Bank of America Premium Rewards® Credit Card Review: Rewards for High Spenders with a BofA Relationship

Bank of America is joining the premium rewards card category with the new Bank of America Premium Rewards® credit card. This card boasts a 50,000-point sign-on bonus and a much lower annual fee ($95) than comparable cards, making it a great way for consumers to earn rewards at a low yearly cost. There are additional perks for Bank of America account holders that will allow you to earn a higher rewards rate, making this card a great choice if you have an account with Bank of America and are looking for a premium rewards card.

We believe that everyone should be able to earn at least 2% cash back, without paying a fee (thanks to Citi Double Cash). If you have over $20,000 in a Bank of America checking, savings, or investment account, you will be able to earn more than 2%. If you have less (or no relationship balance), it gets more complicated.

Key insights

  • This card only works if you have a deep relationship with Bank of America. If you don’t have other assets (either in a savings account or investment account), you are better off with a flat-rate cash back card, such as the Citi® Double Cash Card
  • This card is probably not for you:
    1. If you have less than a $50,000 relationship with Bank of America and spend less than $2,000 a month on the card.
    2. If you spend a lot in travel and dining but have less than a $20,000 total relationship balance with Bank of America.
  • This card is for you – and you can earn more than 2%:
    1. If you spend at least $2,000 a month and have at least a $50,000 relationship balance with Bank of America
    2. If you have a relationship balance between $20,000 and $50,000 and spend a lot on travel and dining.
  • The biggest winners are people who have more than $100,000 at BofA (and that can include an IRA at Merrill Edge) and spend more than $3,000 a month on the card. People with this profile can earn up to 3% – which is hard to beat.

How the card works

This card charges a $95 annual fee, which is much less than competing premium rewards cards that have annual fees around $450. But this card competes on value (the amount of cash back you can earn) rather than luxury (you will not get access to swanky Amex lounges, for example).

There is a 50,000-point intro bonus offer, available for qualifying customers. Customers must make at least $3,000 in purchases in the first three months of opening to earn the bonus. This is a feasible amount if you typically charge $1,000 a month.

The amount you earn depends upon your relationship with the bank. Your total relationship includes:

  • How much you have deposited in a checking and savings account. (But beware: interest rates are very low at BofA. Find the best savings account rates here).
  • How much you have invested at Merrill Lynch, which includes Merrill Edge (the self-directed brokerage account that has very competitive fees and commission).

As a cardholder you will automatically earn 2 points per dollar spent on travel and dining and 1.5 points per dollar spent on all other purchases. The more assets you have at BofA, the more points you can earn. Account holders must enroll in Bank of America’s Preferred Rewards program to benefit from these higher rewards levels. See the breakdown below.

We like the concept: BofA is trying to reward their most loyal customers with the best rewards.

The Bank of America Premium Rewards credit card is most beneficial to those who have $20,000 or more in a Bank of America account. This is a lot of cash for a savings or checking account with low interest rates. However, it’s possible to earn a higher interest rate from your Bank of America account if you roll over your IRA or 401(k) into a Merrill Edge® account. You can learn more here.

The table below shows your effective annual cash back rate depending on your monthly spending and relationship with Bank of America. This first table demonstrates the cash back rate earned for cardholders who are not big spenders in the bonus categories of travel and dining. Monthly spending was allocated at 40% toward travel and dining and 60% on all other purchases. The effective annual cash back rate deducts the annual fee, but does not factor in the sign-on bonus.

As you can see from the table, you won’t see significant return until you have at least a $50,000 relationship with Bank of America and spend over $2,000 a month. This will allow you to earn an effective annual cash back rate of over 2%. From this point on, you will start to see higher cash back earning potential.

Now if you’re a big spender in the bonus categories of travel and dining, you will see higher cash back earning potential at lower relationship levels. For the table below, monthly spending was allocated at 80% toward travel and dining and 20% on all other purchases. Again, the effective annual cash back rate deducts the annual fee, but does not factor in the sign-on bonus.

As you can see from this table, having at least a $20,000 relationship with Bank of America and spending over $3,000 a month allows you to earn an effective annual cash back rate of over 2%. From this point on, you will start to see substantial cash back earning potential.

In conclusion, the Bank of America Premium Rewards card is a good option if you are an affluent account holder at Bank of America and prefer to open a premium rewards credit card from the same bank as your savings account. If you plan on moving your IRA or 401(k) to Merrill Edge®, you will benefit from a higher interest rate.

How to qualify

To qualify for this card you will need excellent credit. The higher rewards levels for Bank of America checking, savings, and investment accounts with large amounts of money target affluent customers. Therefore, you will also need to have a steady job, which will show that you are responsible and can pay your bills.

What we like about the card

Large sign-on bonus

This card offers a 50,000-point sign-on bonus when you spend $3,000 in your first three months of account opening. This a reasonable amount of money to earn the large sign-on bonus, and lower than competing cards.

Reasonable annual fee

This card charges an annual fee that is significantly lower than competitors who can charge upward of $450 a year. The low annual fee allows you to enjoy more of the rewards you earn.

Bonus for Bank of America account holders

If you have a checking, savings, or investment account with Bank of America, you will benefit greatly from the additional points you earn. Higher tier points depend on the amount of money you have in your account and can increase your rewards potential significantly.

Unlimited higher rewards rates

You will benefit from the higher rewards rate for travel and dining without any caps. This means you don’t have to worry about hitting a predetermined dollar value and then being downgraded to a lower rewards rate.

What we don’t like about the card

Must be a Bank of America account holder for higher rewards rates

To earn more points per dollar spent you need to be a Bank of America account holder with a checking, savings, or investment account. If you don’t have an account, you will still earn the 2 points per dollar on travel and dining and 1.5 points per dollar on all other purchases, but can find a better deal with a flat-rate card such as the Citi® Double Cash.

Who the card is best for

This card benefits affluent Bank of America account holders with a checking, savings, or retirement account balance over $20,000 at the bank. If you fall in this category, your loyalty to Bank of America will be rewarded with the higher tiered rewards levels that allow for high rewards earning potential. In addition, this card has one of the lowest annual fees for premium rewards cards on the market and offers a large intro bonus.

Alternatives

There are multiple combinations of savings accounts and credit cards that you can use to maximize your savings. In the table below we compared the Citi® Double Cash Card, the Chase Sapphire Reserve® card, and the Citi ThankYou® Premier card paired with an Ally Bank savings account to the Bank of America Premium Rewards credit card.

Note that the Citi ThankYou® Premier card waives the annual fee in year one. Also, we listed the effective annual fee for the Chase Sapphire Reserve® card; assuming you spend $300 in travel a month, the $450 annual fee would be an effective $150.

*.06% interest may be available if you roll over an IRA or 401(k) into a Merrill Edge® account.

From this table we can draw several conclusions:

  • The Citi® Double Cash Card paired with an Ally Bank savings account will earn you the most money at year’s end.
  • Ally Bank earns you the most interest compared to the other savings accounts.
  • The Bank of America Premium Rewards credit card will earn you the most cash back, but coupled with the low interest rate from the Bank of America savings account, you will fall short of earning as much money at year’s end as Citi® Double Cash or Chase Sapphire Reserve® cards paired with an Ally Bank savings account.

To sum it all up, if you want to earn the most money at year’s end, the best option would be the Citi® Double Cash Card paired with an Ally Bank savings account. The high interest rate that Ally Bank offers coupled with the card’s flat-rate cash back rewards are what make this the most profitable pairing. The Bank of America Premium Rewards credit card lures consumers in with the higher tier rewards levels for affluent account holders, but offers a low interest rate for those accounts that ultimately hinders your year-end earning potential. However, if you transfer your IRA or 401(k) to Merrill Edge, you will earn a higher interest rate than a typical Bank of America savings account and can make up some of the difference.

Here’s an overview of the alternative cards:

Citi® Double Cash Card

Annual fee

$0 For First Year

$0 Ongoing

Cashback Rate

1% when you buy, 1% when you pay

APR

14.49%-24.49%

Variable

The Citi® Double Cash Card is a flat-rate cash back card that will earn you a consistent cash back rate. You will earn 1% when you make a purchase and an additional 1% when you pay your bill. This card has no annual fee unlike the Bank of America Premium Rewards credit card or the other alternatives. Keep in mind this is a cash back card, so you will not be earning points that can be redeemed for travel. Cash back comes in the form of a statement credit, deposit, check, or gift card. Paired with an Ally Bank savings account, this card will earn you the most money at the end of the year (excluding year one), beating the Bank of America Premium Rewards card by $177 in subsequent years. Refer to our chart above for a detailed comparison.

 Chase Sapphire Reserve<sup>SM</sup>

Annual fee

$450 For First Year

$450 Ongoing

Rewards

3X points on travel and dining, 1 point on everything else

APR

16.99%-23.99%

This card comes with several great perks that make it a stand-out favorite among frequent travelers. Each account anniversary year, Chase automatically gives you $300 in statement credits as reimbursement for travel purchases you make throughout the year on your card. This lowers the $450 annual fee to an effective $150. You will also benefit from a 50% rewards boost when you redeem for airfare, hotels, car rentals, and cruises through Chase Ultimate Rewards®. For example, 50,000 points are worth $750 toward travel. The Chase Sapphire Reserve® is a great alternative if you are a frequent traveler and want a higher redemption value for your rewards.

Citi ThankYou® Premier Card

Annual fee

$0 For First Year

$95 Ongoing

Rewards

3X on travel, 2X on dining and entertainment, 1X on all other purchases

APR

15.49%-24.49%

This card is a good alternative if you want a card that offers a high rewards rate for travel, dining, and entertainment. If you’re not a Bank of America account holder, you will earn a higher rewards rate on travel and entertainment with the Citi ThankYou® Premier card. Citi also charges an annual fee, but this is waived the first year. Keep in mind that you will fall short of earning as much money at the end of the year with this card compared to the Bank of America Premium Rewards card (by approximately $63 in year one and $158 in subsequent years). Refer to our chart above for a detailed comparison.

FAQ

This card will be released in September 2017.

Yes, anyone can apply for this card. Keep in mind, an excellent credit score is needed to have the highest approval odds.

No, there are no limits to the amount of points you can earn in each category. That means you will consistently earn the higher rate for travel and dining, regardless how much you spend.

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