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 Merrill 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.

There’s also a similar program business checking and credit card customers which we discuss in a dedicated post.

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+

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

Ineligible Cards

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
• Bank of America Premium Rewards
  • 50,000 points after $3,000 in spend within 90 days
  • 2x points for every $1 spent on travel and dining purchases
  • 1.5x points for every $1 spent on all other purchases
  • $95 annual fee
  • $100 annual airline credit
• 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.

Bank of America Premium Rewards

Read our review

This card earns 1.5x points on all purchases and 2x points on travel and dining purchases. Points are worth 1¢ each.

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

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 10 per month with Gold 
      • 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.