We’re barely into 2020 and already my goal to simplify our family’s financial picture is being challenged. I find myself tempted to open another bank account.
Bank error in your favor, collect $600
Let’s back up a bit. Last year when we were preparing for our family DIY study abroad to Spain, we opened a slew of credit cards to score some signup bonuses of cash and miles. Some of the mileage points enable us to fly the family to Spain for only $75 per person!
In addition to the credit card accounts, we also opened new checking and savings accounts with Chase. The offer was for a $600 signup bonus when opening both a checking and savings account.
Hoops to jump through included:
- Setting up direct deposit from work (it couldn’t be just a ACH transfer from another bank)
- Keeping accounts open for at least 6 months to avoid early closure fees
- Keeping a balance of $15k in the savings accounts for at least 90 days
The work to set it up was minimal. Having convinced my wife to open accounts, we stood to gain a total bonus of $1200.
Unlike the credit card bonuses, these bonuses are taxed as bank interest. We signed up for the offer in December of 2018, so half of the bonus was taxed in 2018 and the other half will be due in 2019. With a marginal rate of 22%, the bonus is really only $936.
Further complicating things, there’s also the opportunity cost of keeping all that cash in savings accounts that earned infinitesimally small interest, something like 1×10^-100 percent. Other online banks were offering close to 2% at the same time. Rounding the loss interest to $150 takes the signup bonus is now whittled down to only $786.
The time to set it up and maintain it was small, but the mental energy spent keeping it all straight all while avoiding fees was undesirable. I’d probably still do it again, but it does make me wonder if it’s worth it.
Bank pays you dividend of
Enter the current/latest offer. HSBC is offering “up to” $720 for opening a HSBC Premier account with them. Like the Chase offer, this bonus is taxed, so the offer is really only $560. There are also plenty of hoops to jump through, including:
- Maximum $60 “cash back” on direct deposits each month for 12 months
- Special code can only be used once (no doubling up with spouse)
- Four year “cool off” for previous customers (not an issue)
Either maintain $75,000 total balances OR monthly direct deposits > $5k OR residential mortgage > $500k to avoid $50 monthly maintenance fee
To maximize the cash back, I’d need to direct deposit at least $3,000 each month. But since I’m unwilling to park $75k at HSBC, I’d really need to direct deposit at least $5,000 to avoid the monthly maintenance fee. And I’d have to keep this charade up for at least a year, and probably more like 14 months because the cash back isn’t deposited until up to 8 weeks after the qualifying direct deposit.
On the other hand, this offer is superior to the Chase bank offer in one regard: opportunity cost. There’s no minimum required balance as long as I’m making direct deposits of at least $5,000/month. I could immediately transfer the money out immediately after it lands from my employer. The opportunity cost ends up being a few days of interest each month.
The offer literally came yesterday and I haven’t decided what I’m going to do yet. Part of me hesitates to take on more complexity, while the other part is excited about free money.