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Earn Up to 5.25% Cash Back With a No Annual Fee Card

Jan. 24, 2019
5 min read
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The new Bank of America Cash Rewards credit card is offering up to 3% cash back in rewards with no annual fee. That value proposition alone is enough to warrant some real attention, but it only gets better for Bank of America and Merrill Lynch customers. Let's look at how the Bank of America Preferred Rewards program can really ramp up the already solid earnings available on the BoA Cash Rewards card.

New Cash Rewards Earning Structure

The award earning structure of the new Cash Rewards credit card is a 3-2-1 cash back arrangement with the card holder controlling what category falls into the 3% bonus each month.

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Your 3% bonus options include gas, online shopping, dining, travel, drugstores, home improvement and furnishing. You have the ability to change your 3% category once every calendar month, so you could change it Jan. 31 and then again Feb. 1.

The 2% cash back categories of grocery stores and wholesale clubs are fixed, but the 3% and 2% cash back awards are capped at the first cumulative $2,500 spent in those categories per quarter. As an example, if you spend $2,500 at Sam's Club, which earns 2% cash back in a quarter, all additional purchases with your credit card will receive 1% cash back. If you spend all $2,500 in your 3% category for a quarter, the maximum cash back you could earn is $75 before all your purchases revert to 1% cash back.

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I'm generally not a fan of limits, but the good news is that you can elevate those earnings if you use Bank of America and/or Merrill Lynch for other banking services.

Bank of America Preferred Rewards Basics

I've covered the Bank of America Preferred Rewards program frequently in order to remind readers of the great value that is far too often overlooked. Preferred Rewards is a tiered program offering a variety of benefits across many Bank of America products and services. Basically, the more assets you hold with Bank of America, the more rewards and discounts you earn. But let’s set aside the Preferred Rewards benefits, like the money market account interest boosters, fee waivers and no ATM fees, and just focus on the credit card rewards.

From the chart above, we see anyone with a three month combined average of at least $20,000 in Bank of America and Merrill deposit accounts qualifies as a Gold Preferred Rewards member, and thus earns a 25% bonus in credit card rewards. That means your 3% cash back category with the new Cash Rewards card becomes 3.75% cash back, increasing your maximum quarterly cash back potential to $93.75 -- if you spend all $2,500 each quarter in your selected 3% cash back category.

Here's how much cash back you'll earn with the new Cash Rewards card based on your Preferred Rewards tier:

Platinum Honors ($100,000)5.25%3.5%1.75%An important note: Even after you've reached your $2,500 quarterly limit on bonus cash back, you will still earn your Preferred Rewards bonus. This means as a Preferred Rewards member, your cash rewards will never drop back to 1%.Platinum Honors members, requiring a three month average of at least $100,000 with Bank of America and Merrill deposit accounts (admittedly a big number), can earn an astounding 5.25% cash back in their chosen monthly category -- all for no annual fee. If you have half that at $50,000 in eligible accounts, you'll earn Platinum Preferred Rewards status and earn 4.5% cash back in your chosen category, 3% back at grocery stores and wholesale clubs and 1.5% on everyday purchases.

Bottom LineWhile I love squeezing every ounce of value out of traditional airline miles and points, I am also always after cash back rewards so that I am prepared for travel expenses that points and miles can't cover. While there are now plenty of 2% cash back rewards cards available, few can boost earnings up to 5.25% back -- and any card that comes close will probably have an annual fee. If you have the ability to achieve even the Gold tier with Preferred Rewards, it could be a worthwhile strategic move so you can stack bonus earnings with Bank of America products like the new Bank of America® Cash Rewards credit card .For more TPG news delivered each morning to your inbox, sign up for our daily newsletter.

Preferred Rewards Tier3% Choice CategoryGrocery Stores/Wholesale ClubsEveryday Purchases
None3%2%1%
Gold ($20,000)3.75%2.5%1.25%
Platinum ($50,000)4.5%3%1.5%