Bank account bonuses can help you earn extra cash just for opening and funding a new account. These bonuses don’t require much effort but do require organization and available funds or direct deposits.
If you’re fine with moving money around and tracking deadlines, you could earn hundreds of dollars from bank account bonuses. However, earning these bonuses may be challenging if you struggle with managing multiple accounts or deadlines. Whether a bank sign-up bonus is worth it depends on your finances, organizational skills and willingness to manage the requirements and challenges involved.
How Bank Account Sign-Up Bonuses Work
Banks may offer sign-up bonuses, which are incentives to open a new deposit account. Bank account bonuses are usually $100 to $600 or more for opening a new checking, savings or combination account.
Typically, you’ll need to make minimum deposits during a specific timeframe, and some bonuses require setting up direct deposit. For example, you might have to open the account and make two qualifying deposits of $500 or more within 75 days to earn a $250 bonus. “Most requirements for bank account sign-up bonuses will lean towards earning your business,” says Sarah Wicker, manager of deposit account and IRA services at Georgia’s Own Credit Union. “The requirements can include establishing a direct deposit of a certain amount monthly and using different services the institution offers, such as debit card services and online banking. The goal is to earn the consumer’s business and become their primary financial institution.”
Bank account sign-up bonuses can be lucrative. Some bonuses offer up to $1,500, but may require you to deposit up to $200,000 in new money funds.
Depending on the offer, you could earn more from a sign-up bonus than you would depositing that same amount into a certificate of deposit. For example, one sign-up offer could let you earn $250 from making two $500 deposits in 75 days. If you got a six-month CD with a 3.8% annual percentage yield and fund it with $1,000, you’d only earn about $19 in interest.
[Read: Best CD Rates.]
Bank Account Bonus Challenges
While you could earn hundreds of dollars from bank sign-up bonuses, they come with challenges. You’ll have to track multiple accounts and could face overdraft fees if you get confused and don’t have funds in the right account for transactions. Some accounts have maintenance charges you’ll have to pay or waive with actions such as maintaining a minimum account balance or regular direct deposits.
You could earn a bonus and then close the account after meeting the requirements, but you may pay a fee if you close your account too early. For example, some banks charge $25 for closing an account within 90 days of opening.
Also keep in mind that bank sign-up bonuses are considered taxable income. So, you may receive a 1099 form from the bank and have to claim the bonus as regular income.
Finally, juggling multiple bank accounts, tracking deposits and qualifying periods, and managing maintenance charges can take considerable time and effort. It’s worth considering whether the bonus is really worth the hassle.
“These incentives often require changing your direct deposit,” says personal finance expert Barry Choi. “If you’re one to chase these bonuses, your employer may get annoyed that you’re constantly asking to change your banking information. Additionally, if you need to maintain a minimum balance to get the bonus, that could tie up funds that could be used for something.”
[See: Best High-Yield Savings Accounts]
Who Should Consider Bank Sign-Up Bonuses?
Bank sign-up bonuses can be worthwhile if you have extra cash you can deposit in a new bank account and leave there during the bonus earning period. For example, if you have a savings balance you don’t need immediate access to, you could use it for bank account bonuses that accept ACH transfers as a qualifying deposit.
However, some banks only accept direct deposits for bonus qualification. In that case, you’d need to receive a direct deposit from your employer or another source rather than transfer funds in from another one of your bank accounts. This could work if you’re willing to move your paycheck deposit around or have gig payments that you can direct to a new bank account for bonus earning.
It should go without saying that you’ll have to be financially organized and able to handle multiple accounts if you’d like to earn a bank sign-up bonus. If you struggle with account management or can’t easily meet the deposit requirements, the hassle of opening bank accounts to earn sign-up bonuses may not be worth it for you.
Tips for Maximizing Bank Account Bonuses
— Research offers and look for bonuses with requirements you can achieve.
— Read the fine print to understand all fees and requirements involved.
— Keep track of deadlines and ensure you meet the conditions of the bonus on time.
— Have a plan for what you’ll do with the account after you earn the bonus.
— If you plan to close an account, be sure you don’t close it so early that you’ll forfeit your bonus or pay a fee.
— Consider using bonuses strategically, such as by saving or investing the bonus funds.
“Use these sign-up bonuses as a trial period,” says Wicker. “As much as the financial institution uses these to draw in consumers, it’s important that a consumer use this time to try out the institution.”
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Are Bank Sign-Up Bonuses Worth It? originally appeared on usnews.com
