Lots of banks are offering free cash: Should you bite?

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Many banks these days are offering to throw free money at you if you’ll open an account with them.

But while these offers can work to your benefit in some situations, you have to pay special attention to some gotchas…

RELATED: Bank at Wells Fargo? You may be entitled to some cash…

A look at popular banks offering sign-up bonuses

Amid fierce competition for customers, banks are offering sign-up bonuses and getting the word out through direct mailers, online ads and other media.

These flashy offers of hundreds of dollars in cash are designed to both bring in new clients and poach existing customers from competitors.

One of the most eye-popping offers comes from Ally Bank. With its newly announced PayBack Promotion, Ally will give you 1% of any money you move over to them. That means the minimum cash bounty you’ll get is $10 (on a deposit of $1,000) and the maximum bonus tops out at $1,000 (on a deposit of $100,000).

But act fast if you think you like this offer. You must sign up by October 21, fund your account by October 31 and maintain the amount you deposited until mid-January 2019 in order to receive your cash bonus approximately one month later. See full details here.

Here’s a look at a few of the other bonuses available right now specifically for opening a checking account:

Note that all offers subject to change without notice.

Bank Offer
Chase $200*
Citi $200*
HSBC Up to $750
Sun Trust Up to $300*
Wells Fargo $200*

* requires direct deposit


Most of these offers require qualifying activities, which typically include setting up direct deposit and making a certain number of debit card purchases each month (usually a minimum of 10).

The higher dollar rewards also require you to keep loads of cash with the bank — for example, the HSBC offer calls for you to have $100,000 on deposit! Meanwhile, the Chase offer requires that you keep a more modest $25,000 on deposit for 90 days.

Joel, one of the producers on the Clark Howard Show, recently took advantage of a sign-up bonus offer from Discover that required a $25,000 deposit for a minimum of 30 days. He’s been very happy thus far.

“I opened an online account with Discover recently and scored $200 for keeping my money with them for a month,” he says. “I specifically like their model for the ease of use.”

That ease of use Joel refers to includes a simple online sign-up process and not being required to set up direct deposit with Discover.

If you do decide to do a sign-on bonus with a bank, money expert Clark Howard has a key piece of advice:

Always keep any promotional offer you get in the mail when you open an account. That protects you if the bank suddenly gets amnesia about the terms of the offer.

Should you take a bonus offer from a big bank?

Clark has long advised people to bank with credit unions and small local banks rather than the “giant monster mega-banks” as he calls Bank of America, Chase, Citi and Wells Fargo.

The consumer champ’s attitude has been shaped by the many instances of “customer no-service” from the big banks and what has proven to be a systemic pattern of taking advantage of customers, in some cases. (Hint: We’re looking at you, Wells Fargo.)

In fact, Clark has long said that “it’s not a question of if, but when” you’ll be done dirty by one of the nation’s four biggest banks, if you choose to do business with them.

So while we can’t decide for you whether you should or shouldn’t do a sign-up offer with a big bank, just keep this in mind as you weigh possible offers.


Here are a few potential gotchas to keep in mind

Be on the lookout for these common pitfalls:

Understand that your bonus may be treated as taxable income

It’s not unheard of for banks to report your sign-up bonus to the IRS as taxable income by issuing a 1099 for the amount they paid you.

Shortly after the recession, The Los Angeles Times reported Citibank was issuing 1099s to customers who got a 25,000 mileage bonus when opening a checking or savings account.

Unfortunately, Citibank gave the miles an overly generous rate of 2.5 cents per mile for tax purposes, which was well above the industry standard rate of 1.1 cents at that time. So somebody who got the 25,000 miles bonus instantly had $625 of extra taxable income!

This may not happen to you, but it’s something to remember if you’re considering one of these offers.

Watch out for hidden fees

Be sure to read the fine print on these sign-up bonus offers. For example, HSBC will change a $25 fee if your account is closed within 180 days.

While these sign-up bonus offers can be great, you’ll want to go into this with eyes wide open.

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