Each year when I do my taxes, I end up having to gather dozens of different 1099-INT forms. For those of you that don’t know what these are, a Form 1099-INT is the documentation that you receive whenever you earn anything that is classified as interest income. The interest you earn on a bank account, for example, is the most obvious type of 1099-INT income. If you have a savings account at any bank, you’ve likely received these forms in the past.
Most people only get one or two of these forms each year. I end up with dozens of them. That’s because I open a ton of different bank accounts each year to earn lucrative bank signup bonuses. I also have a lot of cash that I keep in different “mega” high-yield savings accounts, which results in a 1099-INT for each of them as well. Combine that with my wife’s various bank accounts, not to mention my regular bank accounts that I have, and you end up with what some might consider an unwieldy number of forms.
This money all adds up though. Indeed, this past year I surprised myself with how much I was able to earn in bank interest income, bringing in nearly $14,000 worth of interest. That’s a huge amount! A minimum wage job pays about $15,000 per year, which means the interest I earned from bank accounts was almost enough to be a really low-paying job.
For most people, earning that much interest in a year would require a huge amount of cash – easily over a million dollars in cash depending on your bank’s interest rate. I’m not rich enough to have that much cash, but what I can do is maximize the cash that I do have by utilizing different strategies that allow me to earn far more interest than what most people can earn.
I sometimes wonder whether it’s worth the time to do this. But when I think about how much cash I’d need to save to generate this type of income, I’m convinced that this is worth doing.
Here’s how I think about all of the 1099-INT income that I’m able to earn and why doing all of this makes sense to me.
Mega High-Yield Savings Accounts And Bank Bonuses
Your typical savings account these days pays less than 1%. At the time I’m writing this, most regular online savings accounts are paying around 0.5% interest. That’s not a lot of interest – and it doesn’t make it very appealing to keep a ton of cash in the bank when you’re getting so little back. But with the right strategies, you can actually get very appealing returns on your cash. It just requires a bit of upfront work and research.
The first strategy I use is to take advantage of what you could call mega high-yield savings accounts. These are savings accounts that pay much more than the 0.5% interest that many banks currently offer – often 3% to 5% interest. The catch with these banks is that they typically require some sort of upfront setup work and limit the amount that you can have earning these mega high-yield rates. Once you set them up though, these accounts can run themselves (I probably spend 30 minutes per year to maintain these accounts – primarily just to withdraw the interest that accumulates).
It’s a bit much for me to go into a ton of detail in this post, but here are some other posts I’ve written detailing exactly how I’ve set up these mega high-yield savings accounts:
- Where To Get 5% Interest Savings Accounts Now That Insight Is Gone
- Getting More From My Emergency Fund With 3% and 5% Interest Savings Accounts
At the moment, I have a little over $34,000 earmarked as an emergency fund that earns 3% to 5% interest in FDIC-insured savings accounts (specifically, $13,000 earning 5% interest and a little over $21,000 earning 3% interest). This is divided between 15 different bank accounts between me and my wife. It sounds overwhelming, but they don’t require any work beyond the initial setup. And since I treat this money as my emergency fund, I think of it as one big pool of money that I don’t need to look at very often.
We’re also saving a downpayment for a house, which means we’ve had to keep a big chunk of cash saved over the past year or so. For this, we’ve been taking advantage of HMBradley, which is another mega high-yield savings account that’s currently offering 3% interest on up to $100,000 if you meet certain requirements. It’s not difficult for me to meet these requirements and having that much cash earning 3% interest means I get a lot of interest each month ($3000 per year of interest or about $250 per month).
These mega high-yield accounts allow me to increase my interest earnings, but it’s not enough by itself for me to get to $13,000 or more of interest income in a year. To hit that mark, I also take advantage of bank account bonuses, which is the second strategy that I use to increase my interest income. This is when banks offer new customers cash if they meet certain requirements – typically direct depositing a certain amount, or using a debit card a certain number of times, or keeping a certain amount with the bank for a particular length of time.
Over the last few years, I’ve been able to earn thousands of dollars worth of bank account bonuses, allowing me to dramatically boost my interest income. Last year, I earned over $10,000 worth of bank account bonuses.
For the most part, you don’t need much cash to earn a decent amount from bank account bonuses. And even beginners can likely earn four-figures worth of bank account bonuses each year without a ton of work. Like with the mega high-yield savings accounts, bank bonuses are far too big of a topic to cover here, but you can read all about how bank bonuses work in my Ultimate Guide to Bank Account Bonuses.
Is it Worth The Hassle?
One caveat with the way I earn all of this extra interest income is that it’s not exactly passive. The mega high-yield accounts are passive at this point, but many of them required some setup work to make them passive. This isn’t to say it was a lot of work, but it was more than just simply opening a bank account.
Bank account bonuses are decidedly not passive. They require me to do research with each account and make sure that I’m meeting all of the requirements. But that also doesn’t mean they require a lot of work either. Most bank accounts pay $100 or more and the time it takes me to complete the requirements for each account means I’m typically earning $100 or more per hour for my time.
So is it worth the hassle? In the grand scheme of things, an extra $13,000 or so isn’t really that big a deal, especially since I’m paying ordinary income tax on those earnings.
But there are a few things that help me justify doing all of this. First, it helps to think about how much you’d need to have saved in a regular bank to earn this type of interest income. Consider this. Your typical high-yield savings account these days pays around 0.5% interest. To earn $13,000 worth of interest in a year, you’d need to save $2.6 million in a typical high-yield savings account. That’s a ridiculous amount of cash and really shows you how little interest your cash is earning. When you see this perspective – how much it takes to earn that same amount of interest – it suddenly seems much more reasonable to go through the trouble of setting up mega high-yield savings accounts and getting bank bonuses.
Second, and perhaps more importantly, taking advantage of all of these different high-yield bank accounts and bank account bonuses forces me to save more money than I otherwise might. It’s a bit of a game for me at this point – how much can I earn with all of these different bank accounts and bank bonuses? In many years, it’s a lot.
I earned nearly $14,000 worth of interest income last year. When you think about it, that makes my interest income a side hustle in itself basically.
Doing all of this isn’t something you have to do. It works for me because I enjoy the challenge of figuring out all of these different strategies to earn more on my cash. Depending on your situation and how you value your time, you might opt to keep things more simple. But even setting up a few mega high-yield accounts and earning a few bank bonuses each year can have value.
If you put $3,000 into a few mega high-yield accounts earning 5% interest, you’d get $150 of interest in a year. As a point of comparison, you’d need $30,000 in a savings account earning 0.5% interest to earn that same $150. That’s a big difference.
Add in $1,000 worth of bank account bonuses in a year (something attainable for most people) and you’re now generating the same amount of interest income as if you had $230,000 in a regular savings account.
When you come at it with that perspective, it makes a lot of sense.
Was this one or two player mode? It sounded like it was between two people, so it was really more like $7000 each yes? Still not too shabby.
Even without having tons of $$ in the other accounts (my emergency fund is pretty low, since my COL is low- been making up time in my retirement accounts) I’m still getting on average $3-4k a year from bank bonuses alone. I don’t have the cash on hand to do any. of the bigger bonuses (that require $15-20k to sit in a bank for 3 months or whatever). It is definitely a reliable source of income for me for the past 5 years and I plan to keep doing it into FIRE whenever that happens.
Financial Panther says
This is 2 player mode between me and my wife. $3-4k is great! You’d need 700k to 800k cash to get that same amount in a regular savings account!
Kevin, I received all my 1099 INT’s except Chime…..I just looked at my account and used the amount I earned in 2020 which I entered on my tax return. If you gain access to the Chime 1099 INT can you share with your readers how to access it?
Financial Panther says
I haven’t been able to figure out to get your 1099-INT online. I received one for me but my wife never got hers. You don’t need it to report it, so I would just report it with the numbers you have.
Dragons on FIRE says
Chime 1099 was a weird one. They sent one of us a separate email with a unique website and code. You then enter the code and your account number to access the 1099 from the website. Only one of us got the email with the code so I had to call to ask for my information. Turns out the code and website was the same for both of us. Not sure why they couldn’t just put it on the online account page.
Dragons on Fire! Please tell us the site code to enter. That is what I need! And provide the website too-I don’t remember what it is.
I wish I had your energy – 14K is worth the effort.
I just opened the chase preferred card (thanks for the recommendation) to get those bonus points – so that’s a start. Now to spend the 4K – any ideas?
Just an FYI- you probably should have an idea of how you meet the minimum spend BEFORE you apply for the card.
But, rent or mortgage payment (using plastiq for that) groceries, transportation (IDK about you, I’ve had to work in person all year), normal spending, bank account funding….get ya started?
Financial Panther says
Paying taxes is the easiest way to hit spend quickly. If you can afford to float it until you get your refund, then you’re in good shape to hit the spend in one go.
Check this post:
The Benefits Of Paying Taxes With Your Credit Card
Kevin, I was just looking over your ‘Resources’ page. Simple Bank is still on there, but, as know, it is shutting down this year.
Financial Panther says
Yeah I gotta update that. Wrote a post recently about which bank I’ll be switching too now that Simple is gone. I’m Switching Banks – But Which Bank Should I Use?
Accidentally Retired says
Wow. I honestly would never have thought about this. I recently opened up a new brokerage account to get a $1000 bonus, and thought I was mighty smart. But this is a brilliant tactic. Especially in this day in age, I used to have a money market account paying 1.5%, but now I have struggled to figure out what exactly to do to make even that. Boom!
Accidentally Retired, since it is over $600 bonus that the broker will pay you, then next year you will receive a 1099 MISC. If you do your own taxes with a program, ie TurboTax, the 1099 MISC will cause you headaches. I had to contact TT expertise for assistance to get my taxes filed on time.
They knew what to do and guided me through it after giving them remote access.
Accidentally Retired says
Thanks Joe – I have been using an accountant for the past five years (after using Turbo Tax), but had to switch after running into too many edge cases.
A Journey to FI says
You’re the king of bank bonuses. I’ve done it for consecutive years but nowhere even close to your level. We are a one-household income family so that limits flexibility with the direct-deposit requirement. That said, we still have managed to get a good chunk of cash. Every time we do our taxes, we usually say we’re done and that we need to simplify our finances but honestly, it is too hard to pass on “free” money. In 2021, we haven’t done anything given that we have been refinancing assets, had to get a vehicle (hit and run = totaled), and have been in the process of acquiring real estate. We are only in Q1 of 2021 so we will see. By the way, I got both our Chime 1099-INT wo any issues using the web app.
Financial Panther says
There’s still plenty of time for 2021. Always more bank bonuses every year!
Do some more reading and you’ll find that true direct deposit is rarely required to trigger a Direct Deposit requirement.