Checking Account PromotionsPosted on September 13th, 2010 William No comments
Some days, it seems as if every bank out there is trying to get you to open a checking account with them, and most are willing to offer you some bonus to do it. The day of this writing, for example, the author got an offer of $75 to open a new checking account with Chase bank (as he already has two, he declined). What should you look for (and avoid) when considering a checking account promotion?
The obvious thing, of course, is checking whether you're actually eligible for the promotion. Most likely, it's only available to people who don't already have an account (or at least, a checking account) with that bank; if you do, you want to find out whether you're even eligible before you invest any time into it. Others require that you participate in some specified behavior to get the money, such as setting up a direct deposit or keeping some minimum balance for the first six months. In that case, whether it's worth getting the account depends on your own circumstances; it might be that you're starting a new job and need to set up a direct deposit anyway, but otherwise it's likely to be more trouble than it's worth.
Once you've determined that you do qualify for the promotion and are willing to do whatever it takes to meet the requirements, it's time to look at how the bank plans to get their money back. They aren't offering you free cash or gifts out of the goodness of their hearts, you know, and all those checking account promotions have to be paid for somehow! Generally, this is in fees. Read the fine print carefully! Most likely, by signing up for a "free" checking account, you're agreeing to pay a monthly fee if your account balance drops below some specified minimum, or if you don't write several checks (or make debit card charges) each month. Chase, mentioned before, is one of the banks that does that - failing to make at least two debit transactions each month leads to a $12 fee on some types of free checking - but is far from the only one.
You'll also need to make a decision about overdrafts. One of the main ways banks make money on debit accounts is by creatively processing overdrafts to generate the maximum number of fees. For example, if you make a series of small charges throughout the day and then a large charge that overdraws your account, the bank will process the large charge first so that they can hit you with multiple penalties, often $29 or more per charge for even minor things like a $3 snack. While this is unfortunately legal, recent changes in the law mean that banks are no longer permitted to automatically opt you in to the so-called overdraft protection; you must specifically choose to accept it or transactions that would result in an overdraft are simply declined. We recommend that you do, in fact, decline this so-called protection.
So are checking account promotions worth chasing? If you can use a new checking account anyway, go ahead; who can't use an extra $75? Just keep in mind that you'll probably have to keep the account open for at least six months, and be sure to read the fine print; you don't want to end up spending your own money (and time) chasing a bonus that ends up giving you nothing but headaches.