Nerdy takeaways
- Bank bonuses can be worth hundreds — or even thousands — of dollars, but the fine print varies between offers.
- Before you go after a bonus, ask yourself a few questions, like whether the payout is worth the effort.
- Taxes and monthly fees can eat into what you actually walk away with, so run the numbers.
Bank bonuses are usually worth going after as long as you can meet the bonus requirements and avoid fees. Switching to a new bank can be a bit of a hassle, but making that change could be worth the outcome if it puts extra money in your pocket.
Here's what to weigh before you open a new account.
» Looking for bonus offers? Here’s NerdWallet’s list of the best current bank account bonuses
How do I know whether a bank bonus is worth it?
Craig Joseph, a writer on the NerdWallet Travel team, has qualified for enough bank bonuses to earn $32,000 over time. He breaks the decision down into three questions.
- Is the payout worth the effort? You may want to draw a line for yourself for how much work you’re willing to put in compared to how much money you’ll receive. Going for a bonus often requires that you not only open a new account, but also that you set up direct deposits into the account over a certain amount of time. For Joseph, a $500 bonus is usually the minimum amount he’ll try for.
- Do you actually want a relationship with this bank? This consideration isn’t strictly necessary if you don’t plan on keeping the account after you earn the bonus, but if you’re going through the effort of opening an account, it helps to actually like the bank. If the account you’re opening is good or if you’re interested in the bank’s other products, like its mortgage offerings or a low rate on an auto loan, then a bonus would just be a nice added benefit when establishing a customer relationship with that bank.
- Can you stay organized enough to actually collect it? To collect a bonus, you have to make sure you’ve hit all of the qualifying activities that the bank requires. And if you’re trying to get more than one bonus at a time, it can be especially important to keep track of the steps you’ve taken just to make sure you qualify. Tracking those steps can also help you prove your bonus eligibility to the bank, just in case it comes into question. Joseph keeps a spreadsheet of all of the bonuses he’s received or is currently working on, including the bank name, when he applied for a new account, the type of account, the initial deposit requirement and when he actually received the bonus. Joseph says he also takes screenshots of the process so that he can prove to banks that he’s applied for and qualified for particular bonuses, just in case there’s ever any doubt. Organization will also help you when it's time to do taxes because bonuses are taxed. A bank will typically send you Form 1099-INT if it pays you at least $10 in taxable interest or bonuses, but you may still need to report taxable income even if you don’t receive the form.
Add on instead of switching completely
If you aren’t ready to say goodbye to your old bank but you want a bonus, you can open a new account while keeping your old one open. Just make sure you meet all of the required activity for all of your accounts so that you don’t get hit with fees. And if you’re planning on closing the new account after you earn the bonus, check the fine print. Some banks charge a fee for accounts closed too soon after opening.
A quick example
Say a bank offers a $300 bonus for a new checking account with a $2,000 direct deposit within 60 days. If the account carries a $5 monthly fee that you can't waive, and you're taxed at a 24% marginal rate, your real take-home sum is:
$300 − (0.24 × $300) − ($5 × 2 months) = $218
This amount might still be worth it, but it’s not the full $300. It’s worthwhile to run the numbers before you commit.
Tips for getting the most out of a new bank account bonus
Keep track of the bonus’ stipulations to make sure you qualify. Some banks have high and/or frequent direct deposit requirements that customers have to follow to earn a bonus. Keep a close eye on whether you’re hitting the necessary marks.
Like the bank for reasons besides the bonus. Ideally, the bank account that you open to receive a bonus is an account that you like for other reasons as well. Banks often require that new customers keep their accounts open for a set period of time to qualify, so make sure it’s an account that works for you.
» MORE: How to choose a bank
Avoid fees that could offset your bonus. If the bank account has a monthly fee or minimum balance fee, those fees could eat into the value of your bonus. Look for free accounts, or for accounts that give easy ways to waive their monthly fees.
Don’t forget the bonus at tax time. If the bonus is over $10, you’ll have to pay taxes on it. The IRS requires that taxes be paid over that threshold, and the bonus will be taxed at the same rate as your income.
Do the math on whether you’d earn more with a high-yield account instead. If your bonus requires a large deposit into an account that doesn’t earn interest, check out high-yield savings accounts and high-yield CDs to see whether you might earn more from putting your money in one of those accounts instead.
So, should you pursue a bonus?
A bank bonus can be free money, but pursuing it only makes sense if you can realistically meet the requirements, the bank is a good fit for you in other ways and you don't mind the tax hit. If any of those don't line up, a high-yield savings account or CD may get you further with a lot less tracking to do.
