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- If you have extra cash or a large emergency fund, moving your savings to a new bank account can qualify you for a bonus worth hundreds of dollars.
- However, you should be clear on what exactly the new account requires of you in order to earn the bonus, like a minimum balance or direct deposit.
- Opening a new bank account shouldn’t significantly affect your credit score. You might get a temporary ding when the bank runs a credit check on you, but that’s a non-issue unless you’re applying for a loan soon.
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A few months ago, I moved a big portion of my emergency fund to a new savings account at a new bank because of a $500 bonus.
While I’ve chased credit card bonuses a few times in the past, opening up a new bank account for a bonus was a new experience for me.
There are some pros and cons to consider when opening a new bank account for a bonus, so it’s important to weigh your options before moving forward.
What is a bank account bonus?
A bank account bonus is a cash bonus you can earn for signing up for a new bank account and meeting the bank’s requirements. Not all bank accounts offer a bonus, but when you can find one they can be quite lucrative, such as the $500 bonus I earned last year.
Most banks require you to deposit a minimum balance for a certain length of time to earn a bonus on a savings account. Checking bonuses generally come with activity requirements including direct deposit and debit card activity minimums. But if you can meet the requirements, you may be on the way to a free bonus payday.
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A new bank account shouldn’t have a big impact on your finances
Unlike a new credit card, a new bank account does not directly impact your credit. However, some banks may perform a credit check on all new customers, so you could find a new inquiry on your credit report if signing up with a new bank. This can lower your credit score by a few points but typically isn’t a big deal unless you are hunting for a new loan in the near future.
Otherwise, there is no major effect on your finances from adding a new bank account. It is an additional bank to keep track of, but there is no big downside to that. If you use a money managing app like Mint, Personal Capital, or Clarity Money, you can quickly add the new account to your dashboard for easy tracking.
Consider the bonus requirements
Before you fill out the application, carefully review the bonus requirements to make sure you qualify. If you need to deposit a high dollar amount to earn the bonus, you’ll need that amount of cash on hand in another bank account.
Because most savings bonuses have the minimum time requirement, you might have to hand over thousands of dollars for a period of months. Most people are safe to put an emergency fund, down payment fund, or other long-term savings in this type of account. But don’t deposit funds you need for living expenses if you’ll need them early.
For a checking bonus, you might have to effectively change banks to earn the bonus. For that, it’s up to you to decide if the new bank is better than your current one — or at least good enough to motivate you to switch.
Remember that bank bonuses are taxable
Just like the interest reported on 1099 form from your bank, bonuses are taxable. All income you earn is generally taxable and required to report to the IRS. Banks are known for distributing 1099 forms for bonuses as well.
Depending on your tax bracket, taxes could easily gobble up 20% or more of your bonus. If you live paycheck to paycheck, make sure to pull enough cash aside to pay the tax bill in April of the following year. If you expect a refund, the taxes for your bonus are simply deducted from the refund amount.
Take note of fees and convenience before you decide to switch
The decision to move banks for a bonus is up to you. Some people are very loyal to their banks and have been there for a long time, but there is generally little benefit in this outside of personalized customer service if you regularly visit a branch.
For most people, the important factors to consider with a bank are fees and convenience. If you can find a bank that meets your needs and will pay you to move, there’s little harm in switching.
Just make sure you don’t forget to move old recurring deposits and transfers to avoid fees and problems with those accounts. Once you take care of that, you can enjoy the bonus and your new account with little worry.
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