But yes, you can get around FDIC if you are creative. Most people ask why you would hold such large amounts in a Savings or checking or MMA? And there are all kinds of different reasons. For example, I still do with some of my accounts because I get American Airlines frequent flyer miles which I use to upgrade to 1st class so they are VERY valuable to me and they aren’t taxed.
In this environment of VERY low interest rates, and already having more than I want in the stock market, it’s great ROI for me while still protecting past FDIC limits.[/quote]
Do you have an account with Bank Direct?[/quote]
Yep. I’ve had one for years there. It used to be GREAT as they didn’t have any caps on the amount of money you could park and earn unlimited miles. It was heaven. Now they put restrictions and limits on the amount you can earn. But you can still earn in a few different categories.
Also, I got grandfathered in with another bank as Guaranty Bank had a program with American Airlines many years ago. They ended it when Guaranty went belly up many years ago but they grandfathered in all the people that were with that program before so I’m still earning lots of miles in that program.
They have devalued the miles in this low interest rate environment. Before, when interest rates were high it was a no brainer for them but now it’s more expensive for them as interest rates are so low.
But still, I fly a lot internationally and I use these miles to upgrade to 1st class so often times I buy a cheaper $1,200 ticket and I’ll upgrade with miles and it can be worth a $12,000 ticket to fly across on a long haul international trip. Again, the miles have never been taxed. So although I give up a bit in interest I come out ahead because I’m not taxed on these miles.
Also, Citibank routinely has promotions where you can open a Gold checking account and keep $X for 3 months and you can get 50,000 miles. I’ve done that before. Also, if you fly American Airlines quite a bit, it makes sense to get this credit card.
I fly some of these routes every month and nice getting a 7,500 reduced mileage award. (For example flying up to Toronto from SAN for only 17,500 frequent flyer miles is a real bargain, IMHO). Really great. Plus you get a rebate of 10% of frequent miles back with the card.
Even before when interest rates were MUCH higher, I still came out ahead earning frequent flyer miles vs. getting the interest as I’d pay taxes on that interest and I was in the highest tax bracket. So I’d find legal and creative ways to minimize my taxes and produce the highest ROI.
Granted, for people that don’t fly too often it might not be compelling. But for me, I have over 3 million miles flown in the past 20 years. So needless to say it’s valuable for me.
