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The battle of bank bonuses is heating up. As financial institutions compete for deposits in a high-interest rate environment, they have increased their cash bonus offers for customers who open new checking accounts.

The average checking account promo is now just over $400, up from about $300 in 2021, according to Curinos, a financial data company.

Intended as a hook to attract customers, these bank bonuses can be an easy way to make extra cash. But before you bite, there are also some potential risks you should know about like unexpected fees, taxes and the possibility of being denied on future account applications.

Ultimately, you should choose a bank to use for your checking needs based on factors like ATM locations, fees, overdraft protection and money transfer options — not a one-time bonus.

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Bank account bonuses: How they work

To cash in on bank bonus deals, new checking customers need to satisfy specific requirements, which vary from bank to bank but can be as simple as creating an account and receiving a couple direct deposits. (Two paychecks for a typical worker would satisfy many banks' requirements).

However, the highest-dollar promos have significant deposit minimums. For example, Wells Fargo is running a $2,500 bonus for opening a Premier checking account and making $250,000 in deposits. The bonus is paid after 90 days if you meet all the requirements.

Even if you can't drum up that kind of cash (or an amount anywhere near it), you can still qualify for decently large bank bonuses in 2024.

Citi’s $300 checking promotion is a fairly typical example of what big banks are offering. To claim the bonus, customers must open an account and receive at least two direct deposits totaling at least $1,500. The bonus should hit within 30 days of meeting the requirements.

Once you receive a bank account bonus, there’s typically nothing stopping you from withdrawing the money and closing the account.

Similar to credit card “churning,” some people chase bank account bonuses, opening many new accounts with no long-term intention to use the bank.

They’ll change where their paychecks are sent for a few weeks, or shift some money around to meet the requirements. People who play this game tend to close their accounts quickly after they get the cash to avoid monthly fees.

That strategy can be risky (more on this later), but assuming you’re in the market for a new checking account anyway, it's worth looking into the various promos as part of your research.

Why banks offer bonuses

Banks that offer bonuses are hoping that once they get you in the door you’ll stick around as a customer for many years. “This is all about primary customer acquisition,” says Olivia Lui, marketing and product innovation expert at Curinos.

Because savings products like high-yield savings accounts are offering annual percentage yields (APYs) above 4%, banks have to work harder for deposits into their checking accounts, which generally don’t pay interest, she says. For consumers, there's little incentive to storing cash in a checking account when it's easy to earn returns in a savings account. That’s partially why banks increased their bonuses.

Lui also notes that banks like Chase, which have lower-APY savings accounts, are running combo checking and savings account bonus offers.

“You're actually seeing a lot of increase in tiered offers, so you may get $200 first for your checking account with direct deposit, and then they'll tier on and say you'll get an additional $200 if you open a savings account at the same exact time. So they're trying to really round out, getting the entire relationship upfront,” Lui says.

Chase’s combined checking and savings bonus can net you up to $900 if you meet three requirements: Open both accounts, satisfy a direct deposit requirement for your checking account and keep a balance of $15,000 in the savings account for 90 days.

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Should you go after bank bonuses?

Bank account bonuses may seem like easy money — and they typically are, if you're opening an account you otherwise would. In other cases, though, the pursuit of this cash can become a headache.

Charles Fowles, 34, and his wife both received $300 bonuses from Wells Fargo last year. He said it was a straightforward process of opening the accounts and putting in $1,000 of direct deposits each.

“Any way you can get free money, I’d advise people to do it — as long as they're organized and don't get any fees,” he says.

In the past five years, he says he’s brought in more than $7,000 from bank bonuses. Those have mainly been checking account bonuses, but he’s mixed in a few savings account bonuses as well. It’s been a successful “side hustle,” he says.

If you’re wondering if you should give it a try, there are a few things you should know before diving in.

First of all, as Fowles mentioned, you have to be careful about fees. Basic checking accounts often have monthly fees in the ballpark of $10 to $15, as well as overdraft fees. Make sure you have a plan to avoid or minimize fees to ensure that going after the bonus remains worth it.

Another thing you should be aware of is that bank account bonuses are considered taxable income, just like the interest you earn in a savings account. This may be surprising because credit card signup bonuses usually aren’t taxed.

Next, there’s an agency called ChexSystems that should be on your radar. A ChexSystems report is similar to a credit report but it focuses specifically on checking and savings accounts.

Ryan Johnson, editor in chief of profitablecontent.com, a website that tracks bank account bonuses, explains that banks and credit unions may use ChexSystems to assess the risk that a potential new customer will bounce checks or overdraft an account.

“One of the things that seems risky to banks is how many accounts you’re opening and closing,” he says.

Having signed up for dozens of checking accounts over the years, Johnson says he now frequently gets denied from opening new accounts because of his history. The denials usually come from credit unions and regional banks, he says.

These denials haven’t deterred him from going after bank bonuses, but he says he wishes he’d known about ChexSystems sooner. The good news is the stakes aren’t as high as having a bad credit report because your ChexSystems report doesn’t affect your ability to qualify for loan products, apartment leases or other items that consider your traditional credit score.

For the average consumer, Johnson recommends starting off by going for one account opening bonus.

You’ll get a feel for whether it’s worth your time, he says. For example, it may be really easy for some workers to go online and change where their paycheck is sent. Some companies even allow you to split paychecks into direct deposits to more than one account, so you may not need to move all your earnings into the new checking account. At other workplaces, it could be more hassle than it’s worth. After trying one bonus, you can decide if you want to do more.

As far as the bonuses aimed at more affluent customers seeking large deposits, Johnson encourages folks to crunch the numbers to see if it’s worth setting your money aside for a few months. Most of the accounts with signup bonuses have much lower interest rates than the 4% (or more) that your money can earn currently in the best savings accounts.

“You do have to weigh the opportunity cost of putting your money in a higher yield savings account versus chasing the bonus, which maybe has no real APY but it does pay out a promotion, and kind of see what the difference is,” he says.

Lui encourages people who are thinking about opening new accounts to shop around and research the pros and cons of the many different checking account options. When you’re choosing a primary checking account, think of the bonus as a nice perk but focus on the other criteria that will matter more in the long run.

For example, some accounts require that you maintain a minimum balance to avoid paying a monthly maintenance fee, so if you're likely to have a low balance from time to time, then a checking account without a monthly fee is probably best for you. Or if you regularly pull cash out from ATMs, you'll likely want a bank that either has conveniently located machines or reimburses for fees on out-of-network withdrawals (Charles Schwab is an example).

While there’s sometimes a perception that all checking accounts are basically the same, Lui says, “there is a large opportunity to actually differentiate within the deposit space.”

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