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Bank Account Bonuses and Promotions

Ultimately, bank account bonuses are a marketing tactic to attract new customers.

While most checking accounts are free (either by default or because you’re able to meet the requirements necessary to waive the fee), banks profit from you in other ways. Overdraft and other fees, add-ons like safe deposit boxes or checks, deepening their relationship with you through products like credit cards or loans, and more.

But even if you never pay your bank a single fee or a dime of interest, they still make money by having you as a customer.

How?

Bringing in new money gives banks lending power – which means they’re able to lend to other clients and earn interest (and origination fees!) from those loans.

So, to attract new customers (and their cash), many banks offer welcome bonuses to new customers.

First, you almost always need to be a new customer.

Next, you'll have to meet certain requirements – the exact details of which will be unique to each offer. Often, the more difficult the requirements, the higher the reward.

While the exact steps vary, requirements for new account offers usually fall into four categories:

1. Minimum Balance: Some bonuses will require you to transfer new money to the account and then maintain that balance for a certain period of time. How long will vary, but it's typically from 30 to 90 days.
2. Direct Deposit: Other offers will require you to receive qualifying direct deposits from your employer or government benefits such as social security. Often, the deposit will need to exceed a certain amount, and terms can vary from a single deposit to a recurring deposit that occurs over consecutive months.
3. Debit Card Purchases: Sometimes a checking account bonus will require you to use your debit card to make a certain number of purchases. Keep in mind that ATM withdrawals won't count.
4. Account Features: The last common requirement involves using account features like Bill Pay, enrolling in eStatements, remote deposit capture, or logging into the mobile app.

Banks will outline exactly which of the above requirements – sometimes just one, sometimes a combination of several – are necessary to qualify for the bonus.

In addition to meeting the initial requirements, you also have to stay in good standing with the bank or credit union for a certain number of days after account opening (the first three to six months is pretty typical).

Sign-up bonuses typically range from a couple hundred to a thousand or more dollars, depending on the bank, how much money you deposit, and how "tough" the requirements are.

In other words, it varies a lot.

That means some offers are worth it, and some aren't.

Tip: Check out our Bank Bonus ROI Calculator to determine the effective return of an offer and how it compares to the APY of your HYSA. The tool even lets you factor in any fees that might come with your new account, including monthly maintenance, check writing or ATM fees.

Most of the time, it's cash that the bank deposits directly into your new account. Less commonly, the bonus payment might be handed out in other forms, such as a Visa Gift Card or reward points.

Once you've met all the requirements, it'll usually take anywhere from a few business days to a couple weeks for the cash to show up in your checking or savings account.

Remember that these are general guidelines; the terms of any individual offer will vary. Most banks will state clearly when and how to expect your new account bonus, so read the fine print!

Yes, money you earn from a new account bonus will be reported to the IRS and taxed as income. Keep this in mind when you're figuring out your total return on any given offer.

One exception to this are credit card sign up offers. Since most credit cards require you to spend a certain amount in order to qualify for a bonus, the reward doesn't count as taxable income.

The short answer is yes, chasing too many bank account bonuses too quickly can cause other banks to decline your application, particularly if you open the account just for the bonus and then close it a short time after (also known as "bank account churning").

This is because when you open a new bank account, it gets reported to ChexSystems, a reporting agency used by banks. And opening too many bank accounts too recently can show up as a negative item on your ChexSystems report.

Another possible issue is failing to manage your accounts properly, which can happen if you sign up for too many all at once. For example, without proper oversight, you may end up with unpaid fees or negative balances, or you may fail to meet some other requirement causing the bank to close your account involuntarily.

So, how do you avoid this?

We recommend viewing the bonus as a cherry on top of an already great account.

In other words, don't go after a bonus for an account or card that isn't a good fit for your financial needs long-term.

Some clues this may be the case: the account has a monthly fee that you can't waive; the bank has no physical locations in your area and you deal with a lot of cash; the credit card has an annual fee for perks you won't use.

We also recommend taking it slow. Don't try to go after too many bonuses all at once. Not only is that a red flag to the banks, it also makes it easier to miss requirements.

Ultimately, chasing multiple bank account bonuses is not illegal, and banks have done analysis on the ROI of offering the bonus even factoring in churners. But you should be striving to be a good customer for any account you open. Read the fine print, leave the correct amount of money deposited, leave your account open long enough, and otherwise follow the bank's rules.