Many banks offer cash sign up bonuses as a way to recruit customers. You can turn this fact to your advantage and easily earn hundreds or thousands of dollars per year in cash bonuses. In most cases, banks only require one or two of the following things to reach the bonus: Set up a direct deposit, make several bill payments (using bank funds to pay credit cards companies), a certain number of debit card transactions (you can meet with Amazon reloads or Square), or maintain a certain average balance.
Advantages of Bank Bonuses
Easy– The requirements to obtain a bank bonus are typically pretty easy to meet. Many times all you need to do is change your direct deposit on your paycheck for a month or two and you will get the bonus.
Funding Opening Balance with a Credit Card– Many times banks will allow you to fund your initial balance with a credit card without a fee. This can be a great way to hit credit card minimum spends for the sign-up bonus.
Typically No Hard Pull– Unlike applying for a credit card, the vast majority of bank accounts will only do a soft pull of your credit report. Bank bonuses can be a good way to generate some extra cash without affecting your credit score. If a bank offers you overdraft protection, deny it since many times that will result in a hard pull. (Exceptions: Charles Schwab and Credit Unions perform a hard pull)
Disadvantages of Bank Bonuses
Monthly Fees– Several banks place monthly fees on bank accounts. This can eat into your profit from the bonus. However, most times the banks have ways to waive the fees such as maintaining a minimum balance or number of debit card transactions.
Early Termination Fees– Some banks will charge an early termination fee if you cancel the account within 90-180 days. Be sure to read the fine print and find ways to avoid the monthly fees before the termination date.
Taxable Income– Bank account bonuses are treated as interest. Therefore, you will need to pay taxes on these bonuses. You will usually receive a 1099-INT form at the end of the year. (Whereas points or cash back bonus from a credit card is not taxable income.)
ChexSystems– Instead of pulling your credit report, banks will typically pull a report from ChexSystems. ChexSystems is an agency that collects information from banks regarding your deposit accounts. Banks report negative balances, depositing fraudulent checks, suspicious activity, and overdrafts of the account. You can also get a free report online. If you have something negative in your ChexSystems report, it won’t effect your credit, but it will effect your ability to open additional bank accounts.
In order to get a bank bonus, most banks require you to do some sort of activity to get the bonus. The most common are below and banks usually require at least one of them.
Direct Deposits– This requirement is the most popular. Banks want you to set up your paycheck or a government benefit transferred into your bank account and for you to start using that account as your main bank account. If you don’t want to transfer your work direct deposit, an ACH transfer or a transfer from PayPal or Venmo might work depending on the bank.
Debit Card Transactions- This is another common requirement to meet a bonus or waive an annual fee. There are a few ways to meet this requirement quickly, including doing $1 transactions via Square or reloading your Amazon account in small increments.
Bill Payments– Bank will sometimes require you make a certain number of bill payments to get a bonus. I just set up a few bill payments for my credit cards in small amounts in a bank require this.
Minimal Balance- Banks could require you to maintain an average daily balance of $1,000 for a month to get a bonus or waive monthly fees. This is more popular to waive monthly fees rather than for a bank bonus.
Finding Bank Bonuses
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Hub accounts are banks that you plan to keep for the long term due to their benefits. Below on some recommended hub banks.
Charles Schwab– Charles Schwab is my and many other peoples favorite bank because ATM fees are reimbursed, there are no foreign transaction fees for foreign ATM withdrawals, and great customer service. However, Schwab is one of the only banks to do a hard pull on your credit, because your free bank account also comes with a brokerage account that you can choose to use or not. If you plan to travel internationally once or twice a year, Schwab can save you a ton of money by withdrawing money from foreign ATMs rather than exchanging dollars for local currency at a currency exchange.
USAA– USAA typically does not offer a bank bonus, but their benefits (no fee banking, credit cards, and insurance) are well worth setting up an account. However, membership is restricted. You must either be in the military or have an immediate family member who had served in the military. Luckily, my grandfather was a World War II veteran, so I qualified for a USAA account.
Simple– Simple is a bank with no fees and free ATMs. They would be a good option if you don’t want Charles Schwab or qualify for USAA.