- What Are Bank Account Bonuses, How Do They Work, And Why Should You Do Them?
- Initial Steps Before Going For Bank Account Bonuses
- Requirements For Bank Account Bonuses
- Things To Think About Before Going For Any Bank Account Bonus
- Things To Know After Opening The Bank Account
- Addressing Common Concerns
- Tips To Make Bank Bonuses Easier
- Where To Find Bank Bonuses
- Don’t Call The Bank!
- Final Thoughts
- Suggested Bank Account Bonuses To Start With
One of the things I’ve gotten pretty good at over the years is figuring out ways to get great, risk-free rates of return on my non-invested cash. For years, I’ve taken advantage of a little financial hack that allows me and my wife to earn a guaranteed 5% interest on up to $10,000 in FDIC insured savings accounts (I detail exactly how I do that in this Netspend 5% interest account post and in this post on where to get 5% interest accounts). I try to keep a decent-sized emergency fund, so being able to earn what essentially amounts to greater than bond level yields on my cash, with no risk of loss, is something I’m pretty happy with.
Another way I’ve been able to earn great rates of return on my non-invested cash is by taking advantage of bank account bonuses. I’ll go into more detail about how these bank account bonuses work as we get further into this post, but in short, many banks will offer you some sort of bonus if you open a bank account with them and meet certain requirements. These requirements can vary, but they typically involve direct depositing a certain sum or maintaining a certain account balance for a specified period.
In practice, what this means is that if you have some cash set aside, you can use that cash to earn bank account bonuses, essentially allowing your idle cash to earn much more than the typical 1 or 2 percent interest that most savings accounts offer. I’ve personally earned thousands of dollars over the years simply by taking advantage of these bank account bonuses.
For reference, here are what my bank account bonus earnings have looked like since I started taking advantage of these back in 2016.
- 2021: $4,946
- 2020: $6,336
- 2019: $4,433
- 2018: $3,262
- 2017: $1,300
- 2016: $935
That’s over $20,000 worth of bank account bonuses I’ve earned over the years – not a life-changing sum, but definitely not pocket change for most people either. And like most things in life, the more I do these bank account bonuses, the better and faster I get at them (this can be seen by the fact that in 2018 and 2019, I more than doubled my bank account bonus earnings compared to 2017 and 2016). These numbers also don’t include my wife’s bank account bonus earnings, which typically range from $1,000 to $3,000 each year.
To understand how much these bank account bonuses are worth, consider this. A high-yield savings account paying 2% interest would require $150,000 to generate $3,000 per year in interest. You can earn that same amount just by having $5,000 to $15,000 that you can dedicate solely to bank account bonuses. This makes bank account bonuses a great way to utilize cash that you don’t need (like your emergency fund), allowing you to earn 5% or more in interest per year with no risk of loss. Sure, it’s not entirely passive. But I think it’s well worth the effort.
Bank account bonuses can be a little bit intimidating, especially if you’ve never done them before. In this post, I’m going to walk you through all of the information you need to know about bank account bonuses so that you can take advantage of them and start making some real money off your idle cash.
What Are Bank Account Bonuses, How Do They Work, And Why Should You Do Them?
The concept behind bank account bonuses is pretty simple. Just like any other business, banks have to spend money to acquire new customers. One obvious way that banks do this is by running advertisements. Another less obvious way is by offering signup bonuses to new customers – basically paying people to open up an account with them.
In general, getting a bank account bonus will require you to do three things:
- Find a bank offering a signup bonus;
- Open the specific bank account that’s eligible for the signup bonus; and
- Meet the requirements to earn the bonus.
Make no mistake – it does take some work to do this. Still, it’s not much work, and most people can do this while sitting around watching TV. Your typical bank bonus should pay you at least $100 after you complete all of the requirements (and more often $200 or more). Most of these requirements can be automated, and even if you took an hour to open up and set up a bank account, that’s still a good return on your time – $100 or more per hour is probably more than you make from your day job.
Perhaps most importantly, bank account bonuses are a great way to use your cash to earn significant risk-free rates of return. There’s a lot of debate about whether keeping an emergency fund is worth it since that money could be kept elsewhere earning much better rates of return over the long term. If you take advantage of bank account bonuses and 5% interest savings accounts the way I do it, it becomes a no-brainer to keep a strong emergency fund in place. Your cash earns 5% or more per year in interest with no risk to the principal, and you get all the benefits of having liquid cash that you can use in the event of an emergency.
The way I see it, keep $5,000 to $10,000 in 5% interest savings accounts. Keep the rest in regular high-yield savings accounts and deploy those funds to earn bank account bonuses.
Initial Steps Before Going For Bank Account Bonuses
There are a few things you’ll need to do before you get into the bank account bonus world. These include the following:
1. Have Money That You Can Dedicate To Bank Bonuses
If you’re going to go for bank account bonuses, I typically recommend having at least $5,000 that you can dedicate solely for bank account bonuses. Most banks will require you to do some amount of direct deposits and/or you’ll need to keep some minimum balance to avoid fees. For the most part, $5,000 should be enough for you to do most bank account bonuses. If you have $10,000 or $15,000 that you can set aside for bank account bonuses, then you should be able to get any bank account bonus you want.
2. Figure Out Ways To Trigger Direct Deposits
I’ll go into this in more detail in the next section, but the gist of this is that most bank account bonuses will require you to meet direct deposit requirements – typically something like direct depositing $500 into your bank account one or two times. Obviously, an actual direct deposit from an employer will work as a direct deposit, but for most of us, changing our direct deposit at work isn’t really realistic.
Luckily, it’s almost always possible to meet direct deposit requirements by doing an ACH transfer between different bank accounts. That’s because most banks can’t distinguish between what’s a real direct deposit from an employer, and what just looks like a direct deposit. Essentially, if you can’t easily change your employer direct deposit, then your goal is to “fake” a direct deposit.
What works as a direct deposit will always be something you have to figure out on a case-by-case basis. Later in this post, I’ll go into all of the strategies I use to meet direct deposit requirements.
3. Create A “Hub” Bank Account
Since getting bank account bonuses often requires transferring money between your bank accounts, it’s helpful to have a bank account that you can link to a lot of external bank accounts and that you can move money in and out of easily. You can call this your “hub” account.
The bank account I’ve primarily used as my “hub” account is Ally, primarily because they let you link up to 20 external banks and don’t have any major limitations on how much money you can move between accounts.
If you’re serious about bank account bonuses, I highly recommend you open up a checking account with Ally. It’s a 100% free bank account and is the primary checking account I use. Indeed, if I had to choose which bank I think is the best bank in the world, it’d probably be Ally – and no, I don’t get paid to say that.
Requirements For Bank Account Bonuses
With those preliminary things out of the way, let’s go into the basic requirements that you’ll have to meet for every bank account bonus. Below are some of the most common requirements, as well as strategies for meeting them.
1. Direct Deposits
The vast majority of bank account bonuses will have some sort of direct deposit requirement. This will typically require you to do a certain number of direct deposits; two direct deposits, for example. These direct deposits also usually have to be for a minimum amount – typically $500 or more.
Direct deposits are usually the hardest requirement to meet and are something that can trip you up if you don’t know what you’re doing. That’s because, for most banks, only certain types of deposits count as a “direct deposit.”
There are basically two ways to do a direct deposit. You can either do a “real” direct deposit. Or you can do a “fake” direct deposit. Let’s look at the differences between the two:
1. Real Direct Deposit. The absolute easiest way to meet a direct deposit requirement is with a real direct deposit from an employer. Most people won’t be able to do this because the vast majority of employers don’t make it easy to switch the direct deposit for your paycheck. If you happen to have an employer that allows you to easily switch your direct deposit, then getting bank account bonuses will be really easy for you.
Gusto is one payroll company that makes it particularly easy to get bank account bonuses, and it’s the payroll company that my wife uses for her dental practice. What makes Gusto really amazing is that you can switch your direct deposit anytime and you can split up your paychecks between different bank accounts.
My wife started using Gusto when she bought her practice and it’s been a game-changer for my bank account bonus system. If you are lucky enough to have an employer that uses Gusto, take advantage of it!
2. Fake Direct Deposit. For most people, getting direct deposits from work won’t be possible, since most of us can’t change our employer direct deposit easily. If you’re in this situation (which is very likely), then you’ll need to figure out ways to simulate a direct deposit. This will involve doing ACH transfers.
You need to know a little vocabulary before we continue. An ACH push involves doing a transfer out of one bank account and into another. An ACH pull is the same thing, but in reverse (pulling money from an outside bank account into your bank account).
To fake a direct deposit, you’ll need to do an ACH push from one bank account to your target bank bonus account. Many banks will automatically code ACH transfers from certain accounts as a direct deposit.
Note that you’ll need to do your own research to figure out which accounts trigger the direct deposit requirements. Doctor of Credit keeps a list of data points for what triggers the direct deposit for different bank accounts, but this can change over time, so it’s not always 100% accurate. Many times, you will have to send multiple ACH transfers in and out of the bank accounts and hope that one triggers the direct deposit requirement.
Below is a list of accounts I typically use to trigger direct deposits. In general, I’ve found that some combination of the below will work. This obviously isn’t an all-inclusive list, but it’s a good starting point that should hopefully help you.
- Ally or Capital One 360 or Discover
- Robinhood or WeBull
- Fidelity Bank Account
Here’s some more detail about each of these direct deposit methods.
- Ally or Capital One 360 or Discover. For Ally, Capital One 360, and Discover, I basically link those accounts with my target bank bonus account, then do ACH pushes into those target accounts. This is pretty straightforward.
- Airbnb. Airbnb is a direct deposit method that is unique to my situation since I also host on Airbnb. The website lets me change the bank account that Airbnb deposits my earnings into, as well as set minimum payout amounts. This almost always triggers the direct deposit requirement for me – perhaps another reason to consider hosting on Airbnb!
- Robinhood. Robinhood is a free stock investing app that can often trigger direct deposits. To do this, you move money into your Robinhood account, then initiate a transfer from Robinhood to your target bank bonus account. You’re basically moving money into a brokerage account but not investing it, then you’re moving it right back to your bank account. Since it’s a brokerage, it’ll often code as a direct deposit, since it doesn’t look like a normal ACH transfer.
- WeBull. WeBull is also a free stock investing app like Robinhood. Follow the same process here as you would for Robinhood.
- Fidelity. Fidelity has a bank account that will sometimes code as a direct deposit. This is from Fidelity’s FDIC-insured bank account. I’ve had some luck using this as a direct deposit method.
- PayPal. PayPal is another method that will sometimes code as a direct deposit. The process is pretty much like any other method – move money into PayPal, then move it into your target bank bonus account.
- Astra. Some people have had some luck triggering direct deposits using an app called Astra. To trigger a direct deposit with it, simply move money between your accounts using Astra. You can label your transfer whatever you want, so try labeling it as “Payroll” or something similar and it could code as a direct deposit.
Again, this is NOT an all-inclusive list and is really just an example of methods I’ve used to trigger direct deposits. Figuring out what works as a direct deposit is really more of a trial and error type thing, so you’ll often have to use multiple methods to see if something codes as a direct deposit. Make sure to do your research in advance if you’re going to “fake” a direct deposit.
2. Debit Card Transactions
This is a fairly self-explanatory requirement. Some banks will require a certain number of debit card transactions to meet the bonus requirements. Typically, it’ll be something like 10 debit card transactions within 30 days.
You can obviously meet this requirement by actually using the debit card, but an easier way to meet the debit card transaction requirement is by buying small denominations of Amazon gift cards (i.e. $0.50 or $1 Amazon gift cards).
Another way to meet debit card transaction requirements is to link the debit card to a payment app like Venmo or Square Cash, then send small amounts to your friend or spouse. They can then send you the money back via some other method.
3. Moving A Certain Amount Of Money Into The Bank
Again, pretty straightforward. If the bank has this requirement, you’ll just need to transfer a designated amount of money into the new bank account.
Most banks will also require you to do a minimum opening deposit when you open the account. It’s usually a pretty small amount, typically $25 or so.
4. Keeping A Certain Minimum Balance For A Period of Time
If a bank has this requirement, you’ll need to move money into the account and then leave it in there for a specified time period. It’ll usually be something like 90 to 120 days. When a bank has this type of requirement, you can sort of think of the bank as serving as a short-term CD.
5. Bill Pays
Again, this is a self-explanatory requirement. If a bank requires bill pays, you’ll need to schedule bill pays using the bank’s bill pay system. Most of the time, the bank will require a certain number of bill pays (e.g. three bill pays within 60 days). This type of requirement is pretty easy for anyone to complete.
Things To Think About Before Going For Any Bank Account Bonus
Before opening any bank account you’ll want to think about the following things:
1. Is Opening The Bank Account A Hard Pull Or A Soft Pull?
The difference between a hard pull and a soft pull is that a hard pull appears as a credit inquiry on your credit report while a soft pull does not appear on your credit report at all. You generally do not want to do a hard pull for a bank account unless the bonus is really big. Soft pulls, on the other hand, are totally fine because they literally do not impact anything and cannot be seen by anyone.
The vast majority of banks will do a soft pull or no pull at all when you open a bank account. You’ll want to do some research before opening any bank account to make sure it’s a soft pull, but in general, most banks will do a soft pull (e.g. Bank of America, Wells Fargo, Citi, Chase, etc all do soft pulls when you open a bank account with them).
2. Bank Account Fees
Some banks that offer bank account bonuses also charge monthly fees that can be waived by meeting certain requirements. You’ll often be able to meet these requirements just by meeting the requirements needed to earn the bonus.
The typical requirements that you’ll need to meet to waive the monthly fees include doing direct deposits, maintaining some minimum balance, or hitting a certain number of debit card transactions each month. For the most part, the only time you’ll really need to worry about monthly fees is if it’s a bank account that requires you to keep it open for a certain period of time or if it’s a bank account that charges an early termination fee, which essentially means you’ll need to keep the bank account open for at least that long.
The requirements to meet these fees are usually not difficult to meet so long as you have a decent amount of cash earmarked for bank account bonuses. For example:
- If the bank requires a certain amount of direct deposit to waive the monthly fee, simply use a bank account that codes as a direct deposit, then move the money back and forth each month. For example, if the bank requires a monthly $500 direct deposit to waive the monthly fee, I simply schedule a $500 ACH push from whatever outside bank I’m using, then schedule a $500 ACH pull back into the same account.
- If the bank requires a minimum balance to waive the monthly fee, I simply move that amount in and leave it there until I can close the account.
- If the bank requires a certain number of debit card transactions, I simply do these debit card transactions by sending money to my spouse via Venmo or Square Cash. Or I buy small denominations of Amazon gift cards.
3. Household Limits
Some banks will have restrictions on how many people at the same address can earn the bank bonus. If there is no restriction, then this is a good opportunity for you and your partner to basically double up on bonuses from the same bank. I’ve done this with my wife for many years, earning the same bonus from the same banks.
If the bank does have a household limit restriction, then only one person in the household will be able to earn the bonus.
4. Location Restrictions
Some bank account bonuses are nationwide in scope, meaning that anyone can open a bank account and earn the bonus, regardless of where you live. Other bank account bonuses have geographic restrictions. You’ll need to look at the bank account bonus and make sure you’re eligible for it depending on where you live. In some instances, even if you’re out of the bank’s footprint, you can still open an account in-branch. This makes it possible for you to earn a bonus if you’re going to be traveling to a city that has that bank.
5. Credit Card Funding
Some banks will allow you to fund a bank account with a credit card. This is a great way to meet minimum spending requirements. You charge the credit card to fund your bank account, then use those funds to pay the credit card. You’re essentially moving money in a circle when you do this.
If the bank lets you fund your account with a credit card, take advantage of it to hit the minimum spend requirements on your credit cards. Most banks will limit how much you can fund a bank account with a credit card.
6. Opportunity Cost
One thing to always consider with any bank account bonus is what the opportunity cost is of using your cash for the bank bonus. In general, you can always assume that any dollar you have locked up for a bank bonus could also be in a high-yield savings account earning 2% interest. As a result, you’ll need to discount whatever you make from the bank account bonus with what that money could have made if it was just sitting in a regular savings account.
A simple illustration will help you understand how opportunity cost works. Let’s say you have a bank that’s offering you a $200 bonus if you keep $5,000 in their checking account for 90 days (about 3 months). In a 2% interest savings account, that $5,000 would earn about $25 in interest over that 3-month period. You’ll make $200 in that same period by going for the bank account bonus, so it’s worthwhile to go for the bonus in this situation. Just make sure to think about what else your idle cash could be doing to understand your true return.
Things To Know After Opening The Bank Account
There are a few things you need to think about after you open a bank account. These include the following:
1. When Does The Bonus Post?
The vast majority of banks will NOT post the bonus immediately after you complete the requirements. Instead, most banks will state that bonuses will post within a certain number of days after meeting the requirements or after opening the account. Most of the time, the bonus will post earlier than their terms state, but this isn’t always true. In practical terms, what this means is that you need to be prepared to wait for your bonus to post – sometimes for months.
2. When Can You Close The Bank Account?
The majority of banks will either require you to keep the account open for a specified period of time or they will charge you an early termination fee if you close the account before a certain number of days. In general, you’ll probably have to keep the account open for 6 months, and in some cases, 12 months. I use a calendar to set reminders for myself on when I can close the bank account.
Even if there is no requirement to keep the bank account open, I’ll usually avoid closing the bank account immediately just to avoid angering the bank or making it look so obvious that all I’m doing is opening the bank account for the bonus. Remember, you want to be a good citizen if you can, so try to do things in as “nice” a way as possible.
3. When Can You Get The Bonus Again?
This is something you can think about as you get farther along in your bank bonus churning career, but once you’ve gone through a couple of bank account bonuses, you’ll want to start thinking about when you can do them again.
Some banks will only allow you to earn the bonus once in your lifetime. Others will allow you to earn them every 6 or 12 months from the date you earned or closed the account. It’s good to have a general idea of when you can do the bank account bonus again. I’ve earned multiple bank bonuses from Wells Fargo, US Bank, Bank of America, Chase, BMO Harris, and others.
Addressing Common Concerns
I sometimes get looks of disbelief when I tell people that I open up a bunch of bank accounts each year to earn sign-up bonuses. Some people think opening up bank accounts must impact your credit somehow. Like with credit cards, most people seem to have ideas about how bank accounts work, but don’t actually have a clue.
Here are a few things to know:
1. Bank Accounts are Not like Credit Cards – They Don’t Appear Anywhere That Matters. A bank account does not appear on your credit report and will not impact your ability to get a loan or open new lines of credit. The only place that a bank account can appear is on something called a ChexSystems Report (commonly called a ChexReport).
Not all banks will pull your ChexReport and not all of them will report a new bank account to your ChexReport. Some banks are what we call “chex sensitive,” which means that, if you open up too many bank accounts in a short period of time, you could be denied a new bank account. This really doesn’t have much practical impact and most banks don’t appear to be chex sensitive. In short, so long as you’re not closing bank accounts with a negative balance, nothing bad will happen to you.
2. No Hard Pulls For The Majority of Bank Account Bonuses. I’ve mentioned this previously, but most bank accounts do not do a hard credit pull, and instead do a soft credit pull that cannot be seen by anyone. In other words, this also has no impact on your credit report.
3. It’s Work – But It’s Not That Much Work. A common criticism of bank account bonuses is that they take too much work. It definitely takes some work – there’s no doubt about that. However, even the most time-consuming bank account bonuses shouldn’t take you very much time. For most people, bank account bonuses generally translate to a wage of $100 to $300 per hour – much more than most people make at work.
4. Yes, You’ll Have To Pay Taxes. Bank bonuses are classified as bank interest, so you’ll have to pay taxes on the money you earn. That’s no different than the taxes you pay on any interest you earn from a bank account.
Tips To Make Bank Bonuses Easier
Getting bank bonuses does take work. But there are ways to make things easier. Here are things you can do to make the whole process easier.
1. Stay Organized
The most important thing you need to do is to stay organized, especially if you’re doing multiple bank account bonuses over the course of a year. I use two things to stay organized here:
- A spreadsheet; and
- A checklist where I can write all of the requirements for the bank bonus and check off when each step has been completed.
I use Google Sheets for my bank bonus spreadsheet. It’s just a simple spreadsheet that lists (1) the bank, (2) when the account was opened, (3) when the account was closed, and (4) when the bonus posted, along with any other notes I might need to know. Use whatever setup works for you, but make sure you keep this information organized in a way that works for you.
Below is a screenshot of the spreadsheet I use. It’s very basic. Any bank accounts highlighted in yellow are ones where the bonus is still pending. The green highlights are reminders for me on when to close the account. If I go for a bonus and fail to get it, I highlight it in red to remind me that I failed it. Here’s a link to a template of this spreadsheet that you can use. You can copy the rows I’ve made and use that for your own spreadsheet.
For my checklist, I use an app called Taskade. It’s a pretty simple task app where I’m able to create a new checklist, then mark when each step has been completed. Below is a screenshot of my Taskade app and a bonus that I was aiming to earn.
2. Automate Everything
It can be difficult to keep track of everything, especially when you have multiple bank bonuses going at once. To make things easier for yourself, it’s best to automate as much as you can as soon as you open up your new bank account. For example, if your bank bonus requires certain direct deposits, set all of that up at the very beginning. It’s very easy to automate money in and out of any account – do it once at the beginning, then you don’t have to think about it again.
Ally is a great bank to automate transfers in and out of bank bonus accounts. Since Ally lets you link as many as 20 bank accounts at once, you can usually link up a lot of external bank accounts and schedule transfers from there as needed.
3. Set Up Calendar Reminders
You’ll need to remember at least a few dates whenever you open a new bank account: (1) when you need to meet the requirements, (2) when the bonus will post, and (3) when you can close the account. Whenever you open a new bank account, set up these reminders in your calendar immediately. That way, you’ll always remember what you need to do and when.
4. Take It Slow To Start
Bank bonuses can be intimidating, so my advice to anyone, especially if you’re new to this, is to take it slow. Read the terms carefully and make sure you understand exactly what you need to do to earn the bonus. It can be tempting to just jump headfirst into bank account bonuses, but I’d recommend against that. Bank bonuses will likely always be around. Take your time so you can get comfortable with how all of this stuff works.
Where To Find Bank Bonuses
Finding bank bonuses is an art in itself, but in general, you will need to do your own research to find bank account bonuses. If you’re paying attention, you should always be able to find dozens of bank account bonuses each year.
Without a doubt, the best place to find bank account bonuses is Doctor of Credit. He keeps the definitive list of the best bank account bonuses, and this is the first place you should always start.
Other ways you can find out about bank account bonuses are from mailers. Every few months, I’ll usually get something in the mail with an offer from some bank (for example, US Bank seems to always send me something every few months). If you pay attention, you’ll see plenty of bank bonus offers out there – probably more than you can even do in a year.
Don’t Call The Bank!
This deserves its own section, as it’s a mistake a lot of new people make when starting with bank account bonuses. The general rule is this: do not call the bank!
Banks are offering these bonuses because they’re trying to get you to be a customer, so if you call them and tell them that you’re just opening the account to earn the bonus, you’ll not only hurt yourself but potentially hurt other people trying to earn the bonus too.
There are only two times you should ever consider calling the bank:
- The account required you to apply a promo code to be eligible for the bonus. You usually can just send the bank a secure message to confirm that the promo code has been applied to your account.
- You legitimately met the bonus requirements within the time limitations and your bonus did not post. When I say legitimately, I mean that if the bank required direct deposits, you used actual direct deposits from an employer and otherwise met all of the requirements exactly as they were written.
So, don’t be that person who calls the bank and says, “I’m just trying to earn the bonus and read on some blog that I can meet the direct deposit requirement by moving money from another bank.” Otherwise, you’ll incur my wrath and the wrath of the rest of us in the bank-churning community!
Bank bonuses are a wonderful way to utilize your idle cash in a risk-free way. Since these are all FDIC-insured savings accounts, at worst, you might just mess up with meeting the requirements and not get your bonus. As a benefit, however, you’ll never lose your principal, and your money will always be liquid if you need it.
When done correctly, most people can earn $1,000 or more per year just by going for a few different bank bonuses. And you’ll only need $5,000 to $15,000 set aside to use for bank account bonuses. When you do the math, even $1,000 per year in bank account bonuses is an annual return between 6-20% on your $5,000 to $15,000 of funds. That’s well worth it, and when combined with all of the 5% interest accounts I use, you can have a decent chunk of money set aside earning 5% or more interest per year, risk-free. It’s a perfect way to use your emergency fund and have it actually earn real interest.
Have you taken advantage of bank account bonuses before? Anything I missed that I should include here? My hope with this post was to create a comprehensive guide to help the new bank bonus churner, so I hope I did that here. Let me know your thoughts!