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Travel hacking can be a great strategy to maximize credit card rewards while traveling almost for free. At a high-level, the process involves applying for specific credit cards with the purpose of having access to lucrative sign-up bonuses. Travel hacking requires discipline but when done responsibly, it can yield lots of rewards. But what about bank accounts that offer sign-up bonuses? Is it worth it?

Last year, I read an article by Financial Panther that did a great job highlighting the benefits of bank account bonuses. He and his wife were able to make over $7,000 in a year by opening a total of 44 accounts!. My first reaction was: no way, this is too much. To Kevin’s credit, he’s super smart and knows how to take advantage of automation to manage his finances.

Kevin was also kind enough to point readers to doctorofcredit. This is a great site that keeps an updated list of the best credit card and bank account offers. I particularly value Doctorofcredit’s opinion on some of the offers as well as details on the fine print. Just like everything, some of the bank bonuses can be good while others may not be worth your time.

After exploring and analyzing all available options we erred on the side of caution going for quality vs quantity. As a result, we opened a total of 11 accounts in 7 banks and received a total of $2,700 in sign-up bonuses. Not bad in my opinion.

The table below highlights the accounts.

Bank	Type	Status	Bonus
Chase (wife)	Checking/Savings	Open/Closed	$300
Chase (me)	Checking/Savings	Open/Closed	$500
Capital One (me)	Savings	Closed	$200
Wells Fargo (me)	Checking	Open	$400
Citi (me)	Checking/Savings	Closed/Closed	$500
Citi (wife)	Checking/Savings	Closed/Closer	$500
FirstBank (me)	Checkings	Closed	$300
		Total	$2,700

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What You Need to Know

Look, some may call it free money but it is not. Each bank will ask you to meet certain criteria before they can grant you the bonus. But don’t worry, they will be making money on your money or betting that you will somehow mess up so they can charge you fees. Needless to say you should avoid fees at all costs.

Now, below is a summary of all the things we’ve learned along the way:

• Post debit card transactions to avoid monthly maintenance fees or,
• Maintain a minimum daily balance on all your accounts combined.
• Some banks may do hard pulls on your credit.
• Direct deposits are often required (ACH).
• Non-working spouses will have limited options.
• One bonus per household (ouch!).
• Large deposits (~5 figures) can give you access to Tier I bonuses.
• There are tons of Tier II bonuses available on the market.
• It can take up to 90 days for a bonus to post on the account once you’ve met the criteria.
• Premature closure of the account could trigger early termination fees and/or bonus repayment.
• Expect a 1099-INT

Debit Card Transactions

Who in their sane mind would open a bank account to then be charged monthly maintenance fees? I know we wouldn’t.

Some banks will ask you to post 3-6 transactions per month on your debit card. This may sound easy but it will require more work on your part. The way I think about it, the more you need to do the more chances you have to fail.

Since we rely almost 100% on credit cards for travel hacking this is not an option for us.

Don’t be blown away by the bonus amount. Read the fine print and evaluate options to avoid monthly maintenance fees. If you still want to proceed then at least you know what you’re getting yourself into.

Takeaway: Be mindful of ways to avoid or have monthly maintenance fees waived.

Maintain A Minimum Balance

Having a combined daily balance of $1,500+ between all your accounts is often required to avoid fees. The amount could be higher for Tier I bonuses.

You have to be ok with having your money be somewhat illiquid for at least 90 days. If you fail to keep the minimum daily balance the bonus may be gone.

If that is too risky for you then my suggestion is to avoid this type of offer and move on. For us, this type of offer actually works. Rules are straightforward and require little effort on our part.

Takeaway: This is basically a set-it-and-forget-it strategy.

Hard Pulls On Your Credit

We generally avoid opening bank accounts that require a hard pull on our credit. The reason is simple, we prioritize credit card rewards for travel hacking than bank account bonuses.

But how do you know?

Well, all banks have to disclose this information and they do so on the fine print. Spend time reading it but if and when in doubt visit doctorofcredit. He includes this detail in all of his offer reviews.

A word of caution. If you’re working on your travel hacking strategy you may want to avoid opening bank accounts that require hard pulls. Doing so may impact your ability to be approved for some of the best premium cards such as the Chase Sapphire Reserve, Preferred, and others.

Takeaway: Be aware as some bank accounts will do a hard pull on your credit.

Direct Deposits

Most banks will ask for a direct deposit. As far as the amount, it can vary between institutions and the type of bonus. Tier II bonuses (<$100) are simple and can usually be satisfied with one direct deposit.

Some Tier I (>$100) offers are likely to require higher amounts ($1000+) posted monthly for ~3+ consecutive months. Others may need you to hit an amount ($5,000+) during the same period.

With that being said, having an employer that allows you to add different bank accounts for payroll is critical. If that is not the case then I’m sorry, you may be out of luck.

Takeaway: Check with your employer for bank bonuses that require ACH deposits.

Non-Working Spouses

You may have noticed that my wife does not have a lot of accounts. The reason is simple, she stays at home with the kids.

We’ve been lucky in that some banks are ok with her account being funded via payroll deductions from my employer. Other institutions are more strict and require my name be added to the account. Under those circumstances, we stop and move on.

This may not be easy to know firsthand. The only way we’ve been able to find out is after the fact by calling the bank. This can be painful and in the end, could limit your ability to get the bonus.

Takeaway: Find out if the bank allows direct deposits to your spouse without having your name added to the account.

One Bonus Per Household

If you’re married, you need to read this. Some institutions may allow you to open two separate individual accounts and give you access to the bonus, however, we’re starting to see some institutions adding “the one bonus per household” on the fine print.

We experienced this first hand.

After meeting all the requirements and waiting for the bonus to post on my wife’s account, we called the institution and found out she was not eligible.

I had already been granted the bonus and had closed the account a few months prior.

Takeaway: Read the fine print and check if the one bonus per household rule applies to you.

Large Deposits Give You Access To Tier I Bonuses

If you want to reap the rewards of some of the highest bonuses available on the market then be ready.

Some of these institutions are likely to require a large deposit so they can also make money on your money.

In other words. you will need liquidity.

Having an emergency fund is a great option to hit bank bonuses. Yes, your money may be tied up for a little while but the bonus will make it worthwhile. For example, a $200 or $400 bonus may require a deposit of $10,000 to $15,000. That is 2% to 3.33% on your money in less than 90 days.

Some people may find discomfort with these type of numbers or with having their money tied up for more than 90 days. If you would rather have your money available for other investing opportunities then avoid this type of bonus.

Takeaway: No cash set aside? then don’t waste your time with these bank bonuses

Tons of Tier II Bonuses

This is where you could go crazy. A lot of banks offer $10-$50 bonuses and require minimal activity.

We are still debating on what to do in this category. Yes, they are easy to set up and don’t require much work. A little bit of automation and voila.

At this point, we’re not sure. Chime, Sofi Money, and Aspiration are on our radar but time will tell.

Takeaway: a good way to get started. They don’t require a minimum balance and charge $0 fees.

Up to 90 Days Before Bonuses Post

This goes without saying. It is in your best interest to meet the minimum requirements so the bonus can be posted on your account. Sometimes you have full control and in other cases, you don’t.

For bank account bonuses based on direct deposits it is straightforward; however, Tier I bonuses ask that you maintain large deposits sitting on a savings account for 60-90 days.

Once met, the clock starts for an extra 60-90 days for the bonus to post. All in all, your money could be sitting on a savings account for a total of up to 180 days!

Takeaway: Meet the minimum requirements ASAP and accelerate delivery of your bonus.

Early Termination Fees or Bonus Repayment

Ok, you’ve made it. You met all the criteria and after the long wait you see the bonus on your account!.

Now what? do you keep the account open? do you close it? if so, what are the implications?

Today, some institutions are catching up with folks who churn bank accounts and are now demanding you keep the account open for ~180 days post bonus award. Otherwise, early termination fees and/or bonus deductions may apply.

For bank accounts that carry early termination fees consider switching to a different product at the same institution. This is somewhat similar to the recommendation of downgrading from a Chase Saphire Preferred to a no-fee card like the Freedom Unlimited instead of canceling the card.

For example, Citi has one of the best online savings accounts with Citi accelerate. Shortly after receiving the bonus both my wife and I opened a Citi accelerate account, moved all the funds, and closed the checking/savings accounts.

To the best of my knowledge, Chase does not carry early termination fees. As a result, we closed our savings accounts. Given that Chase credit cards are, IMO, the best in the market, we decided to leave both our checking accounts open.

Three reasons: (1) we recently closed our accounts at Bank of America because they don’t have a big presence in Colorado, (2) we have a branch right behind our neighborhood, and (3) we love Chase credit cards and their customer service.

Takeaway: This is where going back to the fine print of the offer will pay dividends. If paying an early termination fee is still worth it, go for it. If you have to pay the bonus back consider alternatives.

Expect a 1099-INT

All bank account bonuses are considered interest and as such, are reported to the IRS. Depending on your timing for both opening and receiving the bonus award, expect to get form 1099-INT via mail or email.

Form 1099-INT is easy to include in your taxes and should not be a reason to make you steer away from bank bonuses. Honestly, this is more of an FYI than anything else.

Are Bank Bonuses Worth It?

I know you’re going to hate me but it really depends.

For us, they are worth the effort as long as we keep a delicate balance between the number of accounts and the bonus amount. Again, quality over quantity.

We don’t chase ALL available offers because some are just not worth our time.

Please recognize this is not an Either-Or strategy, it is a complementary approach to our overall financial plan. We think of it as just another tool in our toolkit 🙂

Final Thoughts

If you’re still on the fence don’t worry. I was there not too long ago.

My best piece of advice is (1) invest time educating yourself about this strategy and (2) start slow.

I’ve also put together a summary of situations where bank account bonuses may not be appropriate for you.

• No ability to set up different accounts for direct deposits.
• No emergency fund or cash to fund Tier I bonuses.
• Like to keep your emergency fund 100% liquid.
• More is less, ie, the fewer bank accounts the better.
• All your funds are to be invested in the stock market.
• You think about opportunity cost 24/7.

Bank bonuses can be lucrative. Are they worth it? Maybe. If you have better plans for your money and think the opportunity cost is too high then stay away from them.

Just like all things personal finance, Do your due diligence to make sure you’re making an informed decision.

Read the fine print before you jump on promotions with high bonuses but that may require a lot of work and cash.

Last, this was not intended to be an extensive review of bank account bonuses. Instead, it was a high-level overview based on our own experience. Take it for what it’s worth it 🙂

If you want to know more details about bank account bonuses then please read this article. Also, don’t forget to visit doctorofcredit to check the latest bank account offers.

Until next time … JJ