These Are the Best and Worst Things About New Account Bonus Offers

Getting cash for opening a new bank account and meeting a few requirements can be an effortless money grab. But it could also present missed opportunities if you ignore the finer details.

I’m a bank bonuses expert and a consumer who’s taken advantage of bank promotions. Here’s what to know about the best and worst things about bank account bonus offers.

Trying out a new financial institution can provide a fresh start. You might discover that you can do banking tasks more easily within the institution’s mobile app, or have access to more branches or ATMs.

I’ve opened a savings account to take advantage of a bonus offer. What made it more enticing was that it was at a credit union, a type of financial institution I’d always wanted to try. I found that I liked using the credit union, which offered competitive rates on other products such as share certificates, which I ended up opening, too. Not only did I meet a goal of becoming a credit union member, but I also got a bonus for opening and using my first account there.

Some of the best offers might not pay a lot of cash but will offer something invaluable: a tool and incentive to build your savings habit. I’ve opened a high-yield savings account to help myself get used to socking away some money on a regular basis. For meeting an affordable minimum monthly deposit requirement for 12 consecutive months, I earned $100. This got me in the habit of automatically moving a chunk of cash into savings every month.

I’ve been enticed by a bank bonus offering a reward that was equivalent to 60% of the minimum deposit requirement. The account paid no interest, but I was lured in by the easy requirements and the bonus-to-deposit ratio. I knew I could move my money to a more rewarding account after getting the cash reward. I earned the bonus relatively quickly. But I put the task of moving my money to an interest-bearing account on the backburner.

Suddenly, it was years later. I realized that all that money was just sitting there, not earning interest. Say I’d deposited $500 to start, then $150 each month and left it untouched for three years. In a high-yield savings account that pays 4% annual percentage yield, I could have earned nearly $400. I consider that missed interest a costly tuition fee — what I paid to learn the consequences of sticking with an account because of inertia.

“It’s important to track these bank bonuses,” says Zina Kumok, a financial advisor at C.H. Douglas and Gray Wealth Management. “You have to be organized, and that might just entail creating a little spreadsheet.”

Details to track include exact requirements, the date you first deposited or transferred funds, and dates when you could expect to complete requirements and then receive the bonus.

Next time, I’d put to use the advice of Nadia Vanderhall, financial planner and educator and founder of The Brands + Bands Strategy Group. I’d give the account a job description (“earn promotion bonus,” for example) and consider the role that account plays in my bigger financial picture (boosting my balance). Once the account had lived up to its job description, I’d reconsider where those funds should go and their new job description (a high-yield savings account, for example, “to continuously earn interest”).

Not everyone reads the terms and conditions like it’s their job. Your efforts could be wasted if you misunderstand a nitpicky requirement.

“Miss a condition, even by a day, and you could forfeit the entire bonus,” Mike Casey, CFP® and President of AE Advisors, said in an email.

Consider details and conditions such as making an opening deposit by a certain deadline, keeping your funds in the account for a specified number of days, meeting a minimum number of direct deposits, or applying a specific code that’s accepted only at the time of application. It’s important to understand what exactly qualifies as a direct deposit if one is required to earn the bonus. Not all banks have the same definition.

There can be implications for bank bonuses that aren’t spelled out in the fine print but are critical to know. For example, bonus earnings are taxable, so you’ll need to be ready to report them when doing your taxes.

Some bonuses require making huge deposits. We’re talking a minimum of $250,000. The $250,000 figure is significant because that’s the amount that’s covered per depositor, per ownership category at each bank insured by the Federal Deposit Insurance Corp. If you deposit more than that (or if you deposit around that amount and the account pays interest), your funds may not be fully protected unless you make certain arrangements, like adding a joint account owner to increase the insured amount, assuming the account or offer allows it.

As I learned the hard way, if the account doesn’t pay competitive interest and you’re required to leave the funds there for a long period of time, you’ll miss out on what you could earn elsewhere.

Before you sign up for a bank bonus, carefully consider what you’re really getting into, and what you’re getting out of it beyond the cash. Make sure you understand all the requirements. Decide whether you’ll continue to use the account the way you set it up to earn the bonus even after you’ve earned the award, or if you’ll need to transfer the money somewhere it can earn more interest.