I'd Rather Open a CD at 5.00% APY Than Sign Up for These Savings Account Bonuses

A few of the biggest banks in America, like TD Bank, U.S. Bank, and Wells Fargo, are offering new account bonuses if you open a savings account with them. But these offers have big strings attached -- you must deposit $10,000-$25,000 just to get a few hundred bucks.

And other than the new account bonus cash, these savings accounts usually pay shockingly low APYs (as low as 0.01% APY). And you have to jump through hoops to qualify for your new account bonus -- you typically have to leave your cash deposited for several months, earning near-zero interest.

Meanwhile the best CD rates are currently at 5.00% APY or higher for a 1-year CD. If you have a decent-sized lump sum of cash saved up, putting it into a CD could be a better deal than chasing these new savings account bonuses.

Let's look at the downsides of these big banks' new savings account bonuses, and show how much you could earn with a 5.00% APY 1-year CD instead.

TD Bank ($200 savings account bonus)

The offer: Get $200 when you open a qualifying new savings account with TD Bank. (Offer valid through June 30, 2024.)

The catch: You have to deposit $10,000 into the account within 20 days of opening. And you have to leave at least $10,000 deposited for at least 90 days beyond the 20th day after opening your account. And the best TD Bank savings account only pays 2.00% APY on a $10,000 balance (with a "relationship bump rate" for having a linked TD Bank account).

How much you'd earn vs. a 1-year CD at 5.00% APY

Let's assume that you open a TD Signature Savings account, earn your $200 bonus after 180 days, qualify for the "relationship bump rate" of 2.00% APY, and keep earning that same 2.00% APY for one year. (Bank account interest rates can change any time, while CD rates are fixed for the length of the term.)

The TD Bank savings account bonus isn't the worst place to put your money, as long as you get that 2.00% APY relationship rate. But you're still better off with a 1-year CD.

U.S. Bank ($200 savings account bonus)

The offer: Get $200 when you open a U.S. Bank Standard Savings Account.

The catch: Deposit at least $15,000 in new money by June 27, 2024, and keep that same minimum balance through Oct. 31, 2024. Oh, and the U.S. Bank Standard Savings Account pays one of the lowest APYs in America: only 0.01% (as of 3/24/2023).

How much you'd earn vs. a 1-year CD at 5.00% APY

Let's assume that you leave your $15,000 deposited long enough to earn the $200 bonus after four months (it might take slightly longer than that to get the bonus deposited to your account).

That $200 bonus is "costing" you more than $500 of lost interest income that you could've gotten from a 1-year CD. A $200 bonus is not worth putting up with 0.01% APY.

Wells Fargo ($525 savings account bonus)

The offer: Get $525 when you open a new Wells Fargo savings account by June 25, 2024.

The catch: You have to deposit $25,000 and maintain that minimum $25,000 balance for 90 days. And the best Wells Fargo Platinum Savings account pays only 0.26% APY for balances under $100,000 (with a "relationship rate" for having a linked checking account).

How much you'd earn vs. a 1-year CD at 5.00% APY

Let's assume you open a Wells Fargo Platinum Savings account (with 0.26% APY relationship rate), leave your cash deposited for three months and then receive your bonus after four months. So you have eight more months for your money to grow at 0.26% APY.

Wells Fargo's $525 bonus might sound great, but you would've earned an extra $659.09 with a 1-year CD at 5.00% APY.

Bottom line

Bank savings account bonuses can sound enticing at first, but when you crunch the numbers and read the fine print, they might actually be costing you money. Putting your money into a low-interest bank account is not a "bonus," it's a missed opportunity. Your money will grow faster with the best CDs, savings accounts, and money market accounts, which are all offering 5.00% (or higher) APYs today.