If you’re in the market for a new account or just looking to confirm your current account is the most appealing option, banks are always offering special deals to convince consumers to jump ship and open a new account.
No matter which product or account you are comparing, today’s financial institutions have a deal waiting for you. As a consumer this is great news. It means, after you find a product at a bank at which you want to open an account, take a minute and check to see what bonus or promotion that bank is offering. You could put an extra $100 cash in your pocket.
Cash Bonus: This kind of deal is probably the most common and lucrative for consumers and is commonly found on checking accounts. Banks have been offering as much as $300 to attract new deposits. It’s easy to see why banks are forced to offer free cash – interest rates are just too low to attract customers. If the cash bonus is the option you wish to take, make sure to review all the requirements necessary to earn it. Missing one means no cash bonus and, in some cases, could cost you a fee.
Interest Rate Bonus: This one can get a little tricky, so it’s important that you understand how the bonus rate works. A typical scenario: You have an account that offers one of the best rates on the market, but the rate only lasts for three months. After the first three months, the rate drops by as much as 30%, leaving you with a product that is on par or worse, below the top tier market average.
Because of this sudden drop or limited time offer, consumers call this tactic “teaser rates.” While the concept can seem negative, someone with a lot of cash can sometimes see the higher rate pay off. When deciding between a cash bonus or a bonus rate, make sure to check and see what the rate will be after the bonus (teaser) rate is done and if you initial deposit will earn you more interest then the cash bonus. If not, you may want to compare other features of the product before deciding on one or the other.
Finally, check to see if there is a early closing fee. Some institutions apply this, to stop consumers from only keeping the account during the initial bonus stage.
Free Gift: In most cases, these offers are the weakest of the available options. Commonly offered by small or community banks, consumers should treat this as a added bonus to an account you already wanted.
With the popularity of Apple products, it has become more common to see banks giving away an iPod Touch or an iPad. While we still recommend taking cash over the gift, if the account is right, this can be a huge win. As always, ensure you can meet the requirements to earn the gift.
Points / Rewards / Miles: Anyone looking to open a credit card has probably heard of travel rewards or points rewards. Banks and credit card companies have made partnerships with a number of hotel and airline companies. This had allowed them to offer thousands of points or air miles as part of credit card contracts.
The general rule for those considering a credit card based on a bonus is to treat it as a just that – a bonus. Keep your focus on the intro APR, standard APR and annual fee. If you are able to earn a bonus on top of a great card, that would put you in a good position. Just make sure you have no problem flying or staying with the partner company the bank bonus is affiliated with.