 2% (consisting of 1% bonus cash rewards and 1% base cash rewards) for Net Purchases at eligible grocery merchants and 3% (consisting of 2% bonus cash rewards and 1% base cash rewards) for Net Purchases at eligible gas merchants (the “Bonus Categories”), for the first $1,500 of combined Net Purchases made during each calendar quarter in the Bonus Categories.

    • Greg says:

      The terms are different for the cash rewards card vs the AAA Card. For the AAA card, the terms say the bonus only applies to the base reward rate. For the cash rewards card, it says the bonus is applied when you redeem the rewards into a checking account, at a point when the 2% and 3% have already been applied to the grocery and gas purchases respectively.

  10. GFM says:

    Your calculation for the BankAmericard Travel Reward is correct since the 1.5 points earned per dollar are all considered “base” points.

    From the T&C,

    BankAmericard Travel Rewards® Program Information. Earn 1.5 base points per dollar of new Net Purchases (qualifying purchases less credits, returns, and adjustments) charged to the card each billing cycle.

  11. Greg says:

    Under the eligible cards section above, it incorrectly states that the cash rewards card has no foreign transaction fee. Only the travel rewards card has no transaction fee.

  12. Jonathan says:

    I can confirm that travel card earn 2.625%. I got 2.625% reward 3 days after any transaction was posted. I mainly charged the card 10K+ a month for buxx cards or amex gift card .

  13. sean says:

    Does anyone have old Privilges card that was transferred from Schwab 2% card and have this program?
    I’m trying to see if the card qualifies or not. One bofa rep told me yes but not so sure.!!

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  15. Eli says:

    Does the percentage adder apply to sign up bonuses as well? Just got a mailer for 20,000 pts for travel rewards, could this amount increase by 75%?

    • Chuck says:

      75% increase does work on signup bonuses, but only on cash bonuses, like a $200 bonus will become $350, I think.

      • Lrdx says:

        It works on the Cash Rewards card, as the bonus is applied at redemption. BTW that also means you can get the bonus on the cashback earned while having no Platinum Honors status.

        Other cards get the bonus at spend, and signup is not eligible.

  16. Nus says:

    It appears that the AAA Member Rewards now has 0% Foreign Transaction fee
    https://www.bankofamerica.com/credit-cards/products/aaa-credit-card/

    Perhaps this is a recent change, as I googled this card and found many blogs saying 2% FTF.

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  18. Sparviero says:

    If you can find a good deal through Orbitz, you can get 4.125x on travel purchases through BofA’s Orbitz Travel Center. There are ways to redeem these points at 2cpp, effectively making it 8.25% cash back on all Travel Center purchases or (1.5*1.75*$0.02) 5.25% on everything else. Absolute best setup given the no AF. You need plat honors to do this and go through a few hoops. if it became widespread they would for sure cut the program. Best kept a secret

  19. El Guapo says:

    You earn another 10% if you redeem your rewards into your BoA bank account. That bumps the cash back from 2.625% to 2.8875%…or maybe I am missing something.

  20. Bill says:

    There’s a new $1000 for $200k offer for Merrill Edge. You should update the info on this page.

    Also, has anyone determined if it’s possible to get the AAA card without being a AAA member? I know they ask for it when you apply. How about if you convert an existing card?

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  23. Nus says:

    I just noticed that the AAA Member Rewards card has disappeared from the BoA CC website. It’s also not mentioned on the Preferred Rewards webpages as an eligible card. (I don’t know when it happened as I hadn’t looked for a month or two.) Through googling I found a AAA (not BoA) website from which you could apply for it and it still seems to be a BoA card.

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  26. Ken says:

    Would anyone know if spouses can each apply for a BankAmericard Cash Rewards card so as to have 2x the quarterly limit of spending ($2,500)? We have a joint brokerage and checking account with Preferred/Platinum Honors, but our Cash Rewards card is in the wife’s name, while I’m the authorized user.

    I’d gladly apply for one under my name if it also provides the Preferred Rewards

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  29. Bodiddely says:

    Is it possible to convert points from the Travel Rewards card to another card and redeem for straight cashback (at the 2.625% rate)? I’ve read that both the AAA card and a Worldpoints earning card would both work for this purpose, but looking for some additional confirmation. Sadly I think most of this info was in a thread at the Travel Codex forum which was shut down.

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  31. Jim says:

    I have a 401k that’s managed by Merrill Lynch. I don’t have an account with Merrill Edge; in other words, my sign-on for my 401k at “Benefits Online” doesn’t work for Merrill Edge.

    Does anyone know if I can use the funds in this 401k to count towards the balance needed?

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