Earlier this week, Forbes and The Wall Street Journal reported that Bank of America is preparing to launch a new “premium” credit card with unprecedented cash rewards rates on all non-travel and non-dining purchases.
The catch? The best rewards are reserved for Bank of America account holders who have overall balances of at least $20,000.
The Annual Fee and the Up-Front Rewards
From what we know based on Forbes’ article, the card’s annual fee is $95. Premium/luxury cards have annual fees of more than $400: the Chase Sapphire Reserve, Citi Prestige and U.S. Bank Altitude Reserve are examples of this.
We also know that cardholders will get a 50,000-point bonus if they can spend $3,000 in the first three months of owning the card.
In addition to that bonus, you’ll get a $100 credit each year for airline charges not related to tickets: baggage, in-flight entertainment, in-flight food and beverage and other similar charges.
The Rewards Structure of Bank of America’s Upcoming Cash Rewards Cards
Bank of America’s new credit card has four tiers of rewards rates. What the Forbes article fails to mention is that the rewards boost for customers with total balances of at least $20,000 isn’t in any way new to this card but has been in place for years.
Bank of America has a Preferred Rewards program in which customers who have combined balances of at least $20,000 in their B of A and Merrill Edge/Merrill Lynch accounts get bonuses on their Bank of America credit card rewards rates: Gold gets a 25% boost, Platinum gets a 50% boost and Platinum Honors gets a 75% boost.
According to Forbes contributor Nick Clements, the new card’s base rewards rate is 2x points on restaurants and travel and 1.5 points on everything else.
The nuance here is that no other mainstream cash rewards card gives you bonuses on travel and restaurants. The Discover it and Chase Freedom have rotating bonus categories, but those categories are only good for three months.
The Chase Sapphire Preferred, on the other hand, has a 2x rewards rate on the same categories but it’s “everything else” rate is 1x.
The 1.5 on “everything else” purchases puts this card in the above-average tier along with the Quicksilver from Capital One and the Chase Freedom Unlimited. The Citi Double Cash is still king with its 2x bonus.
As I said earlier, the increased awards rates for customers with high balances in savings, checking and investment accounts is not a new perk associated with the forthcoming card.
That being said, customers with overall balances between $20,000 and $49,999 get a 25% boost on rewards, which totals out to 2.5% on travel/dining and 1.875% on everything else.
Platinum customers are those who have overall account balances between $50,000 and $99,999. These customers get a 50% bonus on their rewards: 3% on travel and dining, 2.25% on everything else.
The final category of Preferred Rewards customers is Platinum Honors, which is reserved for those who have combined account balances of $100,000 or higher. These customers will get a 75% bonus on the base rewards, which results in rates of 3.5% on travel and dining, and 2.625% on everything else.
Forbes, the WSJ and MarketWatch Are Wrong in Two Ways
As for the news surrounding the release of the new card, I think that Forbes, the Wall Street Journal and MarketWatch have errored in two areas.
First, they’ve labeled his card as a premium rewards card when, by the accepted standard of premium/luxury, it is not.
Second, they approach the Preferred Rewards bonuses as if they were something specific to this card and they are not. Anyone with a Bank of America credit card and B of A banking or retirement accounts can take advantage of them, provided they meet the minimum balance requirements.
My View on the Pros and Cons of the New Bank of America Credit Card
In my opinion, this new card from Bank of America isn’t a true premium card because the annual fee is so low and it doesn’t offer airline lounge access like real luxury cards.
Con: No Travel Partners
The new B of A card’s points can’t be transferred to travel partners like the can with the similarly priced Chase Sapphire Preferred.
So, while this new Bank of America credit card may have the same intro bonus as the CSP (50K points), you can’t transfer them to 11 airline and hotel partners like you can with the CSP.
Pro: Travel Reimbursement, Rewards Rates
However, unlike the Chase Sapphire Preferred, the Bank of America card gives you $100 per year to put towards your airline incidentals. And, on top of that, your “everything else” rewards rate is half a percent better than the Chase Sapphire Preferred: 1.5% instead of 1%.
The fact that you can use your CSP to transfer your rewards points to travel partners like United, Southwest, Hyatt and Marriott gives it the edge.
Con: Bonus Rewards Rates Are Out of Reach for Most
As for the ability to earn multiplied rewards if you have accounts totaling at least $20,000, we find that a very small segment of the population is likely to meet that threshold.
First, you have to be a Bank of America customer either for banking or for investing. Second, you have to have at least $20,000 in your accounts.
We all know the sobering numbers about Americans’ savings and retirement accounts. According to data the Federal Reserve release this past May, only 39% of Millennials making less than $40,000 have a retirement account.
In addition to that, GOBankingRates’ 2015 survey indicates that two out of every three of us have less than $1,000 in our savings accounts and that only 14% of us have $10,000 or more.
Based on this data, I think the card’s sweeter redemption rates aren’t accessible to most consumers.
Pro: It’s a New Card That Isn’t a Luxury Card
The preeminent new-card announcements that have taken place in the past year and a half have all been true luxury/premium cards (Mastercard Luxury cards, Chase Sapphire Reserve, U.S. Bank Altitude Reserve), so it’s nice to see a new, legit rewards card with an annual fee of less than $100 pop up.
Not only is it a breath of proverbial fresh air, but it actually offers some strong rewards that put it in the running for the best reward card of 2017.