The days of getting a toaster for opening a checking account are long gone. Nowadays, banks are offering iPods, Flip cameras, or just straight up cash for you to open a new checking account. The standard bank deal is the same at almost every bank. You need to open a checking account, set up at least one recurring monthly direct deposit, and then execute a bill pay or two through their online system.
What are the risks in cashing in on these bank deals?
- Credit checks: The bank will always run a soft inquiry to verify your identity and they may run a hard inquiry if the checking account has overdraft protection (difference between hard and soft inquiries). The only way to know for sure is to call the bank and ask. A hard inquiry will lower your credit score, so it would be a mistake to go after bank promotions if you intend to get a loan in the near future.
- Fees: The checking account may have minimum balance requirements or a maintenance fee, so be sure to review the account’s fee structure before applying up. Getting $100 to open an account only to find out you’re facing $7 per month charges for a year is a bad thing.
- Lost Interest: This is an opportunity cost type of risk because checking accounts don’t pay interest. While interest rates aren’t high right now (the best of the high yield savings accounts are only giving ~1.50% APY), it’s still something to consider.
- Hassle: Banks require direct deposit for a reason, it makes that account “stickier.” You probably only have one job, one direct deposit, and changing it is a big headache. You’re likely better off spending your time on something else.
Now that you understand the risks of these bank deals, you can make an educated decision on whether they make sense for you.
Have you taken advantage of a recent bank promotion? Any words of advice or warning to others trying to earn a little cash on the side?
Jim writes about money matters at personal finance blog Bargaineering.com.