If you’ve been thinking about switching banks, this may be a good time to look around. Many institutions are offering cash bonuses to people opening new checking or savings accounts.
But examine the details carefully, experts said, because there are usually hoops to jump through to get the cash. Make sure, they added, that the bank overall makes sense for you. Otherwise, you could be setting yourself up for costly fees or lower interest rates after the introductory period.
“You have to read the fine print,” said Marguerita Cheng, a certified financial planner in Gaithersburg, Maryland.
Banks have been extending the offers as they face competition for deposits and seek new long-term customers. As interest rates have risen over the last two years or so, savers have shifted cash to low-risk money market mutual funds and to high-yield accounts at online banks, said Greg McBride, chief financial analyst at the money site Bankrate.
Banks have long used bonuses to lure new business, said Adam Stockton, head of retail deposits and lending at Curinos, a bank data analytics and consulting firm. Years ago, he said, $100 was typical, but now “$100 isn’t really moving the needle.”
An online search this week for bank account bonuses turned up a variety of incentives, from big national banks as well as regional institutions, with one-time payments of $200 or more for opening accounts.
“Few things drive signups like bonuses,” said Matt Schulz, a personal finance specialist with the loan site LendingTree.
Adam Rust, director of financial services at the Consumer Federation of America, said consumers might like the idea of getting a cash payment all at once, rather than waiting for interest to accumulate. “It’s psychologically satisfying,” he said.
Chase, the country’s largest bank, currently has a variety of bonus offers, including one for customers who already have some connection to the bank, like a credit card or car loan. It offers $300 to customers who open a new checking account and $200 for a new savings account plus an extra $400 — $900 total — for opening both. (A $300 checking bonus offer is also available to people entirely new to Chase.)
Citi is offering $400 to new customers opening a checking account, as is Truist, the bank created in 2019 by the merger of BB&T and SunTrust Bank. Bank of America is offering $200 for a new checking account, and TD Bank is offering a similar amount for a new savings account.
First Horizon, a regional bank based in Memphis, Tennessee, is offering $450 for a new checking account.
The offers can help persuade customers to tackle the hurdles inherent in changing banks, McBride said. Bankrate’s data has shown that people keep the same checking account for an average of about 17 years. That’s largely because it’s a hassle to set up a new one, which often involves redirecting paycheck direct deposits and automatic bill payments.
Checking account bonuses target customers with regular paychecks made via direct deposits. Such people are seen as stable customers who will make active use of checking accounts.
Typically, to qualify for a bonus, you must be a new customer or at least deposit funds from a different bank. You can’t have, say, a savings account at the bank, then simply open a second one at the same bank and move some of your money into it.
For checking accounts, you typically must establish direct deposit and deposit a certain amount of money by a given date, then maintain a minimum balance for a fixed period. Some offers require you to make a certain number of transactions each month.
Before chasing the cash, “understand exactly what you need to do to get the bonus,” Rust said. After you review the details, the deal may not look as good, he said.
Some banks require you to deposit a significant amount of cash, which may put the offers out of reach for certain customers. The Citi checking account, for example, requires that you deposit at least $10,000 and maintain that amount as a minimum balance for 45 days.
The Chase offer requires that you make direct deposits totaling at least $500 within three months of opening the checking account. (To qualify for Chase’s savings account offer, you must deposit at least $15,000 of “new” money within 30 days and maintain that balance for three months.)
Given that federally insured savings accounts at various online banks are still offering rates as high as 4% to 5%, stashing a large sum at a bank with a lower rate just to get a bonus may not be worth it.
“An educated consumer could make a good decision by doing the math,” said Elaine King, a certified financial planner in Miami. “Don’t let the tail wag the dog.”
Online interest rate calculators show that at 4%, $15,000 would earn about $148 in interest over three months. If you moved your money for a $200 bonus, you’d come out slightly ahead — by about $52.
But if you leave the money in the account after qualifying for the bonus, the picture gets less attractive. Currently, a basic Chase savings account — similar to rates at many big banks — pays an annual percentage yield of just 0.01%. That means your new savings balance of $15,200 would earn just pennies in interest each month.
Stockton said that might still be OK, depending on whether you like the bank’s overall services and what you plan to use the cash for. If it’s for emergency savings, he said, you might see having immediate access to the cash as an acceptable trade-off for a low rate.
“That’s an opportunity cost,” said Ken Tumin, the founder of DepositAccounts.com, part of LendingTree. (Tumin, who left LendingTree in August, said he was working on a new deposit-focused venture.)
You may still decide it’s worth the trade-off if a bank’s network of branches and ATMs is convenient for you and the bank offers features you need, like mobile deposit of checks and the option to use peer-to-peer payment apps.
“Does the offer represent one you’d stick with after the bonus requirements are met?” McBride asked. “If not, are you prepared to move again?”
It’s also important to check what fees the bank charges, such as monthly maintenance fees (often waived with direct deposit) and overdraft fees.
And note: The bonuses are considered interest. The amount will typically be reported to you and the IRS as interest income on a 1099-INT form.
Here are some questions and answers about bank account bonus offers:
Do the bonus offers have deadlines?
Many bank bonuses available now expire in mid- to late October, but a few expire later in September.
How soon after I open the account will I get the bonus?
That varies, but it can take a couple of weeks — or even a few months — after you meet the necessary criteria before the bank deposits the cash into your account.
How can I make switching banks go smoothly?
Some banks offer “switch kits” that walk you through the steps for changing checking accounts. After you open the new account, the usual recommendation is to keep your old account open. Let any outstanding debits or checks clear, which can take a couple of weeks. You’ll also need to submit a form to your employer to have your paycheck directly deposited at the new bank. You’ll also have to have any bills you pay automatically switched to the new account. Once the new account is functioning smoothly, you can close the old one.
This article originally appeared in The New York Times.
