Opening a new bank account can be rewarding – literally. Many banks offer cash incentives, called sign-up bonuses, to attract new customers.
In this article, we will dive deeper and look at what bank sign-up bonuses are, how they work, and how you can take advantage of them.
The headline gives you a sneak peek into what’s covered – defining sign-up bonuses. Now let’s dive in.
What Exactly Are Sign-Up Bonuses?
In simple terms, a bank sign-up bonus is free money given to new customers for opening a checking or savings account. For example, Bank A offers $300 if you open a new checking account. The catch? You must meet certain eligibility criteria – like maintaining a minimum balance or setting up direct deposit – within a set timeframe to qualify.
Banks use juicy bonuses to incentivize customers to open accounts. Why? Opening accounts with new banks expands their customer base. And established banking relationships allow cross-selling of other products like loans, credit cards, and investment accounts. Offering a $200 or $500 bonus on a new account is a small price to pay for securing a lifelong, revenue-generating customer.
The bonus amount can vary greatly between banks. While some may offer $50 or $100, others provide upwards of $700 for personal checking accounts. We’ll break down what affects bonus size later on.
How Do Bank Sign-Up Bonuses Work?
Claiming a bank account bonus is a straightforward process, though terms and conditions apply. Here’s an overview of how it works:
- The bank advertises the sign-up bonus – for example, $400 cash back.
- You open a qualifying account with that bank during the promo period. This is often a checking and/or savings account.
- The bank outlines eligibility requirements. This usually involves actions like:
- Depositing funds into the new account, often $500 or $1000+
- Setting up direct deposits totaling a monthly amount
- Maintaining a minimum account balance
- Making a specified number of debit card transactions
- You must complete the requirements within a set timeframe – typically 60, 90, or 120 days of account opening.
- Once eligible, the bank credits the bonus cash to your new account. This can take 1-2 billing cycles.
While simple in theory, it’s imperative to read the fine print before opening an account. Banks detail full terms, from eligibility to when you can expect the bonus. Actively manage your new account to successfully earn the “free” extra cash.
Now that you know the basics, let’s explore common questions and factors that impact sign-up bonuses.
What Affects the Size of the Sign-Up Bonus?
Banks consider many factors when determining the size of a sign-up bonus, including:
- Competitor Offers – Banks keep a close eye on competitors’ promotions. A more generous bonus from Bank A may prompt Bank B to increase their offer. This trend has led to progressively higher bonuses.
- Account Type – The account you open affects the bonus amount. Savings accounts generally have lower bonuses, while premium checking accounts offer higher amounts to attract customers.
- Deposit Requirements – Banks entice bigger deposits with bigger payouts. A personal checking account may offer $200 for a $500 deposit while a business account gives $500 for a $5,000 deposit.
- Account Usage – Banks incentivize active usage with higher bonuses. Using the account’s debit card for monthly transactions results in a larger reward.
- Creditworthiness – Your credit score impacts eligibility for the highest bonuses. Excellent credit means enticing premium clients with bonuses of $500+.
- Limited-Time Offers – Banks may increase bonuses for a limited period. Watch for time-sensitive, promotional increases around the holidays or tax seasons.
Who Is Eligible for Bank Account Sign-Up Bonuses?
Eligibility for sign-up bonuses varies between financial institutions. However, they generally share a few common requirements:
- New Customers – Most banks restrict bonuses to new account holders who have not had accounts with that bank before.
- U.S. Residency – You must have a valid ID and be a U.S. citizen or permanent resident.
- Age of Majority – Applicants need to be 18+ years old. Some require 21+ for premium accounts.
- Creditworthiness – Many have credit score thresholds, like 700+ for premium checking accounts.
- Employment – Proof of income from employment, retirement, or other sources may be necessary.
- Account Type – Personal checking/savings accounts have different criteria than business accounts.
Before applying, thoroughly read the eligibility details. Also, check restrictions applied to your state of residence. With criteria met, you can take advantage of “easy money” from bank bonuses.
How Much Time Do You Have to Meet Requirements?
Act fast – sign-up bonus eligibility windows are limited. While banks allow 30-120 days, aim to complete requirements as soon as possible. Here are some common timeframes:
- 30-45 Days: Complete basic requirements like account funding and activation.
- 60 Days: Set up direct deposits to a new account. Make debit card transactions.
- 90 Days: Maximize bonus earnings with recurring deposits and transactions.
- 120 Days: Deadline to meet all bonus criteria. Account closures after this period may require repayment.
Tip: Mark your calendar with target dates for meeting deposit minimums, usage thresholds, and other criteria. Set calendar alerts on your phone to stay on top of the timeline.
Are Bank Sign-Up Bonuses Taxable?
Yes, bank account bonuses received over $600 are considered taxable income by the IRS. If you earn $600+ in a calendar year from bank bonuses, you’ll get a 1099-INT form reporting the total value. You must claim this as “Other Income” when filing federal taxes.
Some folks open accounts in December and wait until January 1st of the next year to meet requirements, dividing the bonus across two tax years. While permitted, this delays earning your bonus for up to six months. Consult a tax professional to determine the best strategy based on your situation.
How Do You Find the Best Bank Account Bonuses?
With countless banks offering bonuses, how do you find the best deals? Here are some tips:
- Bookmark bonus aggregators – Websites like Doctor of Credit and BankBonusList catalog ongoing nationwide offers in one place.
- Follow expert deal sites – The Points Guy and FinanceBuzz track and rate bank promos, saving you research time.
- Search bank listings – Review bonuses from big names like Chase, Bank of America, Wells Fargo, and Citi.
- Join deal forums – Discuss new bonuses and strategies with fellow deal-seekers on sites like Reddit.
- Seek targeted offers – Opt into marketing lists and provide income details to receive targeted higher bonus offers.
- Timing – Watch for special promotions around the holidays, tax season, and the new year.
With access to so many bonuses, you can earn hundreds in “free” money just by opening accounts strategically.
Also Read: How to make Mobile Check Deposits
Tips for Maximizing Sign-Up Bonuses
To get the full rewards, be sure to:
- Thoroughly read all terms and FAQs before applying. Understand explicit requirements.
- Note eligibility timeframes and set calendar reminders to complete requirements on schedule.
- Meet deposit minimums as early as possible. Don’t wait until the last minute.
- Set up direct deposit from an employer, pension, or government benefits.
- Use the debit card for everyday purchases to satisfy transaction minimums.
- Pay close attention to monthly statements and sign-up bonus tracking. Dispute missing bonuses promptly.
- Avoid early account closure fees by keeping the account open for 6-12 months after receiving your bonus.
- Compare bonuses nationally and open accounts with multiple banks per year to maximize earnings.
With a savvy strategy, you can collect bonuses from several banks annually and pocket easy extra cash. Just be organized, read fine print, meet deadlines, and keep detailed records.
The Bottom Line
Bank sign-up bonuses offer effortless earnings just for opening accounts strategically and meeting usage requirements. I hope this thorough guide provided you with everything you need to master bonus offers.
We covered what bonuses are, how they work, factors that impact offers, eligibility, timeframes, finding deals, maximizing payouts, and tax implications. With these steps, you can rake in lucrative bonuses this year 2023. Sign-up bonuses provide an exciting way to earn extra cash – take advantage! Let me know if you have any other questions.