How to Approach Bank BonUS Offers
Say a bank wants to give you $500. Interested?
Bank bonuses are nothing new, but often they are little more than window dressing. Before committing your money and opening a new bank account, consider putting deposit bonuses into perspective.
What to keep in mind about sign-up bonuses
While a lump sum bonus can sound tempting in dollar terms, there are two things you need to do to put it in perspective. The first is to calculate what it represents as a percentage of your account. The second is to remember that this bonus is a one-time payment, not an ongoing addition to your account.
Those ideas are important because often a bonus works out to be just a few basis points as a percentage of your account, and when you think about those basis points spread over the years, you are likely to have the account, it really does not add much to the interest rate you will be earning. If you earn $500 though through a bank reward, the bonus can represent as much as 50 basis points to an account yield (a deposit of $50,000 will earn you a bonus of $250).
In today’s era of near-zero savings account rates, 50 basis points can be a difference-maker, even if you think of it as being spread out over a few years. Still, there are other considerations beyond the one-time bonus.
How to choose a bank beyond the bank bonus
Here are some of the other things to consider in choosing a bank:
Interest rates
A deposit bonus is a one-time thing, but the interest rate you earn will affect you year after year. So, a signing bonus typically should not be enough to make up for a low interest rate. In the case of Ally Bank, they consistently rank among the banks with the best savings accounts by rate, so the bonus takes on a little more significance since it is not an attempt to make up for low rates.
Monthly fees and other charges
Check out everything from maintenance fees to transfer charges. After all, there is no point getting paid a bonus by a bank if you are just going to pay it all back in fees.
Branch locations
If doing your banking in person is important to you, branch locations matter — and this would rule out online banks like Ally. For checking accounts, ATM locations also matter because you do not want to fritter away your deposit bonus on ATM fees.
Again, there are things to consider beyond the one-time bonus. However, if you find banks are pretty competitive based on those other factors, bonuses offered by institutions might be enough to tip the balance in its favor. That generally is how one-time bonuses should be regarded — not as a primary reason for choosing a bank, but as a potential difference-maker if other factors are close to even.
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