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Update: Some offers mentioned below are no longer available. View the current offers here – Bank of America Cash Rewards credit card

Each month in his column “The Critical Points,” TPG Senior Points and Miles Contributor Richard Kerr presents his opinion on a loyalty program, card product or recent news that he believes is overlooked, unsung or the result of groupthink taking mass opinion in a direction with which he doesn’t agree. His goal is not necessarily to convince you to agree with his position, but rather to induce critical thought for each of the topics and positions he covers.

Take a straw poll amongst friends and co-workers and ask them what’s the most valuable credit card rewards program. For those who have a bit of knowledge and interest, you’ll most likely hear a smattering of American ExpressChase Ultimate Rewards and perhaps Capital One. From the points and miles “pros,” you’ll hear Starwood Preferred Guest. But I can almost guarantee you that no one, expert or novice, will say Bank of America Preferred Rewards.

Today, I’ll make the case for why Bank of America Preferred Rewards could be the most valuable credit card rewards program for a large subsection of Americans, and why all of us should stop ignoring it. Rest assured this isn’t a paid partnership with Bank of America. The only BofA employees I’ve ever spoken with are credit card reconsideration phone agents when trying to get a decision on my personal credit card applications.

Program Basics

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 and no ATM fees, and just focus on the credit card rewards.

There are three tiers to the new program.

Once you have a total of $20,000 in assets between qualifying Bank of America and Merrill Edge/Merrill Lynch investment accounts, you’ll qualify for Gold-tier 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.

Gold, Platinum and Platinum Honors members receive a respective 25%, 50% and 75% rewards bonus on the Bank of America Cash Rewards credit card, the Bank of America Travel Rewards credit card and the Bank of America Premium Rewards credit card. As a simple example, if your monthly purchases earn $100 cash back on your Premium Rewards credit card statement and you’re a Platinum Honors member, you’ll receive a total of $175 cash back.

The key to maximizing Preferred Rewards is qualifying for the Platinum Honors tier. Yes, $100,000 in assets held with Bank of America, at face value, is a lot for most people to hold in a bank. But once you see it also includes Merrill Edge/Merrill Lynch investment accounts on top of your typical banking accounts, the qualifying sum becomes a lot more attainable. And if you can qualify for Platinum Honors, Preferred Rewards needs to be in your loyalty portfolio, and arguably at the top of it.

Highest Cash Back

Once you’re a Platinum Honors member and have both a Cash Rewards and Premium Rewards credit card, you’ll earn the most cash back in ever day spending and gas purchases out of any credit card I know. Below is a chart of the cash back you’ll earn as a Platinum Honors member with all three cards in the bonus spend categories advertised across all the cards:

Cash Rewards Travel Rewards* Premium Rewards
Gas 5.25% ($2,500/quarter) 2.625% 2.625%
Groceries/Wholesale Clubs 3.5%** ($2,500/quarter) 2.625% 2.625%
Travel/Dining 1.75% 2.625% 3.5%
Other Spend 1.75% 2.625% 2.625%
*In order to get 1 cent/point from the Travel Rewards Credit Card, it can only be used to cover travel purchases made with the card.
**The 3.5% offered for groceries by the Cash Rewards card is beat only by the Blue Cash Preferred® Card from American Express, which won’t earn comparable cash back on other spend categories.

A combination of the Cash Rewards and Premium Rewards cards means you’ll earn, at a minimum, 2.625% cash back on all your purchases. That’s exceptional for credit card rewards, and to my knowledge, is beat only by the Alliant Credit Union Visa Signature card, which offers 3% cash back on all spend for the first year, but then drops to 2.5% for subsequent years, or Discover it® Miles which offers unlimited 1.5x miles and Discover will match the miles you’ve earned at the end of the first cardmenbership year, effectively earning 3x miles for the first year. Then drops to 1.5x in later years. In both cases, after the first year, Preferred Rewards is better.

And 3.5% on groceries, wholesale clubs and travel in addition to 5.25% on gas (the highest available cash back on gas anywhere) is icing on the cake. Keep in mind this is all for a grand total of $95 in annual fees for both cards. Simply superb.

Why is This Ignored?

A 2.625% cash back base earning rate for only $95 in annual fees is great, but many will make the argument it can’t compete with the value of transferable rewards. Take, for example, the Chase Freedom Unlimited, which earns 1.5% cash back (in the form of 1.5x Ultimate Rewards points) on all purchases everyday. Assuming you also hold a Ink Business Preferred, Chase Sapphire Preferred Card or Chase Sapphire ReserveTPG values these points at 2.1 cents each, giving you an effective 3.15% earning rate from all spend. 3.15% is obviously higher than 2.625%, so Chase once again tops Preferred Rewards, right?

But that assumption has two potential flaws: it assumes every transferable rewards credit card holder has the requisite time and knowledge to maximize these rewards, and that award availability (both hotel and airline) isn’t a hurdle for travelers bound by inflexible schedules.

The Interstate Analogy

(Photo by cosmonaut / Getty Images)
(Photo by cosmonaut / Getty Images)

I routinely tell a story to readers and followers who forget how rare it is to actually have a firm understanding of credit card rewards. Picture yourself for a moment on I-95 between Washington, DC and New York, arguably the busiest road in America. Say there’s an accident and traffic came to a standstill for three miles. If you and everyone on that parked interstate got out of their car, how many people around you would:

  1. Be able to tell you what an Ultimate Rewards point is?
  2. Be able to tell you how to redeem it for at least 2.1 cents per point?

I’d hazard a guess of less than 10. Obviously that number would be much higher if the surrounding cars were full of TPG readers, but the knowledge you hold to maximize transferable points is still an exceptionally rare skill.

For Some, Cash Should Be King

The Cash Rewards Credit Card has a $150 sign-up bonus after spending $500 in the first 90 days, and the Premium Rewards Credit Card has a 50,000 point sign-up bonus after spending $3,000 in the first 90 days. Assuming you spend $4,000 a month on credit cards (more than reasonable for a Platinum Honors member), after a year of spending you’d have a minimum of $1,910 in cash to spend how you please.

Remember that in order to earn maximum transferable points, you’ll typically need to factor in a number of costs. For instance, the annual fee on the Chase Sapphire Reserve is $450, a seemingly large amount in its own right for those unfamiliar with rewards or how to maximize the $300 travel credit. And the primary headache to folks starting from scratch will be the overhead in time required to gain earning and redemption knowledge, time spent looking for availability and booking and possible costs absorbed for inflexible travel dates with no availability.

These reasons should make a minimum return of 2.625% to use on any airline ticket, hotel, rental car or other travel related expense at least a consideration for the average American cardholder. Yes, if you take the time to learn all the ways to make points and miles work, you can do better. But many people are happier with the simplicity of cash back.

Bottom Line

While I cannot say that Bank of America Preferred Rewards is a better choice for every single person than Chase Ultimate Rewards or Amex Membership Rewards, it’s time we stop ignoring or forgetting the program when friends, family or colleagues ask for recommendations. I know better than most the borderline insane redemptions that transferable partners make possible, but I can also typically tell within 30 seconds of speaking to someone if his or her professional and family schedule or interest in the subject won’t allow for maximizing transferable points.

So in that case, recommending a ~$2,000 cash rebate credit card to use without constraint for only a $95 annual fee is never going to be a bad strategy. Perhaps Preferred Rewards doesn’t get the attention it deserves, but hopefully you’ll think about it on your next drive down the interstate.

Featured image by Justin Sullivan / Getty Images.

Bank of America® Premium Rewards® credit card

This card from Bank of America gets really interesting if you have a BofA checking, savings or investment account. Depending on the value of your combined accounts you can potentially get as much as 3.5x on travel/dining and 2.625x on other purchases making it the richest consumer banking bonus out there.

Apply Now
More Things to Know
  • Receive 50,000 bonus points- a $500 value – after you make at least $3,000 in purchases in the first 90 days of account opening.
  • Earn unlimited 2 points for every $1 spent on travel and dining purchases and unlimited 1.5 points per $1 spent on all other purchases
  • If you're a Bank of America Preferred Rewards client, you can get a 25%-75% rewards bonus on every purchase.
  • No limit to the points you can earn and your points don't expire
  • Flexibility to redeem for a statement credit, deposit into eligible Bank of America® or Merrill Lynch® accounts like checking, savings, and 529, for gift cards or use at the Bank of America Travel Center.
  • Get up to $200 in combined airline incidental and airport expedited screening statement credits + valuable travel insurance protections
  • No Foreign Transaction Fees
  • Low $95 annual fee
Intro APR on Purchases
N/A
Regular APR
17.99% - 24.99% Variable APR on purchases and balance transfers
Annual Fee
$95
Balance Transfer Fee
Either $10 or 3% of the amount of each transaction, whichever is greater.
Recommended Credit
Excellent/Good

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.