Once upon a time, local banks offered "vacation savings funds," letting you put money aside in a special place for an upcoming trip and earn higher interest rates on that money than you would by stashing it in a typical checking account. But bank consolidation in recent decades has banished such helpful and community-oriented services from most banks.
So, how can you create a money-savvy vacation fund on your own?
Option one: Shop for a good interest rate for an online account. Well-rated, FDIC-insured, long-standing Internet banks may offer higher interest rates than your local bank because they don't have as much infrastructure to support. Compare local bank money-market accounts at BankRate, with rates from well-capitalized online banks like ING Direct (currently offering up to 3 percent annualized interest).
Option two: Find a way to earn mileage rewards on your bank account. For instance, stash your money with BankDirect, which pays its customers in American Airlines miles based on the balance you keep with them.
BankDirect is an FDIC-insured bank that's been around since 1999 and allows no-fee withdrawals from ATMs. It offers the miles to new and current AAdvantage members. Open a checking, money market, or CD account online (or ask for a form to be sent you by mail), and you'll earn 1,000 miles as a sign-up bonus, plus miles for each month you keep the funds. Mileage earnings vary. For instance, you can earn 100 miles a month for every $1,000 of the monthly average collected balance. Customers generally need to keep a $2,500 average balance to avoid fees.
The interest rates won't be as high as what you'll earn in other accounts. But given that rates are extremely low now nationwide, you might as well earn free miles instead of trying to earn interest. The miles are helpful not only on American flights but also on its partner airlines in the One World alliance, such as British Airways, Cathay Pacific, Iberia, and Qantas.
As always, terms are constantly changing with financial offers, and the above information may not be completely accurate after this post has been published. You should read the fine print for the latest specifics on the relevant websites before acting on any of the above advice.
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