Are bank sign-up bonuses worth it when opening a checking account?

Bank sign-up bonuses can be worth it, but only if the account itself fits your financial needs. A promotion is a smart perk when you're already planning to open a new checking account and you can meet the eligibility requirements without changing your normal banking habits. If you'd have to stretch your budget to maintain a minimum balance or rearrange your finances just to qualify, the bonus may cost you more than it's worth in fees and hassle.

You've probably seen banks offering special promotions or bonuses, and you may have seen them advertised in various places. If you're looking to switch banks or open a new account, these incentives can be very appealing. But before you take the plunge, it's important to make sure you understand what bank promotions are and how they work to help you know if they are worth your while.

What are bank promotions and bonus offers?

A bank promotion or bonus is a special incentive that banks offer to attract new customers or encourage existing customers to use additional services. It can be a one-time bonus or an ongoing promotion for the life of the account.

For example, a bank could offer a cash bonus for opening a new checking account. It might deposit the funds into the new account or give the account holder a gift card. The bank could also waive the monthly account maintenance fee or offer free checks.

To encourage people to sign up for a savings account, a bank might offer a promotional annual percentage yield (APY) that is higher than the standard rate for a limited time. It could also offer a cash bonus to existing customers who refer friends or family members.

How do checking account bonuses work?

A checking account bonus, sometimes called a checking account sign-up bonus, bank sign-up bonus, account opening bonus, or checking account promotion, is an incentive banks offer to encourage customers to open a new account. Most checking account bonus offers require customers to meet specific eligibility requirements before receiving a cash bonus.

Common requirements may include:

• Opening a new checking account within a specific promotional period
• Setting up qualifying direct deposit(s)
• Maintaining a minimum balance for a certain period
• Completing a required number of debit card transactions
• Keeping the account open for a minimum amount of time

Before applying for a checking account offer, review the terms carefully to understand how the bonus is earned, how long it will take to receive the cash bonus, and whether the account's features and fees align with your financial needs.

Are bank promotions and bonuses worth it?

A checking account promotion or bonus could be a deciding factor if competing banks have similar accounts and you aren't sure which one to go with. A special incentive could make an account worth it if you were already looking to open an account.

The best checking account promotions reward banking behaviors you're already planning to use, such as direct deposit, debit card spending, or maintaining an active banking relationship.

For example, if a bank offers a new checking account bonus of $150 but you don't maintain the required minimum balance, you could incur a monthly fee. Over time, the fee will consume the $150 you received for opening the account. This could leave you worse off than if you had chosen an account with lower fees and more favorable terms.

According to Chris Powell, Head of Deposits and Customer Engagement, evaluating a new banking relationship should start with understanding your current financial habits. "Pull up the last two or three months of statements and see what has actually changed," he says. Reviewing your spending patterns can help you determine whether a new account's features, requirements, and rewards are a good fit for your needs.

What’s the catch with bank promotions and bonus offers?

You may have to meet certain requirements to qualify for bank bonuses. For example, when you open a new checking account, you may be required to maintain a minimum balance or sign up for automatic bill pay, direct deposit or something else to qualify.

If a cash bonus is offered, how you receive the funds will also vary from one bank to the next. One bank might deposit the funds in your new checking account, while another might send you a prepaid debit card or credit card with the amount loaded onto it.

While it's important to avoid making decisions based solely on a limited-time offer, promotions can create opportunities for consumers who are already considering a new banking relationship. According to Chris Powell, "Most banks put their strongest offers in market in the fall, so keep an eye out over the next few weeks." Consumers should evaluate any promotion alongside the account's fees, features and long-term value to determine whether it's the right fit.

How to compare checking account promotions

Bank promotions and bonuses can differ greatly between banks. Be sure to find out all of the details before signing up to make sure the account terms and qualifying for the offer are worth it. Then carefully consider all of your options. Compare different accounts' interest rates, fees and promotion eligibility requirements to make sure the account you choose is the best one for your needs.

Frequently asked questions

Are bank sign-up bonuses taxable?

Yes. Bank sign-up bonuses are generally considered taxable income. Your bank may send you a 1099 form for the bonus amount, and you would report it as income when you file your taxes.

Can you get more than one bank sign-up bonus?

It depends on the bank. Many banks require that you be a new customer or that you haven't held an account within a certain period — often 12 to 24 months — to qualify for a sign-up bonus. Always read the eligibility requirements before applying.

Does opening a new checking account for a bonus affect your credit score?

Opening a standard checking or savings account typically does not affect your credit score, because deposit account activity is not reported to major credit bureaus. However, some banks may run a soft credit inquiry during the application process.

Explore Citizens promotions

Yes, Citizens' promotions are offered across our products. These promotions vary over time. Check out Citizens' current promotion for customers or stop by your nearest Citizens branch.