Checking Accounts: Cash Bonuses vs Higher Rates

Banks in an effort to open new online checking accounts sometimes offer incentives including cash bonuses to new customers who open checking accounts (with specific requirements or restrictions). These offers can be attractive to consumers who plan to keep a low balance in their checking account and do not need the high rates offered by some other online banks. The typical offer will give a cash bonus between $25 and $75 for opening a new checking account and in many cases will require either a separate deposit account or direct deposits to the checking accounts. The formula to determine the value of a cash bonus offer (A) vs the value of a high yielding online bank checking account offer (B) after a 6 month trial period is:

(A) cash bonus amount + ((checking rate * average balance)/2) - (monthly fees * 6) + (((6-month anniversary date - date of cash bonus award)/365) * average balance * checking rate)
(B) ((checking rate * average balance)/2) - (monthly fees * 6)

Current cash offers from banks include:

US Bank $75 bonus until July 13, 2007 for opening a new checking account and enacting a direct deposit of at least $100 within 60 days of the account opening

M and T Bank is offering a $50 cash bonus when you activate direct deposit on a new checking account or $25 when you activate direct deposit on any other new consumer checking account.

Citizens Bank is offering a $25 bonus for interest checking accounts opened with a balance of over $1,500 and a $50 bonus if the opening balance is over $5,000.

Bank of America is offering a $100 cash bonus to all Bank of America credit card holders who open a checking account online. No monthly fees, no direct deposit requirements, no minimum balance requirements.

A complete list of banks offering high yields on checking accounts can be found here.