It feels truly amazing to pay for a hotel stay or an airline ticket with points and miles. However, many vacation expenses (i.e. food and entertainment) require a direct payment. These expenses add up quickly! A “free” vacation rapidly changes into a $5,000 bill! Thankfully, there are ways to earn some extra cash for vacation expenses. One of the most popular is a bank bonus.
What Is A Bank Bonus
A bank bonus is a cash bonus you receive when you meet a certain set of criteria. The most popular form of a bank bonus is opening a new checking or savings account. However, the bank regularly attaches additional requirements. Examples of these requirements include: a deposit threshold, debit card transactions, length of account, an average balance, etc. Once you meet the criteria, the bank deposits your bonus. The value of the cash bonus ranges from $50 to over $500. Generally, a bank bonus offer is only for a set period of time. With that said, a bank often extends multiple bank bonuses per year. This is because, a bank bonus is the most popular method to attract new clients.
What Are The Options To Fund A Bank Account
The most common requirement for a bank bonus is a minimum deposit. The agreement usually looks something like this: If you deposit “X” dollars in “Y” days, you earn “Z” bank bonus. Each bank has a unique criteria in place for what counts as a deposit. Popular funding methods include an Automated Clearing House (ACH) or bank transfer.
Bank Transfer
A bank transfer is when one bank sends another bank money electronically.
Advantages
- Bank transfers are fast (often instant), free (domestically), and safe.
- A bank transfer is possible between the accounts of the same individual.
Disadvantages
- A bank transfer does not code as an ACH transfer; therefore, the transfer may not trigger the bank bonus.
- The bank transfer limit equals the bank account balance.
- Higher deposit requirements may call for multiple bank transfers back-and-forth.
Payroll Or Social Security ACH Deposit
A payroll ACH is an electronic direct deposit of the salary of an individual by their employer. In a similar fashion, a Social Security ACH is an electronic direct deposit by the government.
Advantages
- A payroll ACH is the only transfer option which always triggers the bank bonus deposit requirement.
- The payroll ACH transfer mechanism is fast, free (domestically), and safe.
- A payroll ACH offers a higher deposit potential.
Disadvantages
- It is often difficult and time consuming to switch a payroll bank account.
- A payroll ACH occurs infrequently (i.e. monthly or b-monthly).
Buying Group ACH Deposit
A buying group is an organization, which allows “buyers,” i.e. you, to purchase a wide range of retail items, or “deals,” on behalf of the organization. Upon receipt of the item(s), the buying group reimburses you in full for the purchase. For select buying groups, this payment occurs in the form of an ACH deposit.
Advantages
- A buying group ACH is fast, free (domestically), and safe.
- It is easy to change the destination bank account for a buying group ACH deposit.
- The frequency of buying group deals creates frequent deposit opportunities.
- Buying groups allow “cycling” of funds, which place higher deposit requirement bank bonuses within reach.
Disadvantages
- The buying group must offer an ACH deposit option.
- Data points suggest a buying group ACH triggers the deposit requirement most of the time, but not all the time.
- For multiple bank bonuses, there is a need to change the destination bank account.
Credit Card
In rare cases, a bank allows new account funding via credit card. This transaction occurs in much the same manner as a normal purchase of goods or services.
Advantages
- A credit card payment is fast, free (mostly), and safe.
- The credit card payment limit equals the credit card limit.
- For travel rewards credit cards, a credit card payment sometimes earns points and miles.
Disadvantages
- Banks rarely allow a credit card payment to fund a new account.
- At times, a credit card payment to fund a bank account codes as a credit card cash advance.
- A late credit card balance payment incurs interest.
Doctor of Credit maintains a list of banks, which allow funding via credit card.
Why Are Bank Bonuses Important
A bank bonus is an easy way for you to earn extra cash throughout the year. While a single bank bonus is good, multiple bank bonuses are great! At any given moment, there are dozens of banks offering a bank bonus. Additionally, banks offer bonuses across a wide array of account types: personal checking, personal saving, business checking, etc. Furthermore, like credit cards, earning a bank bonus multiple times is possible. After a “cooling off” period of 12-48 months, you are once again eligible for the bank bonus!
The extra cash from a bank bonus helps reduce your non points and miles eligible travel costs.
What Are The Challenges With Bank Bonuses
Despite the potential financial gains from a bank bonus, there are some significant challenges. First, and most importantly, a bank bonus is taxable. If you benefit from multiple bank bonuses over a given year, your taxes increase in complexity. Second, the vast majority of bank bonuses are state or region specific. You are not eligible for every offer. Furthermore, there are many bank specific challenges. Two specific fees stand out: the monthly service fee and the early termination fee. Generally, multiple options exist for fee avoidance. In addition, some banks set an unattainably high bar on the deposit requirements. Always read the offer carefully!
Final Thoughts
While a bank bonus offers an opportunity for financial gain, proceed with caution. Start slow and simple. A good bank bonus opportunity has the following characteristics: no monthly fee, low deposit requirements, and high bank bonus. It is a bonus if the bank allows deposit funding via either credit card or bank transfer. If there is an ACH requirement, first familiarize yourself with buying groups. A buying group ACH is the best method to meet the deposit requirement. With that said, enjoy the extra cash and subsidized vacation experiences!