Similar to credit cards that dole out cardholder rewards, banks make it easy to earn several hundred dollars with little effort on your part. How? With a bank bonus.
While all bank bonus offers are different, the majority require you set up direct deposit or meet a minimum balance requirement to score the bonus.
The upside with these offers is the fact that you can earn some side cash just for setting up a new account and following the directions. But remember, as with most “bonuses” and “special offers,” the devil is in the details.
Meet the specific requirements
While banks tend to make earning a bonus sound easy, there are almost always minimum balance and direct deposit requirements to meet.
For example, say the offer is for $100 in bonuses if you open a new account and set up direct deposit. Great, right? Then you read the fine print and find out you also have to deposit at least $25 into the account at opening and that first direct deposit much happen within 60 days of opening the account. If this is within your budget, great. If not, it may not be worth the free money.
Know payment breakdowns
Some banks say they're offering one amount, but there are tiers to what you can earn. Say the bank offers an impressive $500 bonus, but only the first $200 comes when you open a new account and set up direct deposit. The remaining $300 comes if you deposit $5,000 in the first two weeks after the account is opened.
Understand related fees
Now, here’s where things get even more tricky. Let’s say you open a new account and meet all the terms and conditions to earn the bonus. While this is great, this doesn’t protect you from having to pay any fees levied by your new checking or savings account.
Fortunately, you can usually skip any fees if you know what they are and the general rules around them. Some banks waive the fee if you keep a certain amount in your account or have monthly activity of a certain amount.
Remember, not all banks come with the same set of rules. Whatever bank you get your bonus from, make sure to read the fine print so you understand how to meet all terms and conditions without messing anything up.
Know your timeline
Another reason to read the fine print: You may have to keep your money in the account for a specific length of time in order to earn — and keep — your bonus dollars.
Say your bank requires your account has at least $10,000 for a minimum of 90 days in order to get your bonus. But don't stop reading — they may make you keep your account open for a set amount of time, or they'll take away that bonus and it will all have been for nothing.
Keep track of the details
Keeping your cash deposited for six months or more may be no big deal to you, but that doesn’t mean it’s easy to keep all of your banking details straight.
To make sure you’re meeting all terms and conditions, it helps to write everything down (or save a file on your computer) so you can keep track. You could even mark your “bank bonus day” on your calendar if you want, notating a date several months from now when you can safely withdraw your money (including your bonus) and close your account if you want.
Remember your tax liability
While “free money” is worth pursuing, it’s important to note that bank bonuses are treated differently than credit card rewards. While credit card rewards earned through a cash-back or travel credit card are considered a “rebate” and thus not taxable, bank bonuses are considered taxable income and will be treated as such.
If the bank bonus you earn is worth more than $600, your bank is required to send out a 1099-C for you to use when you file your taxes. You may not receive a form if your bank bonus is worth less than that, but you are still required to claim the income on Form 1040 when you file.