The Bank Account Bonus Game

I have a guilty pleasure. A side hobby that makes a little money: opening bank accounts to collect the new account bonuses. This practice is pretty common with credit cards – there’s a whole community dedicated to “churning”, where people sign up for dozens of credit cards to collect points and frequent flyer miles. But I’m talking about bank accounts, where the rewards are always in cold, hard cash. It’s not for everyone, but it certainly is a very low-effort way to make some free money. I’ve personally made almost $2000 in the past year doing this. I’m not arguing that this “game” is a legitimate way to build wealth or that it should be part of your financial plan. But if you’re good with details and have a little money laying around that you can use to set up new accounts, it can be a rewarding pastime.

The Game

Many banks and credit unions, both local/regional and national/international, offer sign-up bonuses for opening a new checking or savings account with them. I guess the idea is that you’re likely to maintain a presence at their bank over years that they can profit from. A typical bonus is $200 – a tidy chunk of change for what amounts essentially to minutes of work. Some of these bonuses post to your account immediately, while others can take a few months to show up. There are some hoops to jump through, and it helps to be able to keep good records of the various deadlines and requirements, especially if you do multiple bonuses simultaneously.  Most of the time, you’re able to open these accounts online with a special code to activate the bonus; rarely, an in-person sign-up in the physical branch is required.

Requirements

All of these account bonuses will have at least one of the following requirements attached in order to get the bonus paid into your account:

 

  • Opening and funding the account. Duh. You are going to do this anyway with any new bank account. But most bonuses require that you fund the account within a certain time frame in order to receive the bonus. This is the most common requirement for a bonus, and most of the time you don’t need to do much more other than wait to receive your bonus.
  • Debit card transactions. Banks reap the fees when you use their debit cards, so this is a common requirement to get a new bank account bonus. A typical debit card requirement might be to complete 10 debit card transactions per month for 2 or 3 consecutive months. This is easier than it sounds, even if you don’t plan on using the bonus account for actual banking/spending. Buying small Amazon gift cards online is a popular way to fulfill debit requirements. There are multiple apps that let you send money from a debit card account – I use Circle Pay to send money back and forth between my different accounts to fulfill these requirements quickly and without cost. You can even use the debit card at the self-checkout aisle to buy a tiny chili pepper 10 separate times.
  • Direct deposit. This one can get a little tricky. Common direct deposit requirements are to have a direct deposit from your employer into the new account at least two months in a row, or a total of $5000 direct deposit before the bonus will trigger. This is relatively straightforward for people whose employers allow them to divide up their direct deposit online without limitations. But it can be a pain in the butt to mess with your main financial pipeline for the sake of a minor side hobby. Fortunately, there’s typically a way around this. Most bank systems aren’t able to tell the difference between a real direct deposit from your employer and an ACH funds transfer from an external bank account. Doctor of Credit, among other sites, maintains an up-to-date list of which bank transfers count as a direct deposit to satisfy this requirement.
  • Online bill payments. This one is pretty rare in the bonus game, but also pretty simple. Typically this requirement requires something like 5 or 10 billpay transactions. You can break one payment into several smaller ones to satisfy this requirement easily.

 

Pitfalls

The game isn’t for everyone. If you’re not careful with details, you can fail to fulfill the requirements and get no bonus (I did this once when I spaced out entering the promo code when I set up an account, and it took me months to figure it out after my bonus never posted). You can even have your bonus revoked or incur fees if you don’t meet their requirements correctly. Here are some of the things to watch out for:

 

  • Taxes. These bonuses are treated as earned interest, and as such, you have to pay taxes on them at your marginal tax rate. The bank will issue you a 1099-INT for the bonus at the beginning of the year following the bonus. Depending on your tax bracket, this can take a real bite out of your earnings. But the way I see it, free money minus some taxes is still free money.
  • Early termination fees. Most banks will revoke your bonus and even charge a fee if you close your account before a certain time limit – commonly, 6 months. This means that the game is often a long-term project that you’ll have to carefully coordinate using your calendar. Because most of us don’t want a dozen bank accounts and don’t plan on using these accounts to do anything other than earn a bonus, it pays to use your calendar app to keep careful tabs on when you can safely close these accounts without penalty.
  • Monthly maintenance fees. My primary bank is USAA, which doesn’t have any fees. I’m surprised by how common monthly fees are out in the wide world of banking. Almost always, though, these fees are able to be waived by keeping a certain minimum balance in the account – commonly $1000-3000. Practically speaking, this means you’re tying up some of your money for months at a time, usually earning next-to-no interest, in order to get a bank account bonus without paying fees. This starts looking more like an investment than a game. I look at it this way though – if I earn $200 on a $1000 investment for 6 months, that’s a 44% annualized return on investment. And unlike investing in the stock market, this is essentially no-risk, in an FDIC-insured deposit account. It’s a no-brainer.
  • ChexSystems. Opening a bank account typically does not involve a hard pull on your credit. But banks use an alternate “bank account credit” reporting system called ChexSystems that reports any suspicious or fraudulent activity (you can get a copy of your own report for free once per year at that link). Some people who are really aggressive with the game have been denied bank accounts because of their ChexSystems report. Usually, you have to do dozens of accounts per year in order to get this result. In my opinion, there just aren’t dozens of separate bonuses per year that are even worth it – maybe a dozen, tops, which is generally a safe amount to not trigger a negative ChexSystems result. 

    Ride it out, with precautions.

 

How To Do It

First you need to find bank account bonuses that you qualify for (some of them are limited to certain geographic areas). There are tons of websites dedicated to this. My favorite is Doctor of Credit, but you should also check out Hustler Money Blog and NerdWallet.

When you’ve found one you’re interested in and qualify for, open the account online if possible. Choose the lowest-tier bank account that will qualify you for the bonus – these are usually easier to keep fee-free, and you don’t really need all the perks of a premium account anyway since you’re just using it to earn the bonus and eventually close it.

Keep a spreadsheet. Especially if you do multiple of these at a time, you’ll need to keep track of the various requirements. Use your calendar online or on your phone to remind you of the dates you need to move money around, or when you need to close the account. It would be a shame to either lose your bonus or have it diluted by fees because of inattention to detail.

Remember to keep tabs of the 1099-INTs that will roll in next year to document the “interest” you’ve earned in the form of these bonuses, so you can accurately report it on your tax return. If you need to adjust your withholding upwards a bit to pay for the tax on these bonuses, it may be worth it – it’s free money, after all

Why Bank Accounts? Why Not Credit Card Bonuses?
  • Credit card bonuses can mess with your credit score. Nobody messes with my credit score, man – that’s my livelihood. No one wants to keep dozens of credit cards open, and closing them at the end of the bonus will negatively impact your credit score, unlike closing bank accounts.
  • Credit card bonuses are typically points or miles. This isn’t as useful for everyone as cash. It’s true that accumulating points or miles with credit card bonuses can be more lucrative – but then you’re stuck with something you can only spend a certain way. Different cards have separate relationships with hotels and airlines, and they all have different conditions for how you can spend their points (with blackout dates or limited rewards seats/rooms). If you are a professional traveler, it might be worth it. For me, it’s too much of a hassle. No thanks.
  • Points and miles expire. Even if you keep tabs of all your separate points and miles, they can go to waste if you don’t spend them. Cash doesn’t go to waste. At worst, it loses value to inflation if not appropriately invested. But it doesn’t expire.

 

Have you or someone you love fallen victim to the Bank Account Game? If so, what have your results been? Let us know in the comments below.

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