The Bank of America® Premium Rewards® credit card is one of the best cash back cards. As y’all know, I like to earn miles & points for my credit card spending. However, I’m seriously considering switching my everyday spending to this card, and in this post wanted to talk about that in a bit more detail, and crunch some numbers.
For us miles & points geeks who are able to move money to Bank of America or Merrill, the question essentially comes down to “would you buy transferable points for 1.3 cents each?” The answer to that isn’t necessarily as straightforward as you’d assume. Let’s first recap the basics of the card, and then I’ll discuss my thought process.
Link: Learn more about the Bank of America® Premium Rewards® credit card with 60K bonus points
BofA Premium Rewards Card basics
The Bank of America Premium Rewards Card has a $95 annual fee. Here’s the value proposition of the card, in a nutshell:
- The card is currently offering a best-ever welcome bonus of 60,000 points after spending $4,000 within the first 90 days; that’s worth $600 cash back
- The card offers 2x points on dining and travel and 1.5x points on all other purchases; points can be redeemed for one cent each
- What makes this card exceptional is that if you participate in the Bank of America BofA Rewards™ program, you can receive up to a 75% bonus on your credit card rewards; you’ll then earn the equivalent of 3.5% cash back on dining and travel and the equivalent of 2.625% cash back on all other purchases
- The card offers a $100 annual airline incidental statement credit, which is quite easy to use
- The card offers a $100 statement credit toward TSA PreCheck or Global Entry once every four years
Essentially the value proposition here is that many may appreciate the bonus of 60,000 points, worth a $600 statement credit. On top of that, if you can have $100K or more in assets with Bank of America and/or Merrill (this could include a SEP-IRA or 401k), then this card offers an industry leading cash back return on everyday spending.
Read a full review of the Bank of America Premium Rewards Card here.
How I’m approaching the BofA Premium Rewards Card
I’m asking myself if I should be switching my everyday spending to the Bank of America Premium Rewards Card, earning 2.625% cash back on all my spending. Here are a couple of upfront considerations:
- While the card has a $95 annual fee, I’d consider this card to cost nothing to hold onto for mental accounting purposes, given that the $100 airline incidental statement credit is easy to use, based on all the data points I’ve seen (and that offsets the fee)
- I’m fortunate that I have a retirement account that I could move to Merrill without any opportunity cost, which would make me eligible for the BofA Rewards™ Premier tier; I’d then be eligible for the 75% points bonus, and could earn 2.625% back on my everyday spending
When it comes to the best cards for everyday spending, my current go-to cards are the Capital One Venture X Rewards Credit Card (review) and Citi Double Cash® Card (review), which offer the equivalent of 2x transferable points per dollar spent. So the question comes down to whether I’d rather earn 2.625% cash back or 2x transferable points on all of my spending.
Would I buy transferable points for ~1.3 cents each?
Some in the miles & points space like to talk about how they traveled somewhere for “free” by using points, or claim that they spent only $5.60 on a ticket (reflecting the taxes paid in cash). I’ve never viewed it this way, as there’s always a direct cost or an opportunity cost to the points you earn.
Points earned as part of credit card welcome bonuses probably have the lowest opportunity cost, but you also need to factor in any annual fees you’re paying. The highest opportunity cost for the points you earn is through credit card spending. And this is the prime example of that.
If you’re into maximizing rewards, and you’re eligible for the Bank of America Premium Rewards Card with the BofA Rewards program Premier tier, the question comes down to whether you’d be willing to buy transferable points for 1.3125 cents each. And specifically, we’re talking about Amex, Capital One, or Citi points, since all of those issuers have some cards offering 2x points per dollar spent.
On the surface I value transferable points at 1.7 cents each. As I always say, this valuation is entirely subjective, and is just intended to provide a general framework for deciding when to redeem points.
However, when you’re faced with the question of whether you’d rather be rewarded with points or cash, you can’t help but perhaps frame it a bit differently. If you spend $10,000 on a credit card, would you rather receive 20,000 transferable points, or $262.50?
As another example, you can pay your taxes by credit card for a fee of 1.85%. It’s of course great to use that to acquire points inexpensively. But it’s also kind of nice to earn 2.625% cash back for a 1.85% fee, no?
I think the question of whether you’re better off earning cash back or transferable points at such a lucrative rate comes down to a few factors:
- What are your cash and points balances like? Are you more cash “rich” or points “rich?”
- What kind of travel do you like to do? For example, if you’re just looking to travel domestically, or if you want to earn rewards for non-points hotels, earning cash back leaves you much better positioned
- What’s the timeline with which you can redeem the points you earn? We’ve seen so many devaluations in recent years, so if I didn’t have an immediate use in mind, I’d much rather earn cash that I could either invest or put in a high interest savings account
I think that last point can’t be emphasized enough, especially given the combination of the current high interest rate environment, plus the number of loyalty program devaluations we’ve seen recently.
Would I buy transferable points for ~1.3 cents each if I had a short term use in mind, especially for an award ticket sweet spot? Absolutely! Would I buy transferable points for that price if I didn’t think I could redeem them in the next couple of years? No, probably not…
Bottom line
The Bank of America Premium Rewards Card is in a league of its own among cash back cards, assuming you qualify for the Premier tier in the BofA Rewards program. This card can offer 2.625% cash back on everyday spending, which is unrivaled.
As someone who has historically almost exclusively earned points for my credit card spending, I’m finding myself conflicted. Would I rather earn 2x transferable points with the Capital One Venture X Card, or 2.625% cash back with the Bank of America Premium Rewards Card?
I’m curious to hear what OMAAT readers think. What do you think of the value proposition of earning 2x transferable points vs. earning 2.625% cash back? Would you buy transferable points for ~1.3 cents each?
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