Why Chasing BOA 2.625% Cash Back Just Isn’t Worth It…To Me

If I go for the 2.625%, I certainly won’t use the $95 per year Premium Rewards. I would use the no AF Unlimited Cash Rewards. Customized Cash Rewards is tempting too!

Would someone please explain to me how you can get 5.25x back with the BOA cash back/ Premium Rewards combo even if you are a platinum tier?

If you’re willing to change banks or haggle with customer service, there are several no-fee 1.5% cards doubled to 3% for the first year (Discover, Santander, etc.). The total benefit of 3% vs 2% in a year’s non-category spending for me is about $130, so many “$200 after spending $3000” bonuses would outperform this, too. To me, that seems like less work than moving $100k around.

It’s worth noting that there are no foreign transaction fees on the Premium Rewards Visa, which isn’t the case for most of the cards you’re comparing to (Double Cash, Freedom, etc.).

Full disclosure: I work for Bank of America, but not in connection with credit cards. I also hold multiple cards from other issuers, including Amex, Chase Reserve, Citi, and Wells, so I’m not beholden to my employer when it comes to looking for the best card for spending.

I appreciate the analysis, but I don’t understand what you mean when you say: “There is no lifetime language in Discover it Miles credit card application. Long story short, we have obtained 3% cash back long term with new applications and accounts.” and “we are continuously obtaining 3% cash back.” Does that mean you are earning 3% by annually churning? Or are you calling every year to ask customer service to extend the match again? Otherwise, I don’t know how you’d get 3% in perpetuity, since the offer terms expressly limit it to your first year.

If you’re churning, that’s a significant issue. Churning supposedly affects one’s credit score, which may be hard to quantify in dollars, but it’s an issue. If you’re calling to get a courtesy extension, then the 3% is more of a YMMV proposition. That also undercuts your argument that there’s “no assurance” that BOA keeps the same rate, since it sounds like there’s no assurance that Discover continues to allow churning, keeps its rate, or otherwise agrees to a courtesy extension. If it’s easy to get 3% continuously, then please share your secret!

I agree that BOA’s $100K account balance minimum is a significant hurdle for many folks. But if you have that much tied up in any stocks/bonds/mutual funds or retirement account, then it’s not a big deal at all. I have both Merrill and Schwab and they are functionally equal.

doctorpipes already covered the advantage of pairing the BOA Cash Rewards Card and getting more cashback overall. Yes, that requires getting another card, so that should be factored into any analysis. He also mentioned the annual travel credit of $100, which is easily met because it allows for a broad range of qualifying expenses. One thing not yet covered is the $100 credit for TSA PreCheck or Global Entry every 4 years, so that’s a $25/year feature.

If you can really get .74% more cashback through Discover without significant negative credit effects or hurdles, then your conclusion that Discover > BOA Premium only is accurate. But as it stands, I’d need to understand how you’re getting that benefit. Otherwise, it seems like having the BOA Premium and Cash cards is more advantageous.

It could help to include the ME account opening bonuses in your equation: up to $600 per account type, with regular IRA and Roth as two different types. So potentially you can earn the $600 repeatedly depending upon what types of assets you transfer in. Also agree that you need a Cash Rewards card to make this work, and Travel Rewards can also be handy to spread the love.

Worth pointing out the 50,000 points (AKA $500) sign up bonus on the Bank of America Premium Rewards. You could potentially get more from Discover in one year on quite a bit of spend. BoA Premium Rewards has $500/$3000 = 16.67% cash back + 2.625% going forward. Discover requires 16.67K to get $500 back. I personally prefer the Discover It 5% with the double cash back. This limits you to $1500/quarter at 5% though (for a total of $1500 x 4 = $6000), but you are at least netting 10% back instead of 3%. Just my two cents.

I am definitely in the BofA camp. We have three cash rewards cards, with the most frequently used category choice online shopping. (5.25% up to $2,500 per quarter/per card.) Along with the Premier Rewards, (2.625%). I’m a CSR fan, but without travel right now, my BofA combo, along with the Chase Freedom, have resulted in a good return. Extra benefit with the CSR grocery bonus too. Merrill Edge has a decent investment platform, with 100 free trades a month? I think that’s right… either way, moving 100K to an IRA with them was very easy and I can make the same investment choices as anywhere else. Just my 2 cents.

US Bank Altitude Reserve leaves both BofA and Discover in dust, with 4 5% on (almost) everything.

Good analysis. I would also point out that the Discover card functions as a first year 3% in the following way. The 3% is composed of two elements:

A) Ongoing earn rate of 1.5%

Plus

B) one-time, lump sum sign up bonus

The Bofa card generates an earn rate of 2.625% without needing to factor in the additional value of a one-time, lump sum sign up bonus.

On the other hand, generate 2.625% requires the presence of 100K in assets!

Solid article, but somewhat of a limited picture by only talking about Premium Rewards. The huge elephant in the room is pairing Premium Rewards with Cash Rewards, which would change the title of the article to chasing 5.25x. For me, the Premium Rewards and Cash Rewards combo has totally won me over from my Chase (CSR, Freedom Unlimited, Freedom) and AMEX (Everyday, Gold, and Platinum) trifectas. I’ve ended up axing the CSR and Gold because of the outsized rewards I get with that BofA Duo. With the pandemic raging, I’ve been getting my groceries online, so that’s 5.25x back (vs. 3.5x normally) on ~$500/month plus all my Amazon orders on Cash Rewards. It’s also possible to change your Cash Rewards 5.25x category to dining (or gas, home improvement, drug stores, or travel) if you’re more about that takeout life, but the point is that 2.625x back is my worst case scenario. Based on crude estimates in Quicken, my average annual return is about 4x with the BofA Duo, although I anticipate this to jump maybe 0.25-0.5x more over the next year since my frequent traveling and AMEX Platinum use have ground to a halt. I’ll take that any day of the week, along with the extra amenities that come with Visa Signature and the $100 travel credit (although we’ll see how the latter pans out given the pandemic). YMMV, of course, and the big caveat here is that you need at least $100K between BofA, ME, and/or US Trust to reap these benefits. If you’re able to do that (or even manage 3.75x with Gold tier or 4.5x with Platinum tier), that’s as competitive of a value proposition that you can get and destroys the Discover It card. That doesn’t even take into consideration Visa Signature benefits and being able to streamline redemptions into retirement and stock accounts across BofA, ME, and US Trust.

I think you’re trying to justify to yourself or attempting to workaround why you can live without the BofA Premium rewards card when in fact it’s a simple, attractive, strong card. I’d rather take a consistent 2.625% cold hard cash year after year with the least effort instead of a one-time 3% bonus. Since Discover removed all their card protections, I’ve ignored them completely. The BofA card is not something you chase. It’s generally designed for those who have or are building a relationship with BofA. Their ME platform is pretty solid as it provides unique research and their ecosystem allows you to invest immediately after receiving your paycheck with relationship banking benefits. Over several years, I think the BofA card will come out on top for simple, straight cash for ‘Other’ category spending when you take into consideration annual fees and not being able to get certain signup bonuses consistently. But I can certainly see your point of view and respect your opinion and article on this.

If you are going to hold the same ETFs or stocks elsewhere then you might as well do it at Merrill (the only difference may be if you can qualify for the discount on the Schwab Amex Platinum, but that at most is $200 for $1M in assets). If your other retirement and investment vendors provide lower fees or better service, fine, but as a DIYer I find the BoA Securities reports to be extremely informative and worth the price of admission alone. And I don’t do enough MS to make applying for a Discover IT meaningful, beyond office store MS which is covered by Ink. For daily spend it’s good to have one card that I can get a good return on, without worrying about what category is rotating this month or who is offering a high rate.