These days, banks are big on advertising sign-up bonuses for new customers, offering an account credit of several hundred dollars for opening a checking or savings account. These incentives appear to offer easy money, especially if you're already looking for a new bank. However, we advise proceeding carefully: the rules behind these giveaways can cut into their true payouts, and there may be negative consequences for your reputation as a banking customer.
Here’s what you should consider before opening a new bank account just to get a signing bonus.
Most Offers Have Minimum Requirements
Most banks attach specific conditions to their bonuses to ensure that you'll really use your new account. With checking account offers, you'll most likely need to run up a certain balance, and from direct deposits, before the bonus appears in your balance. While the average minimum for such deposits is fairly low, the direct-deposit stipulation is a headache because most people will need to ask their employer to redirect their paychecks into the new account.
Some bonus hunters seem to have found success in meeting direct deposit requirements with other ACH payments, such as a transfer from a prepaid debit card or an account at another bank. However, there are no guarantees that such alternatives will satisfy the direct-deposit requirement of your sign-up offer. Besides the need to make deposits, you may find the bank demands a certain minimum balance be maintained in the new account; this tends to be particularly common with savings account offers. Such a minimum may mean you'll need to keep thousands of dollars in the account, possibly for several months, all to secure a bonus worth a few hundred dollars.
Applying for Multiple Accounts Can Impact Your Banking Relationships
When you submit an application with a new bank, it will usually request a report on your credit score and banking history. The majority of banks perform only what is called a soft inquiry or soft pull, which does not impact your score and may not get recorded in your credit history. However, banks also use companies like ChexSystems to examine your banking history; if those probes reveal you’ve recently opened a lot of accounts (a practice the industry terms “churning”), that may raise a red flag with banks and lenders.
A complicated ChexSystems history may make it difficult to get started at a new bank, and could even restrict your options to less desirable products such as second-chance checking, which is designed for people with poor banking histories.
Account Fees Can Put A Dent In Your Bonus
Opening a new account means accepting all the standard account fees the bank charges. If the bank requires you to keep the new account funded over several months, you'll probably be on the hook for one or more monthly maintenance fees, which average $12 to $15 per account. Most banks provide ways to waive the monthly fee, but this often means keeping the balance above a certain level. While you'll probably meet that balance in the process of meeting the bonus requirements, keep in mind that you'll also need to maintain a minimum to avoid maintenance fees on your original bank account, too.
With so many ongoing fees, it might seem that the best move is to close your new account as soon as you receive the bonus. However, some banks have fees lurking for you here as well, ones for closing accounts too quickly. If you open and close an account within three months, you may run into early termination fees that run from $25 to $50 depending on the institution. Being aware of a bank's standard account policies is critical if you're seeking to take advantage of sign-up offers, which aren't significantly larger than several months of maintenance fees and early termination fees.
Going after bank sign-up bonuses is a complicated process that requires careful planning and attention to detail. Read carefully before you commit to opening an account for the sake of a one-time benefit.