Should You Open a New Bank Account for a Cash Bonus? Do the Math First
Digest
Banks are currently offering incentives to attract deposits, a shift from recent years when they had excess deposits and offered low interest rates. This is because banks need more deposits to lend out, and consumer deposits are the cheapest form of funding for them. These incentives can include one-time bonuses, promotional rates on savings accounts, and other offers. It's crucial to read the fine print of these offers to understand the terms and conditions, including the duration of promotional rates, requirements for earning bonuses, and any associated fees. Before switching banks, consider contacting your current bank to see if they can offer a counteroffer. Also, think about your overall banking relationship, as long-standing relationships may offer benefits like discounted mortgages or travel perks. Switching banks can be a lot of work, requiring updates to payment information and potential disruptions to subscriptions.
Outlines
Bank Incentives to Attract Deposits
Banks are offering incentives like bonuses and high interest rates to attract deposits, a shift from recent years when they had excess deposits and offered low interest rates.
Why Banks Need More Deposits
Banks are offering incentives because they need more deposits to lend out. Consumer deposits are the cheapest form of funding for banks, and they can make more money by lending out those deposits.
Types of Bank Incentives
Banks are offering one-time bonuses, promotional rates on savings accounts, and other incentives to attract new customers. These incentives can be as high as $500 for opening a new account or 5% interest on savings accounts.
Evaluating Bank Incentives
It's important to read the fine print of bank offers to understand the terms and conditions. Consider the duration of promotional rates, the requirements for earning bonuses, and any fees associated with the account.
Considering Your Current Bank
Before switching banks, contact your current bank and let them know about the offers you're seeing. They may be able to offer you a counteroffer to keep your business.
Overall Banking Relationship
Think about your overall banking relationship before switching. If you have a long-standing relationship with your current bank, you may be eligible for benefits like discounted mortgages or international travel perks.
Challenges of Switching Banks
Switching banks can be a lot of work. You'll need to update your payment information with all of your billers and vendors, and you may experience disruptions to your subscriptions.
Keywords
Deposits
Funds placed into a bank account, used by banks to make loans and earn interest.
Interest Rates
Percentage charged by a lender for borrowing money or paid by a bank for deposits. Higher rates can make saving more attractive.
Promotional Rates
Temporary interest rates offered by banks to attract new customers, usually higher than standard rates.
Bonuses
One-time payments offered by banks to attract new customers, for actions like opening an account or making a direct deposit.
Fine Print
Terms and conditions of a bank offer, important to read carefully to understand requirements and limitations.
Fees
Charges associated with a bank account, including overdraft, maintenance, and transaction fees.
Direct Deposit
Service allowing paychecks or other payments to be deposited directly into a bank account.
Balance
Amount of money in a bank account.
Q&A
Why are banks offering incentives to attract deposits?
Banks need more deposits to lend out, and consumer deposits are the cheapest form of funding for them.
What types of incentives are banks offering?
Banks are offering one-time bonuses, promotional rates on savings accounts, and other incentives to attract new customers.
How can I evaluate bank incentives?
It's important to read the fine print of bank offers to understand the terms and conditions, including the duration of promotional rates, requirements for earning bonuses, and any associated fees.
What should I do before switching banks?
Before switching banks, contact your current bank and let them know about the offers you're seeing. They may be able to offer you a counteroffer to keep your business.
What should I consider about my overall banking relationship?
Think about your overall banking relationship before switching. If you have a long-standing relationship with your current bank, you may be eligible for benefits like discounted mortgages or international travel perks.
What are the challenges of switching banks?
Switching banks can be a lot of work. You'll need to update your payment information with all of your billers and vendors, and you may experience disruptions to your subscriptions.
Show Notes
After years of paying nearly zero-percent interest, many banks are offering cash and attractive savings rates for consumers to open new accounts. Wall Street Journal personal-finance reporter Imani Moise joins host J.R. Whalen to discuss what’s in the fine print that could cause you to think twice about moving your money.
Sign up for the WSJ's free Markets A.M. newsletter.
Learn more about your ad choices. Visit megaphone.fm/adchoices
Table of contents
United States
