The Downside of Chasing Account Sign-Up Bonuses

In today's competitive financial landscape, banks and credit unions sometimes entice customers with attractive sign-up bonuses for deposit accounts like savings or checking accounts. These bonuses, ranging from cash rewards to waived fees, can be tempting incentives to open a new account. But don’t let a shiny one-time perk—which may come with potential drawbacks—influence where you bank. This guide will help you gauge whether an offer is actually worth it, or whether you should look elsewhere. 

The temptation of sign-up bonuses

Sign-up bonuses for deposit accounts are designed to attract new customers and expand the customer base of financial institutions. These bonuses may come in various forms:

• Cash rewards. A common incentive is a cash bonus deposited into the new account after meeting specific requirements, such as maintaining a minimum balance or completing a certain number of transactions.
• Fee waivers. Some banks offer to waive monthly maintenance fees or ATM fees for a specified period as part of the sign-up bonus (pssst…the best credit unions have a wide network of free ATMs so members always have convenient access to cash¹). 

The pitfalls of chasing sign-up bonuses

While sign-up bonuses can provide immediate gratification, they may not always translate into long-term financial benefits. Here are some reasons why chasing sign-up bonuses for deposit accounts may not be the best strategy:

Account requirements and fees

Many sign-up bonuses come with strings attached, such as maintaining a minimum balance, setting up direct deposits, or meeting transaction quotas. Failing to fulfill these requirements could result in forfeiting the bonus or incurring fees that negate its value.

Temporary benefits

Some sign-up bonuses offer short-term perks that fade away once the promotional period ends. For example, a bank may waive monthly fees for the first year, only to reintroduce them later, leading to unexpected expenses.

Opportunity costs

Devoting time and resources to chase sign-up bonuses may divert attention from more important financial goals, such as saving for emergencies, investing for the future, or paying down debt. The effort expended in opening and managing multiple accounts could outweigh the value of the bonuses received.

A balanced approach to banking

Rather than chasing sign-up bonuses indiscriminately, adopt a balanced approach to banking that prioritizes long-term financial health:

• Evaluate the overall value. Look beyond the sign-up bonus to assess the account's features, fees, interest rates, and customer service. Choose accounts that align with your financial needs and offer sustainable benefits beyond the promotional period.
• Consider relationship banking. Building a relationship with a single financial institution may offer advantages such as preferential rates, personalized services, and simplified account management. 
• Focus on financial goals. Base banking decisions on your overarching financial goals and priorities. Evaluate whether the pursuit of sign-up bonuses aligns with your long-term objectives or if it represents a short-term distraction.
• Read the fine print. Before opening a new account, carefully review the terms and conditions, including eligibility requirements, fees, and restrictions. Ensure you fully understand the obligations associated with the sign-up bonus and account features.

While sign-up bonuses for deposit accounts may offer enticing perks, they are not without pitfalls and hidden costs. Before chasing these promotional offers, it's crucial to weigh the potential benefits against the requirements, fees, and long-term implications. Remember, the true value of a savings or checking account lies in its ability to support your financial goals over time. General Electric Credit Union’s Simply Free Checking Account is full of perks you can benefit from every day! Get your paycheck and other ACH deposits up to two days early with Early Pay,² earn up to $350 a year in debit card rewards,³ and so much more! Discover better checking and open your account online today.