I’m a Banking Expert: 4 Things To Do Before Taking Advantage of New Customer Bank Incentives

Switching banks can be a time-consuming process for many people. Because so many of us have automatic bill payments set up, setting up a new bank account would require updating each of those bills to avoid missed payments.

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However, switching banks can have a significant financial benefit even with the added work involved. The reason is the massive incentives many banks offer to attract new customers.

While some bank bonuses are easy to receive, others require a lot of work and a significant bank balance. Here are some tips to help you take advantage of these bank incentives .

How Do Bank Bonuses Work?

Banks will offer incentives to attract new consumers and businesses to open accounts. Plus, some banks also offer referral bonuses to their existing customers who refer friends and family.

Depending on the bank and the offer, there will be requirements that need to be completed before earning the bonus. The requirements will fluctuate from bank to bank depending on the incentive being offered.

“Bank bonuses are great for customers for a multitude of reasons,” said Matt Bundrick, co-founder of BankBonus.com . “Many allow consumers and businesses to get some extra cash rewards for completing relatively simple tasks. These typically include a combination of using their new debit card, maintaining a minimum balance, and/or connecting a direct deposit.”

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4 Things To Consider Before Taking Advantage of Bank Incentives

Before you sign up for a new bank account to take advantage of an attractive bonus, there are a few tips you should follow.

Understand the Requirements and Choose Accounts That Are a Good Fit

Each bank account incentive is going to have a different requirement. Savings accounts will typically require you to make a deposit into your new account. Checking accounts, on the other hand, might require setting up a direct deposit and using your debit card a certain number of times.

“Keep in mind that generally, the higher the bonus, the greater the degree of difficulty for the average consumer to obtain it,” Bundrick said.

Smaller $100 bonuses might come with fairly easy requirements. Maybe you need to use your debit card a set number of times in a month or you need to set up monthly direct deposits totaling $500. However, larger bonuses can have a lot of strings attached. There have been $1,500 incentives to new customers that require deposits totaling $200,000. That’s not going to be possible for most people.

“Banks have very specific requirements for how to go about earning the bonus,” Bundrick said. “One wrong move and you could be disqualified. You’d hate to see a $400 bonus slip away all because a debit card transaction didn’t post in time or your minimum balance dropped for even a single day. Make sure you read the terms and conditions found on the bank website and set reminders if needed for time-specific tasks to be completed.”

Some banks are also going to have early termination penalties. They don’t want someone opening a new account, getting the bonus and leaving. Instead, banks will state in the account terms that if you close your account within a certain number of days, they will charge an account closure fee. Understanding these fees early can help you avoid mistakes.

Read the Terms on the Account Before Signing Up

Before signing up for the account, it’s important to read the terms and conditions. While the bonus might be attainable, there might be terms on the account that don’t work for you.

Many bank accounts at traditional brick-and-mortar banks charge monthly maintenance fees. While there are usually ways to waive these fees, it might not be feasible for your situation.

“Keep in mind that not all accounts are created equal,” Bundrick said. “Some come with monthly fees (though many can be waived with qualifying activities) that will quickly eat into the value of the bonus if you aren’t aware of them. Be sure you factor this into the equation before jumping on a bonus.”

Don’t Forget About Taxes

Many people don’t think about taxes when they’re signing up for a new bank account. However, the IRS considers bank bonuses to be income, and you’ll receive a 1099-INT or 1099-MISC at the end of the year. That means it’s important to set aside enough of the bonus to cover the taxes owed.

Keep Accurate Records

It can be easy to sign up for a new bank account and think your job is done. However, it’s important to keep detailed records of the account. This is going to help ensure you complete all the requirements needed to receive and keep the bonus.

“No matter if it’s a credit card or a bank account, I have a spreadsheet that documents everything about the account,” Bundrick said. “I keep track of the bank’s name, product, date opened, the requirement for the bonus, when the requirements need to be met, and any potential account fees. This helps me keep track of everything so there aren’t any surprises.”

Earning a bank bonus can be a great way to earn a little extra cash for switching banks. However, it’s important to do your due diligence before signing up. Make sure you understand everything you’ll need to do to earn the bonus, and most importantly, make sure the new account is going to be a good fit for you.

This article originally appeared on GOBankingRates.com : I’m a Banking Expert: 4 Things To Do Before Taking Advantage of New Customer Bank Incentives