Everything you need to know about Bank of America’s Preferred Rewards program
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Points and miles are wonderful for taking care of flights and lodging, but there are many other expenses involved with travel. Using cash-back rewards in combination with your points and miles can make a vacation truly free from a monetary perspective. Today we’ll look at the often passed-over Preferred Rewards program from Bank of America to see how consolidating your banking and investment needs can quickly compound cash-back earnings and get you some solid banking benefits.
The Preferred Rewards program is designed to entice the public to put everyday checking, savings, investment and retirement banking into a type of one-stop shop with Bank of America and Merrill. The more total assets you have between those accounts, the more benefits Bank of America and Merrill give you.
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Once you have a total of $20,000 in assets between qualifying Bank of America and Merrill investment accounts, you qualify for Gold Preferred Rewards benefits. $50,000 in total assets qualifies for the Platinum tier, and $100,000 in total assets qualifies for the Platinum Honors tier of Preferred Rewards.
Enrolling in Preferred Rewards requires you to have an eligible Bank of America personal checking account and an average daily balance of at least $20,000 in qualifying Bank of America deposit accounts and/or Merrill investment accounts for a three-calendar-month period. If you have an emergency account, holiday account, savings account and a daily checking account, combining all those balances could quickly qualify you for the first tier. Add in investment accounts, including IRAs, and it’s even more manageable to qualify for Platinum and Platinum Honors. Of note, SafeBalance Banking accounts do not count toward the required minimums.
Balances don’t have to be started with Merrill or Bank of America to count; you can roll existing IRAs and investment accounts over to Merrill or Bank of America and immediately use those balances to begin establishing a three-month average to boost your tier. Of course, you’ll have to consider other things like account management fees and available investment options to decide which course is best for you.
You may move up a tier in any month after your average daily balance for the three previous months reaches the next threshold. When it comes to moving down a tier, that will only occur upon an annual review of your account. Here is the verbiage from the personal schedule of fees:
“We will perform an annual review of your qualifying balances in the month following the anniversary date of your initial enrollment in the program. The annual review will calculate your three-month average combined balance as of the end of your anniversary month and place you in the balance tier for which you meet the qualification requirements. If the result of the annual review would be to move you to a lower tier, you will have a three month period after your anniversary month in which to restore your qualifying balance before you are moved to that lower balance tier. If you are moved to a lower balance tier, your benefits may be changed to those of the balance tier for which you qualify without further notice. Please note that while you can be moved to a higher balance tier after any month in which you satisfy the combined balance requirement for that tier, you will only be moved to a lower balance tier as a result of the annual review.”
That means if you can reach the $100,000 average daily balance threshold for three months, you’ll be upgraded to Platinum Honors the following month. If you (or the stock market) then immediately decrease your average daily balance below $100,000, you’ll still maintain Platinum Honors for a full calendar year.
Here’s a chart of the three tiers and associated benefits:
|Money Market Savings Interest Rate Booster||5%||10%||20%|
|Credit Card Rewards Bonus||25%||50%||75%|
|Mortgage Origination Fee Reduction||$200||$400||$600|
|Auto Loan Interest Rate Discount||0.25%||0.35%||0.50%|
|No-Fee Banking Services||Included||Included||Included|
|Client Service Priority||Included||Included||Included|
|Free Non-Bank of America ATM Transactions||0||12 Annually||Unlimited|
|Merrill Guided Investing Fee Discount||.05%||.10%||.15%|
Let’s take a closer look at each of these benefits and analyze the potential value from each tier.
Money Market Account Interest Rate Booster — You need to first have a Rewards Money Market Savings account with Bank of America in order to enjoy this benefit. Enrolling in Preferred Rewards won’t automatically convert any existing Money Market account you have, so make sure to request the conversion. A 5% boost doesn’t mean an additional 5% of interest earned on the account; it means an additional 5% of the current annual percentage yield, which are currently very low. Here are the current APYs for Bank of America Rewards Money Market Savings accounts:
Credit Card Bonus Rewards — Depending on the type of eligible card you have, you’ll earn the Preferred Rewards bonus either at the time of cashing out your earnings to a checking account with a cash-back earning card or at the time of purchase with a points-earning card. Instead of a list of eligible cards, there’s a list of ineligible cards, all of which will not earn the Preferred Rewards bonus:
In order to maximize the Preferred Rewards bonus, you’ll want to focus on the following cards: The Bank of America® Premium Rewards® credit card, the Bank of America® Travel Rewards credit card and the Bank of America® Cash Rewards credit card. I’ll discuss how to maximize these rewards below.
Related: The best Bank of America cards
Mortgage Origination Fee Reduction — Any time you can cut down on fees for buying or refinancing a home, count me in. You’re eligible to receive the discount beginning three business days after the end of the calendar month in which you satisfy the tier qualification requirements. The origination fee reduction you receive once you reach at least Gold tier can’t exceed the amount of the lender origination fee. The Preferred Rewards fee reduction you receive may not be combinable with any other reductions you earn from Bank of America.
Auto Loan Interest Rate Discount — You must complete an auto purchase finance or re-financing loan through Bank of America in order to qualify for this rate discount. You can’t transfer your rate discount to a family member; the car must be in your name or jointly owned by yourself. Of course, you’ll need to make sure that Bank of America offers the most competitive rate even with the discount. A small difference of just a quarter of a percent could save or cost you thousands of dollars over the life of the loan.
No-Fee Banking Services — Gold, Platinum and Platinum Honors members receive:
- Monthly maintenance fees waived on up to four eligible checking and four savings accounts from Bank of America
- No fees for ATM or debit card replacement including rush replacement, standard check orders, cashier’s checks, check image service, check copies, stop payments and incoming domestic wire transfers
- Overdraft protection transfer fees waived from your linked savings accounts, secondary checking accounts or from a Home Equity Line of Credit
Additionally, Platinum and Platinum Honors members have no fees for incoming international wire transfers and can receive a small safe deposit box for free at a Bank of America branch.
Free Non-Bank of America ATM Transactions — Platinum and Platinum Honors members won’t be charged non-Bank of America ATM fees in the U.S. and will receive a refund of the ATM operator or network fee for withdrawals, balance inquiries and balance transfers. Platinum members receive one free transaction a month (12 annually) and Platinum Honors members have no cap.
Merrill Guided Investing Fee Discount — Preferred rewards members receive a fee discount when utilizing Merrill Guided Investing services. You can get started with as little as $5,000, or $20,000 for Merrill Guided Investing with an advisor. Merrill Guided Investing normally carries a fee of .45% of assets under management, while Merrill Guided Investing with an advisor charges .85% of assets under management. While those fees might seem small on a year by year basis, they add up over time and turn into a compound drain on your investments. Whenever possible, you should look for a financial advisor that charges a fixed fee instead of a percent of your assets.
How to maximize cash-back Bank of America credit card rewards
In order to maximize Preferred Rewards, you’ll obviously want to qualify for Platinum Honors and be eligible for the 75% credit card rewards bonus. While I don’t recommend making your investing and banking decisions based entirely on added credit card rewards, if you can work with Merrill and park a rainy-day fund in Bank of America, it may be worthwhile.
The Bank of America® Premium Rewards® credit card is a very solid fixed-value card in its own right, but when you add in the bonus from the Preferred Rewards program it gets even more competitive. The card carries a $95 annual fee and offers a modest selection of benefits, including a $100 annual airline incidental fee credit, a Global Entry/TSA PreCheck application fee credit and some decent travel protections.
However, this card really shines with its earning rates both on everyday spending and the card’s travel and dining bonus categories. Here’s how the earning rates stack up:
|Spend Categories||Regular Cardholder||Tier 1 – Gold ($20,000 – $50,000)||Tier 2 – Platinum ($50,000 – $100,000)||Tier 3 – Platinum Honors ($100,000+)|
|Travel/Dining Earnings||2x points||2.5x points||3x points||3.5x points|
|Other Earnings||1.5x points||1.875x points||2.25x points||2.625x points|
If you’re not looking to pay an annual fee, you can also opt for the Bank of America® Travel Rewards credit card or the Bank of America® Cash Rewards credit card. The Travel Rewards card earns 1.5x points on all purchases. You’ll earn your Preferred Rewards bonus on this card at the time of purchase:
Points earned via the Travel Rewards Card can be redeemed to cover travel purchases on your card at a rate of 1 cent per point. You can redeem points for gift cards or cash, but you’ll get a lower value for these options so they should be avoided:
By earning 1.5x points on everything plus a 75% Preferred Rewards bonus as a Platinum Honors Preferred Rewards member, you effectively earn 2.625% cash back toward erasing travel purchases made with the card. That’s a fantastic cash-back rate to earn on all spending.
The next card to look at is the Bank of America® Cash Rewards credit card, which earns 2% at grocery stores and wholesale clubs and 3% in the category of your choice: gas, online shopping, dining, travel, drug stores, or home improvement/furnishing. Both the 3% and 2% earning are limited to your first $2,500 of eligible purchases each quarter, and the card earns 1% everywhere else.
This means as a Platinum Honors member you’ll earn 5.25% cash back on gas, 3.5% cash back on grocery stores and wholesale clubs and 1.75% cash back on all other purchases. You’ll earn the Preferred Rewards bonus when you cash out to a checking account or investment cash holding account.
2.625% cash back from the Travel Rewards card is great, but you’re limited to redemptions on travel purchases. I wanted to test if you could transfer the points from your Travel Rewards account to your Cash Rewards card and avoid being limited to travel redemptions only. I asked a couple friends who have both cards to try and transfer the points. To my surprise, they got mixed results. The first friend had no problem and could transfer points into cash rewards:
My second friend tried to complete the transfer and was denied. When calling Bank of America, they told him that transfers between Travel and Cash Rewards were not allowed. A few other people with both cards were also denied the ability to transfer between the two cards, so it appears that the ability to transfer was a glitch.
I’m not sure why Preferred Rewards gets overlooked as often as it does. The program’s probably not worth pursuing unless you can qualify for Platinum Honors and max out the 75% bonus on credit card earnings. The additional perks of free ATM transactions and waived banking fees mean that if you already do business with Bank of America and Merrill, you should consider consolidating your banking and investing to compound your rewards and benefits.
It might even be worth switching your business to Bank of America assuming it won’t cost you anything extra, as the Preferred Rewards program can really tip the scale on some of Bank of America’s top card offerings.
Ethan Steinberg contributed to this post.
Featured photo by Smith Collection/Getty Images.