Why I Regret Opening a New Bank Account Even Though I Got a $450 Bonus

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KEY POINTS

  • Most bank bonuses require you to meet minimum deposit requirements for a set period of time.
  • This could become an issue if you need to commit a large amount of money that is better used elsewhere.

You might want to think twice before tying up your money for a bonus.

I recently earned a $450 bonus for a new bank account I opened in June. Great news for me, right? Not quite. Bank bonuses are one of my favorite ways to earn extra money, but as I was waiting to get this one, I had mixed feelings about it.

When you see a bonus you can qualify for, it's easy to tell yourself to go for it. After all, it feels like free money. And even though it is in a sense, it's also a good idea to make sure the bonus requirements work for you. In my case, I regretted tying up so much money that I could've used better elsewhere.

How earning a bank bonus works

A bank bonus is an incentive that banks offer to attract new clients. The basic idea is that if you open a bank account and complete certain requirements, you'll receive a bonus. Bonus requirements vary depending on the bank, but here are a few common ones and examples of how they work:

  • Maintain a minimum balance for a set period of time. For example, maintain a balance of at least $50,000 for the first three months you have the account.
  • Receive a minimum amount of direct deposits. For example, receive $5,000 in direct deposits in the first three months.
  • Make a minimum amount of purchases with your debit card. For example, make $1,000 in purchases with your debit card in the first two months.

Before you sign up for a bank bonus, check that you can satisfy the requirements. If you won't be able to deposit enough to get the bonus, then it probably doesn't make sense to open an account, unless you really want that account anyway.

Even if you're confident you can get the bonus, take some time to think about how it will affect your financial picture and if it's the best way to use your money. That's where I went wrong and why I ended up kicking myself later.

A missed opportunity

The bonus I chose required locking up a large amount of money for three months. After that, the bank would pay me $450. It was simple, which I like. And even though it was a big financial commitment, I figured there was no reason to turn down a free $450.

But about two months in, I was second-guessing my decision. The stock market's value had dropped significantly since the start of the year. Investing in a bear market like that can be a great opportunity to buy quality stocks while prices are low.

I would've loved to have increased my investments to take advantage of those low prices. However, I had tied it up to satisfy my new bank account's bonus requirement. I still had a few weeks to go before I could withdraw my money without missing out on the bonus.

It's not the end of the world, but it was a good learning experience for me, and it could be helpful if you're thinking of going for a bank bonus. My usual financial approach is to invest in the stock market as much as I can. I went against that for some quick cash, when I probably would've ended up doing better over the long haul had I stuck to investing.

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