Bolder Thinking Blog

Bask Bank savings account earns AAdvantage miles

February 6th, 2020 | Mark Miller

On January 27, 2020, Bask Bank, a joint venture between Texas Capital Bank and American Airlines, launched a new online savings account. Unlike the flood of online banking options that have appeared over the past several years, Bask offers a very unique value proposition. Instead of earning interest on the account balance, customers will earn American Airlines miles at a rate of one mile per every dollar saved (Bask has a useful video on its website that explains exactly how those rewards are calculated).

When interest rates finally began to rise after years of post-recession stagnation, high-yield online savings accounts grew in popularity. Players like Ally Bank and Marcus by Goldman Sachs offered rates north of 2%, dwarfing the near 0% offered on traditional savings accounts. But as Fed Rates started to decrease again in 2019, those “high” rates followed suit, opening up the market for a new spin on savings rewards.

Bask Bank challenges consumers to “outsmart interest’ by choosing a banking product with a much more fixed return. While value fluctuations are inherent in airline miles, the upfront reward structure of one mile per dollar saved is static. That, at the very least, can add comfort to savers concerned with volatile interest rates. At the same time, many consumers are traveling less frequently and looking for new ways to earn miles. 

It’s a little unclear though exactly where Bask Bank sees itself in the banking landscape. Its search keyword strategy points to competition with high-yield saving accounts, but a comparison table on its website instead compares the earnings to the national savings average of 0.09%, not the 1.6% – 1.7% APYs offered on the many online options. The same strategy places it alongside travel credit cards, although this is likely to position the account as complementary to a credit card also earning American Airlines miles – sponsored content on The Points Guy also points to this relationship.

Another point of confusion with earning miles is the tax implication. While there is a bit of a gray area with credit cards, often the rewards are classified as rebates instead of income, and thus untaxed (this is not always the case – so don’t ignore that 1099 in the mail). Bask Bank has made it clear in their T&C that they will be reporting miles as interest income to the IRS, and that each mile is currently valued at 0.42 cents, or the equivalent of 0.42% APY. This could create a minor loophole since miles could have a much stronger value than their tax liability. A $50,000 annual balance would earn $850 with a 1.7% APY and 50,000 miles with the Bask Bank account. Those miles would be taxed at a value of $210 but could be worth much more (TPG values American miles at 1.4 cents, so 50,000 miles could equal up to $700). 

Similar industry partnerships: 

Bask Bank’s move to airline miles is not the first time we’ve seen such partnerships outside of the credit card space. Personal lender Best Egg, for example, has been running direct mail promotions with Spirit Airlines, Hawaiian Air, and JetBlue to offer one mile per every dollar borrowed, and Citi has offered up to 60,000 American Airline miles as a bonus for opening a new checking account. Lyft riders can earn Delta miles for every dollar spent on the platform, and, of course, the major airlines also have shopping portals that offer customers extra miles for dining and making purchases (and sharing that data in the process).

Three key takeaways: 

  1. Unique product positioning: Bask Bank’s reward structure is unique in the space, and capitalizes on both consumer interest in travel rewards, and variability of high-yield savings interest rates. 
  2. Challenging Multiple Sectors: Bask takes on both savings accounts and airline credit cards in its positioning, digital buy strategy, and paid search keyword strategy. The unique earn of miles could garner Bask prospects from both categories. 
  3. Real Talk: Bask’s ad copy is pithy and terse. Although the brand employs a hyper-direct creative tone, marketing does not shy away from product context. 
Mark Miller

Mark Miller

Mark Miller is Associate Director of Insights for Payments with Comperemedia. He focuses on credit cards, lending products, and the general financial services landscape.