Depends
 

This would depend on what tax bracket a person is in, and if they plan to use their miles on business or first international travel which is where you get the biggest bang usually for miles. In my case I'll take the miles where I don't have to pay taxes on them (at least not yet) and then use the miles for my business class tickets to Bali. :)

I wouldn't agree, but the $3187.50 is based on depositing only $75,000, while 120,000 miles requires $100,000. What does your bank pay on amounts which do not qualify for the promotional rate?

I would like to know which that bank is that is paying 4.25% on checking accounts up to 25k. That's a good rate in today's market.

My problem with other bank checking account offers with high rates is that usually the rates melt away after a short period of time, which is allowed since they can change the rates at any time. If you could count on leaving the money there for, say a year, then that would be worth pursuing. How long has that bank had rates at 4.25%? I don't want to set up accounts and then have the promo deal pulled out from under me.

That rate is almost sure to be taxable and even a 25% combined federal and state rate would reduce the annual interest to less than $2.400 a year. Still good but now we're in the 2 cents per mile range.

I also agree that there are banks that pay 2.3-2.5% for 2 year CDs-there are even a few that pay almost that for 1 year. But a CD is a different investment, and ties your money up. A checking account, whether Bank Direct or another, is liquid and you can take your money out today, tomorrow or whenever, without penalty.

I've had the accounts there for a year and the rate hasn't changed. You have to meet a few conditions also: e-statements, 12 debit transactions, and direct deposit. Only problem for most people is that it is a small community bank with only a few branches and accounts need to be opened in person.

Absolutely.

If I put my $$ in the bank, currently the bank pays me peanuts in interest.

On April 15, my Federal and State Uncles take nearly half of my peanuts in taxes.

I'd rather be redeeming my miles for a J class seat to Europe or some exotic destination on April 15 (and eating the peanuts that the flight attendant gives me).

I have almost all my free cash in BankDirect. Since I value my AA miles at around $.017/mile this equates to around a 2% after tax yield. I'd have to earn 3% in cash interest to equal this and that would only be possible in an account with more risk or by giving up my liquidity in a long term CD.

Also it's a super easy way to get closer to lifetime Gold or Plat on AA. That is worth something.

There are a lot of good interest rate deals reported on the internet that are only available if you open the account in person. The one I've seen in my area with strong interest rates have capped the balance that could earn that rate at a fairly low level.

On the restrictions (e.g. 12 debit transactions), I've always thought of that stuff as too much to keep track of and not worth the effort. At 4.25%, I'm going to re-think that conclusion.

This site shows rates as high as 6.01%, capped at $25,000. Use the Filter Accounts tab:

http://www.depositaccounts.com/all/c...-accounts.html

Well, this statement is true, but the important question is why in the world would you leave $100k sitting in an exceptionally low interest yielding checking or savings account?

The thing I think people miss about the "alternative miles earning" opportunities (i.e. miles for checking, miles for electricity, etc.) is that most of the time you are not "earning" miles; you are simply buying miles through either a lower interest rate than you'd earn elsewhere, or a higher electricity rate, etc.

To each his own I suppose, but it seems to me that many FTers, in their obsession with miles, often end up spending a dime to save nickel...

Regards

One nice feature of BankDirect is that you can earn AA miles on a checking account. So you can keep a little buffer in the account and make a few miles on money that would otherwise sit somewhere without earning anything. It also keeps your AA account alive and the miles are not taxed. I wouldn't use it for larger amounts in a savings account though.

Great tool-thanks!

I have $100K in such an account because for me there is nowhere else to put the money. I think stocks are overvalued, not gonna buy bonds in a low interest rate environment, not interested in real estate...where else would I put the money?

I'd buy miles any time for under $.01/mile which is what the BankDirect yield is after you consider the tax implications on an alternative liquid account with the highest yield in today's market.

And getting back to the OP's question. Is there anywhere else to put a large balance.

I also agree with vxmike - there really is no where else to put the money.

Without having done any due diligence on the fund, it appears that AA has a partner that offers a money market fund that pays 1 mile for every $10 invested on an annualized basis. While this is much less than BankDirect, I suppose it could come in handy for someone who is pushing against the FDIC limits and desperately wants miles.

See the following link: http://www.americanbeaconfunds.com/earn-miles.html

It is a great tool, and what it shows for $100K+ accounts is that you've got a few no-names that I wouldn't trust offering around 2%, and a handful of bigger institutions offering money market accounts (not checking) providing something approaching 1.5%. While BankDirect offers checking, .05% interest, and the AA miles. If you're going to have a cash balance somewhere, for bill-paying/cash-flow reasons or otherwise, what's better: 1.5% taxed, or 1.2 AA miles?