Personal Finance

Money at 30: Are Bank Bonuses Worth It?

Over the past few years, I’ve reviewed plenty of bank and banking (the latter typically meaning FinTechs that partner with “real” banks for their offerings) services. In doing so, I’ve occasionally earned bonuses for setting up a new account and performing different tasks. This free money is always welcome — especially since I’m doing it for work anyway — but would I recommend bonus chasing to most people? Let’s take a look at the pros and cons.

Reasons Why Bank Bonuses May Be Attractive

Free money

Let’s start with the most obvious perk: the free cash. While the amount of money you can earn from a banking bonus can vary, it can seem pretty attractive on paper. Personally, I’ve earned bonuses as small as $5 and as large as $100 — as well as some American Airlines miles in one particular case. Sure, these weren’t life-changing amounts of cash but were certainly welcome additions to my account nonetheless.

No spend required (typically)

Another benefit to most banking bonuses is that they don’t require you to actually spend anything. This stands in contrast to most credit card welcome bonuses that issue your points or cashback only after you put hundreds if not thousands of dollars in purchases on the card. Granted, in the case of some checking accounts, you may need to make at least a few debit card purchases to earn a bonus. However, more often than not, bonuses issued for savings accounts are unlocked by the amount of money you’re holding, not what you’re spending.

FDIC insured

When it comes to earning bonuses, bank account bonuses are typically pretty safe thanks to the peace of mind that comes with FDIC insurance. As you probably know, FDIC insured bank accounts cover up to $250,000 in funds per depositor, protecting them from bank failures. Therefore, moving money to a new account in order to score a bonus shouldn’t be too big of a deal as long as the institution is a member of FDIC. On that note, you can always consult the FDIC BankFind tool to ensure that your institution is indeed insured.

Could introduce you to better options

Last up in terms of the key benefits is the fact that you may well discover your new favorite banking option by pursuing a bonus. This is somewhat similar to how I’ve come across some truly interesting and innovative platforms while seeking review targets. Furthermore, as you find features you enjoy, you may even be able to recommend that the companies behind your primary accounts add such functionality (hey, they might just listen). Alternatively, you may find that you prefer one account for one function while keeping the bulk of your cash elsewhere. This is something I personally do all the time and is a great side effect of my checking out so many accounts.

The Downsides of Banking Bonuses

Moving lots for little

Topping the list of reasons why bank bonus hunting may not be for you is that you may be required to deposit much larger amounts of money than you’re prepared for. In my experience, I’ve found some bonuses to be downright laughable — such as earning a $20 bonus for depositing at least $20,000. No thank you! That said, these unfavorable ratios are more common among more traditional banks that may not even offer bonuses all that often. Meanwhile, if you’re willing to take a risk on FinTech (more on that in a moment), you may be able to find much more interesting and lucrative rewards with far smaller deposit requirements.

Unproven companies

While FinTech offerings may boast the bigger bonuses, these opportunities do also present some risk. Although most startups do partner with FDIC-insured banks to hold customer deposits, this might not protect you if the company in question goes under and leaves you without access to that FDIC insured account (technically, this insurance only covers you in the event that the bank actually holding your deposits closes). This is a scenario that partially played out with Beam a few months ago, however, things did seem to work out eventually. Nevertheless, when dealing with startups, it can be hard to know just how safe your money is, so proceed with some caution.

Direct deposit requirements

In addition to or in place of needing to deposit loads of cash in order to unlock a bonus, some banking offerings will require customers to set up direct deposit and have a certain amount of money delivered to their account with this medium within a certain timeframe. If you’re not familiar, direct deposits are most commonly made via payroll services. As a result, you may find that the hassle of getting your employer to reroute your paychecks to another account exceeds the benefit you’ll get from them doing so. Then again, thanks to services like ADP that allow employees to log in and update their information themselves, this might not be as bad as it once was. Still, some consumers may not be too keen on experimenting with new bank accounts when their paychecks are in play.

Could lead to ChexSystems issues

Finally, by opening so many bank accounts in order to claim bonuses, you could accidentally raise red flags with ChexSystems. You can think of Chex as the banking equivalent of credit bureaus such as Equifax, TransUnion, or Experian. In this case, the company tracks some of the bank accounts you open and whether they’re in good standing. Even if you don’t have any actual derogatory remarks on your report, some banks and credit unions may decline your application if they see that you have too many accounts already. The good news is that not every account you apply for or use will report to ChexSystems, so this may not be too big of an issue. But, if you’re curious to see what’s on your report, you can follow these steps to request a look at it.

For as great as free money can be, the proverbial juice may not always be worth the squeeze when it comes to bank bonuses. While there are many great aspects of this line of obtaining extra money, there are also some drawbacks and even risks. Ultimately, those hoping to chase banking bonuses will need to assess their opportunities on a case by case basis and decide which make sense for them. Good luck!

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