My take on Bank of America’s updated Cash Rewards card

Some issuers are giving cardholders more of a say in how they earn their rewards

Wealth and Wants with Ted Rossman

Ted Rossman has seven years of experience in the credit card and personal finance industries as a member of the award-winning communications department at and its sister sites The Points Guy and Bankrate.

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I really like what Bank of America is doing with its credit card strategy, including the recent update to the Bank of America Cash Rewards credit card.  

The Preferred Rewards structure the bank launched in late 2017 is a win-win because it encourages customers to keep more money with the bank and offers them lucrative rewards in return. Starting Jan. 14, the new enhancement means a Bank of America® Cash Rewards credit card holder could get up to 5.25 percent back on gas, online shopping, dining, travel, drug stores or home improvement and furnishings, plus 3.5 percent back on groceries and wholesale clubs and 1.75 percent on everything else. That’s if they’re able to deposit $100,000 or more with Bank of America or Merrill Lynch.

The new 3 percent category becomes 3.75 percent if you keep at least $20,000 with the bank, 4.5 percent if you maintain a balance of at least $50,000 and 5.25 percent if you hit the $100,000 threshold. And the traditional 2 percent category (groceries and wholesale clubs) can go up to 2.5, 3 or 3.5 percent, respectively. These earn rates are extremely difficult to top.

The U.S. Bank Cash+ Visa Signature Card is another card that gives consumers a say in how they earn their rewards. Cardholders earn 5 percent back on up to $2,000 of combined spending in two quarterly categories of their choosing, but the selections aren’t as compelling (home utilities, ground transportation, select clothing stores, cell phone providers, electronics stores, car rentals, gyms and fitness centers, fast food, sporting goods stores, department stores, furniture stores and movie theaters). The card also lets you pick a 2 percent category – gas stations, restaurants or grocery stores.

See related: Poll: Cardholders say they earn most of their rewards from groceries

Our research shows cash back cards are the most popular, and I agree with that approach for most people. Frequent travelers are probably still better off with a premium travel card such as the Chase Sapphire ReserveAmerican Express® Gold Card or Citi Prestige (because of other perks such as annual travel credits, airport lounge access, travel insurance and a Global Entry/TSA PreCheck waiver). But for the masses, Bank of America has a really competitive offering that just got even better.

One more thing to note is that the Cash Rewards Card’s bonus categories are capped at $2,500 in quarterly spending – and that’s total, across the 3 percent and 2 percent categories (which can, of course, be worth more through Preferred Rewards). That threshold is still pretty generous. By comparison, the Blue Cash Preferred® Card from American Express caps its 6 percent grocery rewards at $6,000 annually (essentially $1,500 per quarter).

Using that as a proxy would still leave $1,000 per quarter for the Bank of America Cash Rewards Card’s new 3 percent (or greater) category, although you can divide your spending as you wish. I don’t think the $2,500 quarterly cap hinders the card’s value proposition too much.

The carrot, or the stick?

I think we’ll see more issuers copy Bank of America’s Preferred Rewards program. Issuers all want to breed loyalty and reduce card churning, and I think “carrots” (incentives) work better than “sticks” (punishments). I’d put Chase’s “5/24” rule in the latter category. If you have five or more card applications in the past 24 months, Chase won’t approve you for many of their cards. I understand why, but I like Bank of America’s solution much more.

Hotel and airline cards offer their own flavors of carrots. Hyatt, IHG, Marriott, Starwood, Hilton and Club Carlson are among the hotel chains that offer a free night’s stay every year the cardholder renews (and pays an annual fee, something that is rare among cash back cards). 

In the skies, the Alaska Airlines Visa Signature credit card offers a $99 companion fare each year (plus taxes and fees from $22), and Southwest Airlines gives its cardholders bonus miles each year they keep their cards. Free checked bags is another recurring perk for airline cardholders. These benefits make a lot of sense for people who are loyal to a specific airline.

Be on the lookout for more incentives in 2019, as issuers seem to be catching on that it’s a great way to encourage repeat business, and that’s a very consumer friendly development.

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Updated: 01-17-2019