WSJ Your Money Briefing - Should You Open a New Bank Account for a Cash Bonus? Do the Math First

Episode Date: July 25, 2024

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

Your mom hates it when you leave six half-full glasses on your nightstand. It's a good thing mom lives on the other side of the country. And it's an even better thing that you can get six IKEA 365 Plus glasses for just $9.99. So go ahead. You can afford to hoard because IKEA is priced for student life. Shop everything you need for back-to-school at IKEA today. Here's your Money Briefing for Thursday, July 25th. I'm J.R. Whalen for The Wall Street Journal. For the past few years, banks have had enough cash on hand and didn't have to offer much incentive for people to make deposits. Savings rates were near zero. Fast forward and banks

are pulling out all the stops to get your money in the door. You're seeing a lot of one-time bonuses, cash bonuses, sometimes as high as $500 to open up a new account. You're also seeing some promotional rates on savings accounts as high as 5%. Wall Street Journal personal finance reporter Amani Moise will join us after the break. Shop Best Buy's ultimate smartphone sale today. Get a Best Buy gift card of up to $200 on select phone activations with major carriers. Visit your nearest Best Buy store today. Terms and conditions apply.

Should you take advantage of a new wave of promotions offered by banks to open a new account? Wall Street Journal personal finance reporter Imani Moise joins me. Imani, for several years, most banks weren't offering customers much to keep their money in savings. Some were offering close to 0% interest. What's changed? We're a ways away from the beginning of the pandemic when a lot of these big banks had more deposits than they knew what to do with. when a lot of these big banks had more deposits than they knew what to do with. And consumer deposits, so in the form of checking or savings account,

are the cheapest form of funding that a bank could have. Banks take money from depositors and they usually pay them, and then they lend that out for more money than they pay their depositors. And checking and savings accounts are the cheapest version of those deposits. What kinds of incentives are some banks currently promoting? You're seeing a lot of one-time bonuses, cash bonuses, sometimes as high as $500 to open up a new account and take certain actions, like either keep a certain balance in there or connect your direct deposit. You're also seeing some promotional rates on savings accounts as high as 5%. Those incentives might give people a reason to consider opening up a new account,

maybe even switching banks. But in your story, you recommend that they do some math to make sure it makes financial sense to do so. What numbers should they look at? The fine print is always going to be more important than those big, bold numbers that you're going to see on those mailers in your mailbox. The first thing to know is if you're looking at a promotional rate, box. The first thing to know is if you're looking at a promotional rate, see the time duration on that. Is it for a year? In one case, Citigroup is offering a 5% promo rate right now, but it only lasts three months. So you want to know what is the average savings rate? What will it reset at? In the case of one-time bonuses, what does the bank require you to do to earn that bonus? Is it a direct deposit? Is it a certain balance? If it's a balance-based offer,

you may want to see how that cash bonus nets out compared to earning interest on a regular savings account. What else should people look for in the fine print? On the checking account offers in particular, there's a very wide range of deposit requirements. So some offers can be as low as, okay, as long as you're putting at least $200 a month into the account, you're going to earn this bonus. And others can be as high as $2,000. For example, Bank of America's offer for $200, you need to at least be getting a steady $2,000 into the account. So if that's not something that you can rely on, then maybe that offer is not for you. The other thing that you want to look for is the fees.

A lot of these checking accounts have hidden fees. They say, oh, this can be a free checking account as long as you hit certain requirements. But you want to make sure you understand what the overdraft fees are going to be, any maintenance fees, and how to avoid those. What kind of research should people do on their current bank before potentially thinking about making a move? Calling your current bank and telling them that you're thinking about making a move? Calling your current bank and telling them that you're thinking about making a move. Tell them what type of offers you're seeing in the marketplace that are compelling you to consider switching. And maybe they'll counter. A lot of times these banks will have offers that aren't necessarily offered online or their salespeople have levers that they can pull to make sure that they keep your money. What should you think about in terms of your

history with that bank? If you've had one bank for a very long time and you had a lot of connected accounts, switching banks might mean that there's a little bit more friction when it comes to maybe paying a credit card bill or moving money from checking to savings. So you should consider your bank account relationship as a whole before you consider switching. For example, Bank of America has a program that rewards customers for the holistic relationship. So if you have a checking account with them or a savings account and you keep a certain balance, you may be eligible for

a discounted mortgage. So if you have a long, established, sizable relationship with these banks, it could be worth staying. The other thing to consider is international partners. So if you travel a lot and your bank makes it really easy to do that, you should make sure that whatever your bank you're considering also has those perks. What steps do people often have to take if they do want to move their money from one bank to another? Well, people are usually hesitant to switch banks because it's just a lot of work. The first thing that you have to worry about is all of your bills that you may have set up. You have to re-enter that information. Any subscriptions that you have might be disrupted if you close your account. So you have to go back, look at all your statements, try to track down all of the vendors that have your payment information to make

sure that they're updated. That's WSJ reporter Amani Moiz, and that's it for your Money Briefing. This episode was produced by Ariana Osborough with supervising producer Melanie Roy. I'm J.R. Whelan for The Wall Street Journal. Thanks for listening.