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A bank account bonus is an incentive banks and credit unions offer new customers to encourage them to open a new account. The bank gives you a specific amount of money, ranging from $50 to $1,000, when you open a new account and meet their specific requirements.
Bank account bonuses could help make it a bit easier to switch banks, especially if your new bank offers additional benefits. Here's what you should know.
What Are Bank Account Bonuses?
Like credit card welcome bonuses, bank account bonuses are promotions banks offer to incentivize new customers to open an account. Generally, bonuses range from $100 up to $1,000. For example, here are two bank bonuses available at the time of writing:
- Chase: By opening a Chase Total Checking account and setting up direct deposit within the first 90 days, you may qualify for a $200 bonus.
- SoFi: If you're a new SoFi customer opening up a savings or checking account, you may qualify for a bonus ranging from $50 to $250 by direct-depositing money into your account within a 25-day evaluation period. A direct deposit ranging from $1,000 to $4,999 could net you a $50 bonus, while a deposit of at least $5,000 leads to a $250 bonus. As with any account, it's wise to read the full terms and conditions before applying.
As you can see, banks typically require you to meet specific requirements to qualify for its promotional bonus, including the following:
- Making a minimum deposit to open your account
- Keeping the account for a specific period
- Maintaining a minimum balance
- Setting up direct deposit
- Waiting a specific time frame to receive a bonus
- Making direct deposits for a certain amount
Keep in mind, banks and credit unions typically only offer account bonuses to new customers. Also, you may incur a fee from $5 to $50 if you close your account within a specific time frame, such as 90 or 180 days. It's generally recommended to only open up accounts you intend to use. Before submitting a new account application, it's essential to read and understand its terms and conditions.
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Are Bank Account Bonuses Worth It?
Let's examine the pros and cons of bank account bonuses to help determine if opening a new account is worth it.
Pros of Bank Account Bonuses
- You'll receive extra cash. The primary benefit bank bonuses provide is cash in your pocket for opening an account and completing the bank's bonus requirements. Some bonuses can exceed $1,000. Of course, conditions apply, so make sure you understand the account's terms before applying.
- Try out a new bank. By opening an account with a new bank, you may discover banking tools and features not offered at your current bank. Additionally, you don't have to close all your accounts with your current bank or stay with your new bank indefinitely.
- You may boost savings and establish a savings habit. You may be required to maintain a minimum balance for a specific period or make direct deposits to your account to receive the bonus. By contributing regularly to your account, you may establish or improve a habit of saving that can grow your wealth and benefit you throughout your life.
- It could help you nab more generous bank benefits. Even if you signed up for a new bank account in pursuit of a bonus, you may wind up taking advantage of additional bank benefits such as lower interest rates on loans and other debt products, higher yields on savings accounts and more.
Cons of Bank Account Bonuses
- It may depend on challenging requirements. Many banks require you to complete one or more qualifying activities to receive a bonus, and those requirements may be difficult for many to achieve. The most generous bonuses typically have very stringent requirements for earning them, such as significant deposit requirements.
- You could incur fees. Potential monthly fees, such as minimum balance or early termination fees, could add up to offset or even negate the value of a bonus. Always weigh an account's costs against the bonus amount to ensure the value is sufficient to warrant setting up a new account.
- The bonus has tax implications. Remember, financial institutions can report any bonus they disburse to the IRS as income. Consequently, you're responsible for paying the taxes on any bonus you receive.
Other Bank Benefits to Explore
Earning a cash bonus is certainly an incentive to open a new bank account, but it's not the only reason. Opening a new bank account may deliver other significant benefits, such as:
Higher Interest Yields on Savings Accounts
If you have a traditional savings account, you're likely earning near-zero yields on the money in your account. By opening a high-yield savings account with another bank, you may earn rates up to 12 times higher than those of traditional savings accounts. On top of that, some online banks offer a sign-up bonus, adding even more money to your account if you meet the bonus qualifications.
Better Terms on Loans
If you don't have a bank account, opening one may save you money if you eventually want to take out a loan.
While having a bank account isn't always required to get a loan, not having one may relegate you to subprime options like payday loans and title loans, which may not require a bank account. These types of loans are costly, with fees equal to an annual percentage rate (APR) of nearly 400%, according to the Consumer Financial Protection Bureau (CFPB). By contrast, the most recent data from the Federal Reserve states the average interest rate on a two-year personal loan is 11.48%.
If you anticipate taking out a loan soon, check your bank's current rates and compare them with other banks' rates. Ask your bank—and any bank you're considering doing business with—if they offer a relationship rate discount or other perks for customers with existing bank accounts. Additionally, you may receive a reduced rate, such as 0.25%, for setting up a direct deposit into a savings or checking account with the bank. Opening a new bank account may enable you to snag a lower loan rate while earning a bonus.
Lower Fees
Even without a bonus incentive, moving to a new bank may be worth it if your current one charges excessive fees. Many financial institutions charge savings account and checking account fees, including monthly maintenance, overdraft and out-of-network ATM fees.
Even fees that are relatively inexpensive can add up. By switching banks, you could save hundreds of dollars per year and earning a bonus may be the icing on the cake.
The Bottom Line
Financial institutions use the money you deposit to make loans and investments that produce income for them. As such, the more money they have deposited in their bank, the more they can earn. That's one reason why banks offer bonuses that may help you earn money for opening a bank account and meeting specific requirements.
While opening several bank accounts to earn more in bank account bonuses may be tempting, it's wise not to abuse the system. Many banks and credit unions use ChexSystems, a banking reporting agency that collects information about consumers' banking history and activity. A financial institution may reject your application if it deems you're opening accounts too quickly.
If you do open a new account, consider keeping your old one, especially if the two accounts offer complimentary benefits. For example, you may sign up for an online account for higher yields but keep your traditional account for the convenience of in-person service and cash deposits.