An early breakup with Bank of America Premium Rewards?

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Almost exactly a year ago, I wrote a post that was something of an ode to the Bank of America Premium Rewards card called Retirement planning mistakes fixed by credit cards. In that post, I explained that I wanted the Bank of America Premium Rewards card‘s 2.625% cash back everywhere rate, but in order to have funds enough on deposit with Bank of America to get that rate I needed to move my Roth IRA retirement account to Merrill Edge (which was a good thing as it led to a more critical look at my investments and some things I needed to change). I thought that I had found my match for the best everywhere-else card on the market and this was to be a partnership for the long-haul. How surprised I was when along came something new a few days ago and made me question whether the Premium Rewards card may be on its way out of my wallet in the very near future.

It might be time to drop this Premium Rewards card in favor of the new Unlimited Cash Rewards card.

New Bank of America Unlimited Cash card comes out of nowhere

With little fanfare and no advance notice, Bank of America quietly introduced a new credit card last Thursday that they initially only made available for some people as a product change before rolling it out publicly yesterday. The Unlimited Cash Rewards card only offers a flat 1.5% cash back on all purchases, but that’s notable because of Bank of America’s Preferred Rewards program. If you have top-tier Bank of America Platinum Honors status, the Unlimited Cash Rewards card turns into 2.625% cash back everywhere. That’s awesome as that it offers the same return on unbonused spend as the Premium Rewards card minus the Premium Rewards card’s $95 annual fee.

Note that in order to get that 2.625% rate, you need top-tier Platinum Honors status in the Bank of America Preferred Rewards program. It’s easier than it sounds at first: you need to have $100K on deposit in any mix of cash or investments at Merrill Edge. Even retirement investments can count (as noted above, we used Roth IRAs to qualify for Preferred Rewards), so while you do need $100K that may be easier than it sounds for those who have been saving for retirement for a while. Also note that while Merrill Lynch has what some consider to be high fees for managing your money, Merrill Edge is the self-directed discount brokerage arm, which features no-fee trades on stocks and ETFs and no annual management fees. See this post for more: Bank of America credit cards: Awesome with Platinum Honors status.

In my post about the Unlimited Cash Rewards card, I noted that I hoped Bank of America had plans to revamp its Premium Rewards card because it otherwise offers very little advantage beyond the welcome bonus. As discussion continued in the comments, I had myself more or less convinced that there is no reason for me to keep the Premium Rewards card (though there may be enough reason for some readers to keep it depending on your circumstances).

Is that really true? I expect the annual fee on our Premium Rewards card to post within the coming days and when it does, am I really going to drop the Premium Rewards in favor of Unlimited Rewards? Maybe. I had to first consider the advantages and drawbacks on either side. Note that in this case, I’m comparing long-term value. In terms of first-year value, the Premium Rewards card wins hands down with a much better welcome bonus.

Reasons to like the Bank of America Premium Rewards card

The Premium Rewards card does come with some strengths over the Unlimited Cash Rewards card such as:

  • $100 annual airline incidental credit. This isn’t quite as broad as the travel credit on the Sapphire Reserve, but in practice it is easier to trigger than Amex airline incidental credits. On the other hand, am I willing to prepay $95 in airline fees to come out only $5 ahead? It doesn’t really make sense to force myself to remember to use the card for an airline fee and then follow up to make sure that fee gets credited just to come out only $5 ahead. This credit goes a long way toward mitigating the fee if there are also other reasons to want the card, but if this were the only advantage, the five bucks isn’t worth enough to me.
  • 3.5% travel and dining. The card offers 2% travel and dining which becomes 3.5% with the 75% Platinum Honors status bonus. These bonus categories don’t do anything for me: I can currently get 4% back on dining (or 4x transferable points) with no annual fee with my Brex Cash card. The Altitude Go card also offers 4% back on dining with no fee (and in my household we’re going to keep an Amex Gold around, so that’s 4x Membership Rewards points). On the travel side, the Premium Rewards card isn’t the card I will typically use to book travel. I most often use my Chase Ritz card for travel protections (like better trip delay / cancellation insurance when I book a flight) or I use a hotel-branded credit card for better-than-3.5% at hotels or a card that offers primary CDW for rental cars.
  • Global Entry / TSA Precheck credit. The Premium Rewards card offers a credit for Global Entry or TSA Precheck, but the Unlimited Rewards does not. In my case, I have a wallet full of cards that reimburse Global Entry and TSA Precheck and I still don’t subscribe to either, so I don’t value it here.
  • Travel Protections. The Premium Rewards card actually has decent travel protections that come close to being as good as the Chase Sapphire Preferred. The trip delay protection requires a delay of 12hrs or more just as is the case with the Sapphire Preferred and lost or delayed baggage coverage is the same. Chase offers more coverage per passenger for trip cancellation protection and offers some emergency medical / dental coverage (whereas Bank of America does not include emergency medical). The Premium Rewards card only offers secondary rental car insurance, which means personal insurance would have to pay up first. If you’re only going to carry one card with travel protections, the Premium Rewards card is OK, though I’d rather have a Chase Sapphire product for the areas where it has slightly better protection. Since I am going to stay invested in the Chase ecosystem (and keep my Ritz card, which matches Sapphire Reserve travel protections), these travel protections on the Premium Rewards card aren’t worth anything to me.
  • No foreign transaction fees. This could be big for some people. If you spend a lot in unbonused categories overseas, you wouldn’t want to use the Unlimited Cash Rewards card to do it since the 3% foreign transaction fee will more than wipe out the value of your rewards. With the Premium Rewards card, you can earn your 2.625% back without losing something in currency conversion. Personally, I don’t spend that much on things other than travel and dining when I am overseas (and I can match or beat the return in those categories with other cards). However, I know for some readers this will easily make the card worth keeping.
  • Purchase protections. The Premium Rewards card offers “purchase security”, which can cover you if an eligible item purchased with the card is stolen or damaged within 90 days (up to $10,000 per claim) and return protection (up to $250 per claim / $1K per year) that extends for 90 days from purchase date. It also offers extended warranty protection (double the manufacturer warranty up to 1 year). When I first wrote this post, I forgot about purchase protections. While I recently had a negative experience with Chase return protection, I’ve had luck with Chase cell phone insurance and Amex purchase protection. If this is to be your true everywhere else card, coverage for stolen or damaged items could certainly be important. I wish that the return protection had a higher limit than $250 per claim, but overall I do think these protections are a valuable component in an “everywhere else” card.

Reasons to like Unlimited Cash

  • No annual fee. Those with Bank of America Platinum Honors can earn 2.625% everywhere without an annual fee. That’s fantastic.
  • Pairs great with other no-fee cards for a really strong no-fee cash back wallet for those who want to focus on cash back and no annual fees. This card combined with the Bank of America Customized Cash (for 5.25% back in a choice category when you have Platinum Honors status), maybe the Travel Rewards card (for no foreign transaction fees and a similar 2.625% return), the Citi Custom Cash for 5% back on $500 spend per billing cycle in a category of your choice, and maybe a Chase Freedom Flex for even more 5% rotating categories and 3% drugstores (and dining when not available at 5%).
  • Some have been offered a product change bonus. If you’ve gotten an email offering for you to product change a Customized Cash or Travel Rewards card to the Unlimited Cash Rewards card and get a $200 bonus after $1,000 spend with no application/new account, that’s a great bonus since it won’t add to your 5/24 count. I’d take that.
  • Don’t pay for benefits you don’t need. As noted above, while the Premium Rewards card does have some benefits over the Unlimited Cash card, you may be keeping other cards with matching or better benefits, so there is no sense in paying to duplicate those benefits.

What will I do?

Before I sat down to write this post, I was sure that it was time to call and see if there is a retention offer available (at least one reader reports calling and asking to downgrade but being offered a $100 credit with $1500 spend in 3 months to keep the Premium Rewards card). Assuming no such offer, I had myself pretty convinced that downgrading was the way to go assuming Bank of America would allow it (Bank of America can be weird about product changes and sometimes certain changes are possible and others aren’t).

However, when I wrote everything out, I realized that I do value purchase protections. When I wrote about Amex purchase protection a few months ago, I specifically noted that as someone with young kids who aren’t always gentle with toys, protection against damage was certainly something I’d be considering when making purchases for stuff that could even potentially be broken. The more I thought about my “everywhere else” card, the more I realized that I value that protection more on the card I’m going to use on purchases from places like Best Buy, Target, and other places that don’t trigger bonus categories. I wouldn’t pay a lot for this coverage, but since I do find it easy enough to use the card’s airline fee rebate, I think I’ll probably keep the Premium Rewards card. I was surprised to come to that conclusion and will probably still look for a retention offer because the Unlimited Cash Rewards certainly made me question the value of the card. If not for the purchase protection benefit, the $5 win each year on the airline fee rebate wouldn’t be enough for me to keep the Premium Rewards card.

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Ben

Would rather keep the bofa premium becuz of the wide travel category on this card. There are times I’m willing to gamble on a transaction not coding as travel and settle for the lower return

VIS

Just got the offer to change my Customized cash rewards card to new unlimited cash rewards card in the mail. Now this offer is a no brainer to switch. I am still keeping my Premium rewards. Switching just to get $200 bonus.

Richard

The offer Bank of America sent me to PC my Travel Rewards card to the Unlimited Cash card stated that the Unlimited Cash card did not have foreign transaction fees.

rj123456

BTW BofA has something equivalent of Platinum Honors for their Business customers too. Unfortunately they won’t count your personal holdings to count for the $100K balance there. Trying to figure out if a business can have a Merill Edge account or the equivalent.

Last edited 1 year ago by rj123456
Renzo Corazzo

Nick, qualification for Preferred Rewards considers COMBINED balances with Bank of America and Merrill, not Merrill alone. You could have a $70k Roth at Merrill and $30k in bank deposits to qualify for the Platinum Honors tier. Thanks!

VIS

Not so fast. I have the highest level. The card offers 2 points for groceries till Dec. 31st. Also, I have been buying $100 American Airlines gift cards for the last 5 years, gets reimbursed without any fuss. Got $500 sign up bonus so basically I have the card for free and pocketed $500 gift cards. I think $95 fee is still worth it. I will revaluate after December once my bonus grocery points are posted.

walterj

I would never mix my investments with my miles and points hobby.

Vanguard is the gold standard, with the lowest fees. I bet you lose more with higher fees than you get with your 2.65. That .65 percent extra is expensive.

Moving money around is also a loser. Most of market moves happen in just a few days. So taking money out just a few days, you risk missing that return.
Just one or two percent is worth more than the gains you get from your credit card.

I also think mutual funds is easier that ETFs, just turn on the auto reinvesting and let it grow.

Greg The Frequent Miler

I think you’re misunderstanding. You don’t have to withdraw your money and reinvest it. Instead, you simply change which company is the broker for your funds. The fees don’t change. You can even keep your Vanguard investments. For example, I moved my Vanguard Life Strategy fund from Vanguard to Merrill. It’s still the same investment but with Merrill listed as the broker for that account.

anonymous

You can reinvest ETF dividends automatically just the same as with mutual funds.

Vincent

An easier alternative setup that has earning rates that come close to the BofA system involves the Alliant Visa Signature. You can earn 2.5% cash back on the first $10k in spend if you keep a quarterly average of $1k in a checking account with Alliant. They also eliminated the annual fee.

In addition to Alliant, you can get the Chase Freedom Flex (including 3% for dining) and/or the Citi Custom Cash to fill in any 5% categories. To cover groceries, you can go for the Capital One Savor One or the Amex BCP or BCE. The Altitude Go has 4x on dining. Of these cards, only the Alliant, Savor One, and Altitude Go have no foreign transaction fees. None of these cards (except BCP) has an annual fee.

SlippinJimmy

I don’t see any mention of the Bank of America Travel Rewards card with no annual fee and 1.5% back on all purchases (2.625% on everything as a preferred rewards member).
I’ve used this card for a few years now. Sounds like the only difference is the Travel Rewards card points are redeemable against travel, while the Unlimited Cash Rewards card may be redeemable for cash?

Vincent

Another difference is that Travel Rewards has no foreign transaction fee, but Unlimited Cash Rewards does.

rj123456

Does Travel Rewards also reimburse $100 incidentals/yr? Also, redeeming for travel only has the drawback that travel is a bonus category on so many cards and/or a CSR/CSP $.015 or $0125 redemption category.

Ken

Good point about having my wife use the Bank of America Premium Rewards card for almost all spend. KISS. She is not really into all the nuances of cards and gets borderline cranky when presented with a variety of cards for different types of spend. If I was limited to one no brainer card this is it. It is a keeper.

Alicia

I pair the Bank of America Customized Cash Rewards with Chase Freedom Flex and Discover it. I think Discover is worth a mention under your, “Pairs great with other no-fee cards” section. They also have great tie-ups through the year that gives excellent returns (such as reload Starbucks for $50, get 10% off, Amazon offers etc)

Gaurav

Nick, I’m curious why you don’t use GE or PreCheck.

Gaurav

Missed that, thanks for explaining.

Anita Parsa

For what it is worth, I was told via chat that my Premium Rewards card did not qualify for a product change to the Unlimited version.

Stvr

I will say that it’s nice using the Premier rewards card in instances in which you are unsure that the food establishment actually counts as dining

Stvr

Premium

ZinCO

I was thinking the same thing as I read this. For me having my wife and college-student kid carrying the Premium Rewards card means I don’t worry as *much* about what they’re leaving on the table for unbonused spend.

John

Doesn’t the BBP have superior return/purchase protection? Many would value 2x MR at more than 2.625%. I don’t remember the last time a domestic retailer didn’t accept Amex. Many of my bills don’t accept Amex but I don’t need return/purchase protection for those so the Cash Unlimited would work just fine.

Non-dining foreign transaction is the one area where the Premium Rewards can’t be beat and that’s where return/purchase protections are the most valuable. Still, I don’t do enough such spend to justify an additional AF. I’ll take the 1x that most premium cards offer.

FullMoonMadness

Does having $100k at Merrill “Lynch” also qualify for 2.625%?

FullMoonMadness


Should I file this under the category of ‘phone agents don’t know the rules’:

I called BoA to check on the eligibility of an account in player 2’s name that has me connected, and decided to ask if my Merrill Lynch 401K account was a factor for Preferred Rewards. The agent told me, “no.” She said IRAs worked, but not 401K.

So was the phone agent wrong? Thanks!

02nz

Having $100K at ML is going to cost you a lot more than the extra rewards, though. Much better to have $100K at Merrill Edge, their low-cost, self-directed brokerage. It doesn’t cost me to hold my ETFs there (or buy more) than anywhere else.

rich

How is the 2.6% actually given back? Cash? Credit towards future charges?

WR2

Why wouldn’t you have GE/precheck? That seems crazy for anyone who travels a fair amount.

Jags

I find practically everywhere accepts Apple Pay these days. I can’t see keeping Premium Rewards or Unlimited Cash in my wallet when I can get 4.5% with the Altitude Reserve. I mean, we’re talking maybe a few $100 spend all year that might go on either of these cards. If I spend $500 on truly unbonused spend in a year, the incremental value of one of these over a 2% card is $3.13.

wanderlust

I thought about the Altitude Reserve too for that exact reason but my unbonused and non category spend (mostly licensing fees, insurance, exam and education fees etc) would not be via apple pay. I have more like 8K-10K unbonused spend. Even then the incremental value of the extra 0.625% is $62.50 a year over another 2% back card so I found it hard to justify the work involved with moving an IRA or one of my primary brokerages (I have 3 already). It makes a lot of sense of you use BOA anyway or Merril Edge anyway but it is pretty hard to justify all the movement in both checking account and in brokerage for $62.50 a year for me. I do think I would do this immediately if I did not already have a brokerage or wanted to switch anyway and did not have to use derivatives. Its a great deal for the right person I think.

Anita Parsa

I feel like you’re missing an advantage of having Platinum Honors status with BofA. Regardless of whether you keep or switch the premium for the unlimited, you can ALSO get 5.25 for Dining, Online Shopping, and Travel. The no fee cash rewards cards allow you a 3% category which becomes 5.25% for Plat Honors. We have three-one each for dining, online and travel.

Alicia

Why do you want to surrender your Alaska card?

Frank

I cannot see why one would keep an Alaska card at all beyond the 1st year … can you?

wanderlust

Companion certificate is the answer
“Get Alaska’s Famous Companion Fare™ every year! Each year on your account anniversary get a companion fare from $121 ($99 fare plus taxes and fees from $22).”

Last edited 1 year ago by wanderlust
Richard

Yes. I fly to Mexico once a year with my girlfriend. The companion pass and the free bags save me hundreds of dollars. The card also provides $25 lounge access.

Last edited 1 year ago by Richard
Frank

OK, I undderstand, but it doesn’t work for me. I have tons of Alaska miles and whenever I have tried to use the certificates I have found a better/cheaper way to go, like West Coast to Hawaii with BA miles, or Southwest with companion Pass, etc.

Frank

Thank you, Nick! Now that makes some more sense – though I still don’t know if I can use this. I am hoping to go to Hawaii this year and so I may price this out and compare with BA miles.

I generally don’t make complex reservations like your very fancy sample which wanders all around the country because we fly by the seat of our pants: Perhaps 50 years ago I would have loved that.

Typically we just book a flight to some country and then wing it. Now we are usually forced to have some kind of reservation home or at least an exit from our first destination, but we have used some easily refundable option to anywhere just to be allowed on board.