mangoMan

Thanks for this bit...makes sense to me. Although I'm not sure how you got 72K mi the first year. I see 50K earned, 20K bonus, and a 5K sign-up bonus, for 75K mi.

[edit to add]: I think this can be expressed by an equation (which lairdb probably already worked out) as follows:

cost per mile = [ ( i / m ) * ( 1 - t ) ] + ( .0042 * t ) where i = interest rate (decimal), t = tax rate (decimal), and m = mile earned per $ (normally 1, but if bonus year can be higher)

So in lairdb's example, i = 0.0202008 (i.e. 1010.04/50000) , t = 0.35, and m = 72K/50K = 1.44 in first part, and m = 1 in second.

Maayan

Don't forget the 1000 mile bonus for completing the online feedback, so 76k altogether in the first year.

sam007

what do you guys think of this strategy? Basically keeping 50k in BD checking and 50k I’m bask savings for maximum return of miles with a 100k investment (I’m ok with fees given I travel long haul business class netting far above 2c/mike)

mia

You would be paying ~$144 to earn 10,000 additional miles. Do you use the checking account?

pcharles

Yes

lairdb

Yup. Goofed on re-adding. Apparently my day for math goofs...

76,000, actually, as Maayan pointed out. Sheesh. Not my day.


Yes, but although cpm is the familiar measure for us, I don't think it's the right one. Using cpm is appropriate for comparing two things that yield miles -- but in this case we're comparing one thing that yields miles (plus a tax liability) and another thing that yields money. In this case, it's more productive to use value per mile and tax value per mile as inputs and solve for equivalent interest yield:

(Miles * valuePM) - (Miles * ratePM *taxRate) = (dollars * yield) - (taxRate * dollars * yield)

at the 0.0145 value per mile, 76000 miles yielded, and 35% marginal rate, that's

(76000 * 0.0145) - (76000 * 0.0042 * 0.35) = (50000 * y) - (0.35 * 50000 * y)

Solve for y:

y = ((M * v) - (M * r * t)) / (d * (1 - t))

y = ((76000 * 0.0145) - (76000 * 0.0042 * 0.35)) / (50000 * (1 - 0.35))

y = 0.03047, i.e. you need a 3.047 APY to equal the value of 76,000 miles. At the 0.0145 vpm and 35% marginal rate, but only 50,000 miles, you need 2.005 APY.

For me, I prefer using a value per mile of 0.013, and in CA my effective marginal rate is closer to 41%, so I need 2.628 APY to equal the first-year-value, and 1.729 APY in the out years.

So, unless interest rates do something else berserk, I'm planning on maintaining $50,000+ to get the 76,000 the first year, and then move to an interest-paying account.


(I think I finally got this right. libralibra, get out your well-earned red pen.) (And yes, I got the Barbie quote slightly wrong as well: )

rrgg

For anyone thinking of keeping your checking account, BD said if I convert mine to interest checking the account number is the same. It should be a transparent change.

libralibra

I entered mangoMan's equation into wolframalpha which lets you solve an equation for any variable, e.g. "solve c=r/m*(1-t)+.42*t , r=2.0 , m=1 , t=.35 for c" solves for the cpm given a 2% interest rate, no bonus, and marginal tax of 35% (click on "Approximate Form" to see the decimal answer of 1.447 which matches rrgg's value earlier).

Or "solve c=r/m*(1-t)+.42*t , c=1.45 , m=76/50 , t=.35 for r" finds the interest rate necessary for 1.45cpm, with bonus miles, and 35% marginal tax (the answer 3.0470% matches lairdb above).

This part did not comport. wolframalpha says r≈2.9055 and r≈1.9115 ?

yeah, all this math is really overkill with the current rates - it's a no-brainer to switch and get the bonus. However, I'm currently in the 'dormant' state, so will wait a couple more months to switch.

rrgg

Yes I meant 1.447 but I rounded it. Since there’s so much said about this, I’ll share my spreadsheet. You can make a copy and then enter your own tax rate and savings interest rate on lines 1 and 2.

mangoMan

Yep, I'm switching to Bask for a year and then probably quit.

sam007

is it true that 100k in bask earns 135k miles in one year with all promos being added in and leaving the money there for one year? That's how the phone lady explained it. Thanks

sam007

Anybody?

rrgg

100k per year plus 26k first year bonuses. How did she get to 135k?

rrgg

Several posts here compared earning cash interest versus miles used toward a J ticket, and I mostly agreed.

Earlier today I posted in the AAnytime thread that I was seeing 300k and 400k one way US-EU business awards. Now I just saw TPG reporting this is new AA pricing for aanytime. Yes savers still exist but it’s even worse now. With “websaver” moving in too I’m not sure I like BD/Bask anymore.

schistosomiasis

Agree with the comment above. Last year I got a business class ticket PHX to LHR for 135,000 miles and $5.60 (in July, peak season) and waffled over whether it was worth it. Looking at July of this year it’s difficult to get a ticket for this amount of miles. This entirely changes the calculus of Bank Direct/ Bask. Instead I’ll use my amex MR so at least I can get EQM and EQD and elite status. Will probably close out BD, leave $50k in Bask for a year and then leave a nominal amount say $5000. If I can get good redemptions and run low on AA miles then I’ll put cash back into Bask if it compares favorably to interest rates.