Are bank bonuses worth it? Guide to understanding bank account bonuses

Chances are, you’ve seen emails or ads encouraging you to open a new bank account in exchange for a bonus. While some bank account bonuses are hundreds of dollars, others can leave you with thousands. In fact, bank bonuses may reach up to $3,000, especially during peak promotional seasons when interest in them increases.

Bank account bonuses don’t require a lot of effort and may be a great way to earn some extra cash. However, that doesn’t mean you should go ahead and take advantage of one. It’s your job to weigh the pros and cons to decide whether a bank bonus makes sense for your unique situation. Most bank bonuses are tied to opening a personal checking account, which is the most common account type eligible for these promotions.

Let’s take a closer look at how bank bonuses work, what you need to do to leverage them, and how they might affect your taxes and overall finances.

What are bank account bonuses?

Banks sometimes offer bonuses to attract new customers. Their primary goal is to “get you in the door” with a cash payout and hope that you’ll continue to bank with them for years to come. Bank bonuses may be hundreds or thousands of dollars. Their value has shot up over the years, and current market data shows a 15% hike in average bonus amounts since 2024.

While some banks offer multiple sign-up bonuses, you’ll usually only be able to qualify for one at a time. Each bank has its own criteria and process for bonuses, but typically, you have to open a new deposit account, such as a checking or savings account. Once you do, you may be required to make minimum deposits during a set time frame or enroll in direct deposit.

For example, to score a $250 bank bonus, a bank may ask you to deposit $500 or more within 90 days. Since bank bonuses vary by bank and account type, it’s important to read the fine print and understand what’s involved before you commit to one. Many bonuses require a minimum opening deposit, which is the initial amount you must deposit to open the account and qualify for the bonus.

Types of bank bonus offers available

There are several types of bank bonuses you might come across, including:

• Cash bonuses: Typically, bank bonuses are cash bonuses. After you meet the criteria, a bank rewards you with a lump sum of cash.
• Fee waivers: Some banks charge account holders a monthly maintenance fee. A bank bonus may waive these maintenance fees for a certain period or under certain criteria.
• Promotional interest rates: In some cases, banks will offer enhanced APYs for a limited time. Once the promo rate expires, the standard rate will kick in.
• Additional rewards: Banks may also reward you with a variety of perks, such as points, premium features, and executive services.

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How bank account bonuses work

Typical qualification requirements

To reward you with a bank account bonus, a bank will require you to meet specific criteria. Typically, you’ll need to make a minimum deposit or maintain a minimum balance within a set time frame. For example, Bank A might request $1,500 in deposits over 90 days to earn $500.

You might also have to set up qualifying direct deposits or keep your account open for a certain period to meet the requirements. Many banks have a direct deposit requirement, meaning you must receive a specified amount in qualifying direct deposits within a set timeframe to qualify for the checking account bonus. Additionally, bank account bonuses are usually only available to new checking account customers, so if you’re already a primary account owner at a bank, its bonuses are likely not an option for you.

Common bonus structures and amounts

Bank bonuses are usually tiered, meaning some offers are higher than others due to the account type and required criteria. Entry-level bonuses, which are usually between $100 to $300, are fairly easy to secure. Premium account incentives ($300 to $700) and relationship bonuses ($500 to $3,000) are more difficult because you’ll likely need to deposit more money or maintain a higher balance. Some bonuses specifically require you to maintain a minimum average daily balance over a set period to qualify for the higher reward. Fortunately, you can pick and choose which bonus structures are the most realistic for your situation.

Timeline: From application to receiving your bonus

In general, bank account bonuses take some time to claim. The account opening process may be instant or take up to three business days. Then, the qualification period or the time you have to make the required deposits or maintain a certain balance, for example, typically lasts between 60 and 90 days. Banks often require you to meet these criteria within a specific number of days of account opening to be eligible for the bonus. Once the bank verifies you’ve met their criteria, they’ll post your bonus immediately or up to 60 days afterwards. Note that you may also have to meet other requirements 90 to 180 days after you receive your bonus.

How bank account promotions differ from other financial incentives

Bank account bonuses are different from other financial incentives you might find, like credit card sign-up bonuses and investment account promotions. A new account bonus is a promotional cash reward offered by banks for opening a new account and meeting specific requirements, which is distinct from the bonuses offered by credit cards or investment accounts. They’re usually easier to qualify for and almost always reward you with cash. Credit card sign-up bonuses, on the other hand, often require good to excellent credit and usually require you to spend a lot more money.

Seasonal trends in bank bonus offerings

Although bank bonuses are offered year-round, peak promotional periods are usually between March and July. Some banks also leverage year-end bonuses around December to encourage you to open an account with them right in time for the new year. These promotions are often targeted at new accounts, with special incentives for customers who open accounts during peak promotional periods. As a customer, it’s important to time things out strategically so you can maximize your bonus potential.

For example, you might want to wait until the end of the year to participate in a bonus opportunity rather than in February, when there are fewer attractive options out there. Also, pay attention to Federal Reserve actions and rates throughout the year, as they may influence bonus values.

Are bank bonuses worth it?

Calculating the effective return on bank bonuses

Yes, a bank bonus may be hundreds or even thousands of dollars. However, that doesn’t always mean it’s worth it. It’s your job to assess the opportunity cost and compare a bank bonus with other guaranteed returns. You should also consider the minimum balance requirement for the account, as failing to meet it could result in fees that offset the value of the bonus.

If you’re already planning to switch banks, taking advantage of a sign-up bonus can certainly be a logical benefit. “However, for most consumers, the one-time payment of $200 – $500 dollars is relatively modest compared to the long-term benefit of earning a competitive interest rate on deposits,” says Gabe Krajicek, CEO of financial products and solutions provider Kasasa.

Comparing bonuses to traditional interest earnings

Due to account opening bonuses typically being a one-time payment after meeting particular requirements, it can be challenging to compare them directly with ongoing interest earnings.

“A realistic way to evaluate the return is to calculate how much interest you would earn on your average balance over the same period and compare it to the value of the bonus,” explains Krajicek. A high-yield savings account may offer a better long-term return through higher interest rates compared to a one-time bonus.

For example, some savings accounts in today’s market may offer interest rates of 5% or more. On an average balance of $5,000, this would amount to roughly $250 in interest earned annually, often surpassing the value of a one-time bank bonus over time.

Hidden costs that reduce bonus value

Another important aspect to consider before moving forward with a bank bonus is the potential fees involved. Overdraft fees can quickly diminish the value of your bonus if you accidentally overdraw your account. Additionally, if you switch banks, your old bank may impose a closing fee, especially if the account has been open for less than a year. It’s also important to remember that bank bonuses are considered taxable income, so you will need to pay taxes on them. Moreover, monthly maintenance fees can apply if you fail to maintain the required minimum balance or meet other account criteria after opening your new account. Being aware of these costs is crucial to accurately evaluating whether a bank bonus is truly worth it.

Tax implications of bank account bonuses 

How bank bonuses are taxed

Unfortunately, bank account bonuses are not tax-free rewards. The Internal Revenue Service (IRS) considers these bonuses taxable income, and you will need to pay taxes on them at your ordinary income tax rate. If you earn a bonus exceeding $10, your bank will likely send you a 1099-INT form reporting this income. Once the bonus is deposited into your account, it must be reported as taxable income for that tax year.

Even if you do not receive a tax form, you are still responsible for declaring the bonus on your tax return and paying any applicable taxes. Depending on your tax bracket and deductions, the net benefit of the bonus may vary, with those in lower brackets potentially gaining more from the bonus than those in higher brackets.

Think of a bank bonus as an extra perk

While a bank bonus may seem like an easy way to score some cash, it’s not always the best choice. Switching banks solely for a bonus may not be worthwhile if the new account does not meet your long-term needs. “Choose an account where the account bonus isn’t the point.  Instead, focus your attention on where the long-term intrinsic value and overall banking relationship are the primary benefits,” says Krajicek. Features such as competitive interest rates, low fees, and strong customer service will matter most over time and are also important components to consider. “That said, if you find an account you like and that meets those needs and also offers a sign-up bonus, it can be a worthwhile added benefit,” he adds.