Trying to find ways to make extra money? Freelancing or working a part-time job is a good way to bring in some cash. Decluttering and selling items on sites like Facebook Marketplace, Offerup, or Poshmark is another option.
Applying for credit cards with big sign-up bonuses could work – as long as you have a plan to meet the minimum spending requirement and always pay off your credit card bills each month.
Maybe you’ve ignored ads or didn’t realize some banks and credit unions give bonuses for opening new accounts too. Offering promotional incentives is one way lenders attract business.
Are these bank bonuses a good way to make money? Or does the fine print make them not worth the hassle? Let’s find out.
What Is a Bank Account Bonus?
New-customer bonuses can include money deposited directly into your account, prepaid debit cards, rewards points redeemable for travel or experiences, or other promotional gifts.
Some lenders “stack” bonuses and as you add more accounts or agree to different terms, you get bigger bonuses.
A quick online search shows you can potentially earn hundreds of dollars for opening a new account. But keep in mind they aren’t just “giving” money away.
Banks or credit unions use bonuses to get people to open accounts and hope to make money when those new customers use bank services, take out loans, or obtain credit cards and pay annual fees and interest.
What’s the Catch?
The terms and conditions to earn a bank account bonus must be carefully followed. Look for these potential requirements:
High Balances. You may need to deposit thousands of dollars to open the account or maintain a high balance in the account over an extended period (which may also help you avoid monthly fees.)
Direct Deposit. Some banks require a direct deposit setup into your account within a certain number of days.
Transactions. Certain new accounts with bonus offers may require you to complete a specific number of transactions each month.
Limited accounts. Many financial institutions have rules about not opening a new account if you’ve recently had a similar account at the same institution.
Time. Not only may you need to deposit a specific dollar amount within a specified period you may also need to maintain the account for a particular period of time, both before and after the bonus is paid.
If you’re going to attempt making money from bank bonuses, be sure you understand exactly what you need to do to earn the reward. And take action quickly to meet all the conditions of the bonus.
Create a simple spreadsheet to monitor your progress and add calendar reminders to show when you’ve met the requirements.
Lenders likely won’t bend and give you the bonus if you make a mistake. Careful tracking will help ensure your efforts are rewarded with the bonus that enticed you to sign up for the new account.
Can I Close the Account After I Earn a Bonus?
Yes, you certainly have the right to close an account when you choose to. But before closing the account be sure you’ve met any time requirements to earn the bonus.
The lender can take back the bonus or require you to pay an early termination fee if you haven’t met the specific conditions you agreed to. Ensure you are safely outside the required time periods before you close your account to avoid losing your bonus.
Before you decide to open a new account, consider the length of time your money has to sit in the account to earn a bonus.
The bonus may be more than you would earn in a high-interest savings account or CD during that time, but those accounts may be a lot less work and hassle while still making you some money.
Can You Earn Bonuses at Multiple Banks?
Attempting to earn multiple bank bonuses is known as churning. While you may have the money available to meet the minimum requirements to earn bonuses at more than one bank, there are a few things to consider before opening a number of new accounts.
When you open a new account, most lenders do a “soft” pull on your credit to review your history. But some lenders do a “hard” pull which ends up on your credit report and can reduce your credit score for a short period of time.
Another concern is opening multiple accounts can “flag” or “blacklist” you in different systems (such as ChexSystems.) Lenders use these systems to check your banking history. Instead of earning bonuses, you may end up paying higher interest rates or have trouble obtaining an approval on new credit cards or loans.
If you have a spouse or partner, you can apply individually and both earn bank bonuses. You’ll be tying up more of your money and you’ll have to track more information, but it might be a good way for you to make some extra money.
Will I Have To Pay Taxes On What I Earn?
When you earn a bank account bonus, you can expect to receive a 1099-INT at tax time. The bonus is often considered interest income. If your lending institution doesn’t issue you a 1099, that doesn’t mean you shouldn’t include the bonus in your tax return.
Make sure you speak to a financial professional to determine how any bank account bonus should be included in your tax return. It won’t be much of a bonus if you make a mistake and have to pay penalties.
Are Bank Bonuses a Good Way to Make Money?
If you have the money and time needed to apply for a new account that earns a bonus, it might be a good way to make some extra money.
People who are organized and good at managing details don’t mind “jumping through the hoops” required to earn incentives.
There isn’t anything quick about earning a bank bonus though. And many people don’t want to go to the trouble of opening new accounts and tracking everything for a couple of hundred dollars.
If you struggle with money or organization, are concerned about your credit score, or by being identified by banks as a potentially risky customer, you might want to avoid opening multiple accounts to earn bonus money.
There are plenty of other ways to make some extra cash.
Vicki and Amy are authors of Estate Planning 101 – a Crash Course in Planning for the Unexpected -coming soon from Adams Media.