When you hear the word sign up bonus, you probably think new credit cards or switching cable TV companies. But, you can also earn a bonus when opening up new savings or checking account with select banks. Although a bank sign-up bonus will probably not offer you a free hotel stay or plane tickets, you can earn up to $200 or $300 with certain offers. In an era of low-interest rates, banking isn’t exactly the most exciting financial sector. Therefore, they are willing to offer some nice bonuses to attract new customers.
You are probably familiar with the old expression, “Never look a gift horse in the mouth.” While ignorance might seem blissful, this is bad advice for any type of sign-up bonus (whether it’s for a savings account, credit card, or a timeshare). For bank account sign up bonuses, there are several factors to consider before joining another bank. Bonuses are great and many people can benefit from them, but the long-term “costs” might outweigh a bonus. In other words, read the fine print first.
What To Consider Before Joining A New Bank
If you have switched bank accounts recently or are a previous customer of a bank that you want to open an account with, you will need to look at the policy regarding prior customers. Most banks will consider prior customers who had an account as recent as 180 days or 2 years as ineligible to receive a bank sign-up bonus.
Are You Happy With Your Current Bank?
Let’s assume you already have a savings and checking account. The first question you need to ask yourself is why you are considering joining another bank. Is it because you want to have your assets spread among several different banks, just in case one bank goes under? Or maybe you are unhappy with your current bank and will switch to the bank that offers the highest reward.
Bonuses Are Taxable
One fact that is often overlooked and briefly mentioned in the fine print is that sign up bonuses are taxable. When the new bank gives you the 1099-INT for the year, it will show the bonus amount as taxable income. While some money is better than nothing, it does come with some strings attached.
One item to consider is monthly fees, especially for checking accounts. You might receive a sign-up bonus, but it can whittle away if you have to pay monthly account maintenance fees that you might not be paying with your current account. If you are already paying similar fees, this might not be a dealbreaker. You already pay the monthly fee, so the sign-up bonus is extra cash in your pocket that you wouldn’t have seen without switching banks.
Two alternatives to consider with monthly fees:
- Some banks will waive the fee if certain conditions are met each month. This includes things like maintaining a minimum account balance, enrolling in direct deposit, or using their debit card for a select amount of purchases.
- A no-bonus alternative is to consider a bank with no fees at all. No, you will not receive a sign-up bonus, but you also are not choosing to allow the bank to slowly recoup the bonus via monthly fees.
Minimum Account Balance
Most bonuses are not paid immediately. Each bank has different criteria new customers must meet before they are paid the bonus. One requirement for checking and savings accounts is maintaining a minimum account balance for a specified period. For example, a bank will pay you $200 if you maintain a minimum daily balance of $10,000 for the first 90 days the account is open. Banks that require smaller minimum balances will often have smaller bonuses.
Number of Required Transactions Each Month
Banks can also link bonuses with how many times you must use their debit card for purchases each month. It varies depending on the bank and the bonus amount, but you may have to swipe the debit card at least 15 times within the first month. Some banks will also require a minimum spending amount each month, in addition to the minimum number of required swipes. If a bank requires you to spend at least $300 monthly in debit card transactions, you won’t be able to buy 15 cups of coffee (assuming you buy 1 cup per debit card swipe) to meet the minimum spending requirements.
You might also earn an additional bank sign-up bonus if you also use the online Bill Pay service. Similar to debit card transactions, you will probably have to spend a minimum amount. The payments will also have to go to several unrelated merchants.
Enroll In Direct Deposit
A popular requirement recently has been requiring new customers to enroll in direct deposit or schedule automatic deposits for several months to earn a bonus. Most banks require a minimum deposit amount, usually at least $300 monthly, to be eligible for the bonus. It’s a smart move on the bank’s behalf. They have commitments of deposits each month as most employers now use direct deposit for paying employee salaries. It’s also free to the bank account customer.
Convenience Factor of the New Bank
One last factor to consider is if the new bank is convenient. If you usually walk into the physical branch to pay your utility bill or get a document notarized, these tasks can be more difficult to complete if the only brick and mortar branch is on the other side of the country. Online banks have the ability to offer better sign-up bonuses (including higher interest rates and charging fewer fees) because of lower overhead costs than traditional banks, but they lack the advantage of physical interaction when it is needed.
Is There Anything Similar To a Bank Sign-Up Bonus For Existing Customers?
Banks will sometimes offer existing customers bonuses if they enroll in new services like direct deposit or bill pay. If your bank is offering new customers a bank sign-up bonus, it cannot hurt to ask if they will extend the offer (or another incentive) to you for upgrading accounts. This approach might also work if you currently have a checking account but want to open a savings account or vice versa. Most banks will not openly advertise the lucrative sign-up bonuses, even for new customers. Sometimes the only way to find out is by asking.