July 13, 2016 in Checking

How to get the most out of a checking account bonus

In major U.S. cities, it’s not difficult to find banks that will offer you $50, $100 or even $400 for opening a new checking account, a new Bankrate survey has found. The reason for these lump-sum lures is simple: Checking bonuses work.

But we also discovered that the offers tend to come and go rapidly, and that they often have conditions that can make a cash reward less worthwhile than you might think at first glance. So, you have to move quickly and smartly in deciding whether to make a play for a checking bonus-money deal.  

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2 offers, 2 results

Max Soni, owner of the marketing agency Qumana in New York City, took advantage of just such a bonus last year, and so far it has worked out well. He received the cash he was promised — $200 — and because he already was a customer at the bank offering the promotion (Bank of America), signing up was easy.

“I’ve been solicited with these types of offers in the past,” he says, “but unfortunately, you’d have to then fill out an application, so I’ve never really touched any of them, ever, period.”

What ended up making the difference was convenience. He was in a branch doing other business with the bank when the teller made the bonus offer in person. Earning $200 was enough to get him on board.

“I just sat there for about 2 minutes on my phone playing Angry Birds and I was signed up,” he said. All that was left to do was deposit $4,000 in the account within the next few weeks and the money eventually showed up.

There can be snags, however. Andrew Reeves, CEO of Luxe Translation Services in Beverly Hills, California, says he never got the money he was promised from a major bank.

“At the time that I was opening the account, the teller assured me that the $200 would be credited to my account within a week,” Reeves says.

Two months later, the money still hasn’t shown up.

“I tried to speak with them about this on multiple occasions, but they keep giving me the runaround,” he says. “Their excuses range from ‘we will call you back’ to ‘the manager is not here right now’ to ‘your account does not qualify.'”

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Substantial variation in terms

Bankrate initially searched the 10 largest U.S. markets for checking-reward-money offers in late April and early May and found 37 of them, with the bonuses ranging from $10 all the way up to $400. We found that a bank might offer different amounts for different sizes of new accounts.

The strings attached to those payoffs varied, too. Here were some of the most common ones:

Also, be prepared to wait. You’ll typically have to have the account for 60 to 90 days to get the payout.

Don’t let fees eat up your bonus

While we didn’t find any accounts with flagrant “gotchas” in the fine print, be aware of the minimum balance requirements attached to many of these accounts. Failing to meet them could mean your monthly service fees could quickly overtake your cash bonus, says Greg McBride, CFA, chief financial analyst for Bankrate.

Fortunately, if you don’t like the terms, there’s a good chance you can close it as soon as the bonus is paid with no ill effects. Almost two-thirds of the accounts had no fee or “clawback” for canceling the account within the first 12 months. That may be for the best, McBride says.

“I think you’re best served by looking for a free checking account,” McBride says. “Sure, maybe you can make a move that snags a bonus in the interim, but I think long term, you ultimately want to be in an account that has no monthly service charges and no monthly balance requirements.”

Otherwise, you may end up locking up cash in a checking account that pays no interest just to avoid paying fees, rather than putting it in a high-interest savings account, he says.

You may need to act fast

Several offers that we found in late April and early May were gone weeks later, including a $250 promotion that expired at the end of June and a $150 offer that ended May 31. We’ve found that new-checking bonuses typically come with expiration dates, meaning that if you see a deal and it seems like a good one, you’d better grab it while you can.

But if you lose out on one bonus, you probably won’t have any trouble finding another. We searched again for offers in early July and found many that we hadn’t spotted in the earlier round, including bonuses available from some of the nation’s largest banks.

And, here’s more evidence that customers need to move quickly: The clock will run out on several of the fresher deals by the end of July.

What’s in it for banks

In understanding why banks would be willing to pay you to open a checking account, it’s important to realize that banks are already paying for customers, says Joseph Dugan, president of Edge Consultancy, a bank consulting firm in Miami.

“Typically, the cost to acquire a new checking account if you use standard marketing channels is anywhere from $150 to $300 per checking account, so one of the ways to be more direct in the effort is to offer cash for the actual opening of the account,” Dugan says.

In return, banks hope they are getting a customer who will open multiple accounts, not just a core checking account. But that’s not always the case, he says.

“It doesn’t always work. Frequently consumers are very savvy,” Dugan says. “They understand how to take advantage of the opportunity and may or may not move their entire relationship as a result.”

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Checking bonuses available in major markets

Apple Bank: $100

BBVA Compass: $100 NBAStore.com Gift Card

BBVA Compass: $15 Amazon Gift Card

BBVA Compass: $10 iTunes Gift Card

BMO Harris: $200

Cambridge Savings Bank: $100

Capital One Bank(360): $200

Chase Bank: $150

Citibank: $400

Fifth Third Bank: $200

First Republic Bank: $350

First Savings Bank of Hegewisch: Up to $100

Flagstar Bank: $100

Liberty Bank for Savings: $100

M&T Bank: $150

PNC: $50/$200/$300

Salem Five: $100 Visa Reward Card

Santander Bank: $150

SunTrust: $200

SunTrust: $100

Bankrate.com surveyed checking account sign-up bonus promotions currently offered by banks in the 10 largest U.S. markets. Promotional offers are subject to change without notice. The research was conducted in late June and early July 2016.