What Is a Bank Sign-Up Bonus?

A bank sign-up bonus is a lump sum of cash you receive when signing up for a new bank account and fulfilling various requirements. Banks and credit unions offer bank sign-up bonuses to entice new customers into joining or signing up for accounts.

A bank sign-up bonus may be offered for consumer or business accounts. Bonuses can range from $100 to $3,000, according to Investopedia research.

Banks and credit unions use sign-up bonuses to attract and reward new customers for setting up direct deposits or depositing large sums of money in accounts.
Bank sign-up bonuses range between $100 and $3,000, but $200 to $300 is a more common bonus.
You don't usually receive a bonus just for signing up. Sign-up bonuses typically require you to qualify in other ways, such as maintaining a deposit amount.
Most bank sign-up bonuses require you to initiate a series of direct deposits, although some also accept new cash deposit transfers.

How a Bank Sign-Up Bonus Works

Typically, a bank sign-up bonus may require a sign-up code. Then, after opening the account, you perform a series of actions, which could include one or several of the following:

New account deposit: Adding a minimum deposit, such as $25.
Direct deposit: Making one or many recurring direct deposits in the account.
Transactions: Making a certain number of debit card transactions or signing up for e-statements.
Average balance: Maintaining a specific average monthly or daily balance.
Meeting deadlines: Receiving deposits and/or leaving the funds untouched for a specific number of days.

After you complete the actions to qualify for the bonus, the bonus is deposited into your new account within a timeframe specified by the bank. This may range from about 10 days to 180 days.

After your bonus is in your account, you can choose whether to keep the new account or close it. However, some financial institutions will charge a fee to close the account or even subtract the bonus before closing the account.

Credit union sign-up bonuses can be more convoluted than bank bonuses. Credit union bonuses will require that you join the credit union as a member and they typically require more steps over a more extended period. Some bonuses may take up to a year to earn the full amount.

By Jan. 31, you’ll receive a 1099-INT for each sign-up bonus received during the tax year. The other copy of the 1099-INT goes to the IRS. Tax wasn’t withheld when the bonus was deposited in your account, so you’ll owe income taxes on your bonus.

Another type of bonus is a bank referral bonus. You earn this bonus when you refer a friend who opens a qualifying bank or credit union account using a code or link you provide. Your friend may also earn a bonus. This bonus may be much smaller, such as $50 per referral, but may arrive more quickly than other types of sign-up bonuses.

Types of Bank Sign-Up Bonuses

Two primary types of bank sign-up bonuses (direct deposit bonus and large deposit bonus) have slightly different requirements. A third main bonus type, a combination bonus, combines features of deposit and large deposit bonuses.

Direct deposit bonus

The most typical bank sign-up bonus will require a direct deposit. You open the bank account using a code or link, then set up direct deposit within a time window, such as 60 or 90 days. Some direct deposit bonuses may have a minimum amount required to earn the bonus, while others provide more significant bonuses for higher deposits.

In general, direct deposits must be regular monthly income. This could include payroll, salary, and government payments deposited with ACH. Other types of deposits, such as transfers from other deposit accounts or peer-to-peer networks, usually won’t qualify.

You may also be asked to take other steps, such as using a debit card several times or signing up for e-statements.

Large deposit bonus

With this bonus type, the financial institution asks you to deposit substantial cash (typically $5,000 to $300,000) into one or many linked new accounts. This money can be transferred from another external bank account.

Then, you must leave a minimum amount in the account for a specified time. After the time elapses, you earn the bonus, which is deposited in your account. Typically, large deposit bank sign-up bonuses are more sizable than the direct deposit type.

Combination bonus

Some bonuses combine the previous two types. You have to set up a direct deposit within a specified time period, which may be associated with a specific minimum amount. You must also deposit funds and maintain a minimum balance. These bonuses usually work in tiers, with higher bonuses for larger minimum balance amounts.

Pros and Cons of Bank Sign-Up Bonuses

Pros

Earn lump sum for everyday banking
Earn multiple bonuses throughout the year
Reward for trying a new bank

Cons

Taxes due on bonus
Potentially stuck with maintenance fees and low interest
Can be time-intensive

Pros explained

Earn lump sum for everyday banking: Bank sign-up bonuses can offer an easy way to earn a lump sum of cash. Depending on interest rates at the time, a sign-up bonus may pay better than interest earned.
Earn multiple bonuses throughout the year: You can earn multiple large deposit bonuses in one year with the same sizable sum of cash moved between accounts if you plan well and use the right accounts.
Reward for trying a new bank: An account deposit can incentivize you to try a new bank or credit union without committing long-term. You may prefer the new bank to your previous bank, particularly if the bonus is for an account that comes with a decent annual percentage yield (APY).

Cons explained

Taxes due on bonus: The bonus will likely be reported on form 1099-INT, and you’ll probably pay federal, state, or local taxes on the bonus. If you want a tax-free source of earnings, look elsewhere.
Potentially stuck with maintenance fees and low interest: If you’re not careful, you may pay the account’s maintenance fees while you own the account, which will eat into any bonus. In addition, many accounts associated with bank sign-up bonuses don’t reward customers with competitive interest rates.
Can be time-intensive: Consider the value of the time you’ll spend reading through rules, switching your direct deposits, opening and managing the account, and closing it if you don’t want to stay with the bank. This may reduce your earnings compared with a high yield savings account where you can deposit without worrying about as many details.

Requirements for Bank Sign-Up Bonus

To earn a bank bonus, you must read and follow instructions closely. For example, you’ll likely need to use a link or code to sign up for your account or miss out on the bonus. Other requirements to watch out for include:

Deadlines: The window of time you have to complete actions, such as 30 days
Amounts: Specific minimums that must be met to qualify for the bonus
Actions: All steps required, such as setting up direct deposit or using your debit card

Typically, a bonus isn’t available to people in the following categories:

Existing bank customers
Anyone who already received the bonus in the past, within a specific period (such as 12 months)
Customers with accounts closed with a negative balance within a specific period
Anyone under age 18
Anyone without a valid U.S. Taxpayer Identification Number (TIN)

You may also need to live in a geographic area, such as a particular state, to qualify for the bonus.

What To Look for in a Sign-Up Bonus

You might want to look for the following in a sign-up bonus:

Earning a high APY on top of the bonus for the amount in your account
No fees charged to close the account
Easy qualification rules with low or minimal direct deposit amounts
Clear, easy-to-understand communication about which direct deposit types qualify and other bonus qualification terms and conditions
Online application and account maintenance for bonus qualification
Low minimum balance requirements to avoid monthly bank maintenance fees
Rapid qualification and deposit of your bonus—so you don’t wait six to 12 months to earn your bonus

In addition, compare your rate of return from the bonus with how much you could earn in a high-yield savings account over the same time period.

Which Bank Has the Highest Sign-Up Bonus?

Chase, Citi, and Wells Fargo banks have some of the highest sign-up bonuses available, although it takes time and large deposit to qualify. Chase offers a $3,000 bonus when you transfer $500,000 or more into a new or upgraded Private Client Checking account and maintain the balance for 90 days. With Citi, you can earn a $2,000 bonus if you open an eligible checking account with $300,000 for several months. With Wells Fargo, you can earn a $2,500 bonus if you deposit $250,000 and maintain that balance for several months. However, when working with large amounts, remember that the Federal Deposit Insurance Corp. (FDIC) only insures up to $250,000 in deposits per person, per account.

Should I Switch Banks To Get a Sign-Up Bonus?

Deciding whether a bank sign-up bonus is worth your time and money can take some research. First, consider whether the bonus earned bests higher interest rates accumulated elsewhere in a certificate of deposit (CD) or money market account. Also, consider whether you want to keep the account open and pay potential fees or if you want to open, manage, and close the account.

Why Do Banks Give Money To Open Accounts?

Banks award money to open accounts to bring in new, regular customers who use the bank’s services. As a result, each bank or credit union will have a different requirement for keeping an account open to earn a bonus, but the range is generally 90 days to 12 months. If you close the account early, you may forfeit your bonus or be required to pay a fee.

How Many Bank Accounts Should I Have?

You can have as many bank accounts as you wish, as government regulations don’t limit the number of accounts. However, you might consider the amount of digital clutter that can come with opening numerous checking or savings accounts. Closing accounts can be time-consuming and require phone calls with the financial institution.

The Bottom Line

If you have the time and/or cash to meet a bank’s requirements, a bank sign-up bonus may be worth your while, especially if it’s sizable. A bonus may also appeal if minimal steps are involved, or the account isn’t pre-packed with fees.

Consider whether you’re interested in a long-term relationship with the financial institution. This could reduce trouble with moving around direct deposits and opening, managing, and closing accounts. While some bank sign-up bonus aficionados pursue bonuses regularly, your free time may be more limited.