Checking Account Bonuses: What to Know

by Dan Caplinger | Jan. 3, 2019

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The banking industry has never been more competitive, and acquiring customers is a top priority. Checking accounts can be extremely lucrative for financial institutions, and so many of them are willing to pay lavish bonuses in order to convince you to open an account.

However, just because a bank is willing to put up some extra cash to get you to open a checking account doesn't mean that particular bank's offering is the best one for you. In order to make the most of checking account bonuses, you also have to be aware of some of the traps that snare unwary customers. That way, you'll pick the bank account that's truly best for you.

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How checking account bonuses work

At their heart, checking account bonuses couldn't be simpler. The bank sets up conditions that you have to meet in order to qualify for the bonus. If you meet the conditions and open an account, then you'll earn the bonus.

The exact conditions that banks set to have customers qualify for checking account bonuses vary greatly. But you can expect similar general types of restrictions and qualifications across the industry. They include:

  • Minimum initial deposit. Most banks require you to deposit a certain amount of money in order to qualify for a bonus. Some institutions offer smaller bonuses for low balances but then put up bigger bonuses if you have a larger account balance.
  • Other accounts at the same bank. Some banks will require you to open up other related accounts at the same time as the checking account, such as a savings account or a bank loan.
  • Maintaining minimum balances. In order to prevent people from making a large initial deposit and then immediately taking it out of the account, banks require you to maintain a minimum balance for at least a certain period of time. Anywhere from 90 days to a year is a typical timeframe for banks to use.
  • Direct deposit. Some banks require that you arrange to have paychecks or other automatic transfers directly deposited into the new checking account.

If you meet all of the specified terms, then the bank will typically pay the bonus a short time thereafter. Most banks will deposit the bonus amount directly into your checking account. If a bank pays the bonus before all of the terms are met, then it generally reserves the right to take the bonus back if you subsequently fail to make good on your obligations.

How to decide which bonus makes the most sense for you

Checking account bonuses are especially nice if you already wanted to open a new checking account anyway. But there's a lot that goes into the decision of which checking account bonus offer is the best for you, and some of the things you should take into consideration when you're making a choice among different offers might come as a surprise.

The most obvious factor in comparing different checking account bonuses is the amount of the bonus itself. It's fairly typical to run across bonus offers in the $100 to $200 range, but for certain types of accounts, you can easily see anywhere from $300 to $750 bonuses. If terms are otherwise identical, then it'll generally make sense to pick up the biggest bonus check you can find.

However, when it comes to bonuses, size isn't everything. Often, you'll find that the highest bonus amounts have requirements that are so difficult to meet that you don't have much chance to qualify. For instance, one of the top checking account bonuses on the market earlier this year involved making an initial deposit of $100,000 or more. However, a different bank offered a bonus that was only 20% less, and it came with an initial deposit requirement of just $50,000. In other words, you shouldn't lose heart just because what looks like the absolute most attractive checking account bonus on the market happens to be out of your reach.

Bonuses also come and go at a fairly rapid pace. Even if you don't necessarily qualify for an attractive bonus right now, you might find that in a few weeks or months, a new offer that perfectly fits your needs will become available. Patience is a virtue, especially among banking institutions that are desperate for your business.

It can be tempting to take advantage of multiple offers to open checking accounts. If you do, though, then you have to be very careful to make sure that the requirements fit together. For instance, if you want to take advantage of two different offers but both require you to do a direct deposit of your paycheck into the account, it'll be next to impossible to qualify for both. Add to that the hassle of tracking multiple accounts -- along with the fact that you probably don't actually need two different spots for your money -- and you might find that trying to maximize your bonuses by opening multiple checking accounts isn't worth it.

The most important thing

Last but definitely not least, you should never open an account with a bank that doesn't offer all the features and services you need just to grab a bonus. Often, banks count on your using other bank services once you open a checking account, and the fees and charges it collects can sometimes add up to more than the bonus that the bank pays you. That's not a relationship you want to start. You'd be better off accepting a smaller bonus with an institution that you respect and that will treat you well for years to come.

To avoid falling into that trap, look closely at the fee schedule that your chosen bank uses. If its fees for overdraft protection, stop-payment orders, ATM use, paper checks, account maintenance, or other items seem to be excessive, then compare them to another institution's fee schedule. Then, select whichever bank gives you the best balance between low fees and other costs versus the amount of the bonus it's willing to pay.

Free money is an attractive enticement, and if you're looking to open a checking account, then taking advantage of the competitive environment in the banking industry by collecting a checking account bonus is a smart move. As long as you're aware of some of the tricks that banks play in order to earn back what they pay out in bonuses, you'll be better able to make an informed choice and get a checking account that will do you the most good over the long haul.

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