The Bank and Brokerage Bonus Game

Photo by Dmitry Demidko on Unsplash

It was just about this time last year that I went into a panic. I know I wasn’t alone. In the matter of a month, I’d lost 20% of my life savings. And I’m a conservative investor. I can only imagine what happened to other people!

Right then and there, I decided I wanted to move at least some of my money into banks where presumably, it would be safe. Googling around for which banks offered the highest rates, I discovered that the olden days of these institutions rewarding new customers with toaster ovens and basketballs, had given way to those same banks giving new investors cash bonuses! This I found intriguing.

In fact, more than a few sites laundry-listed those banks that wanted to attract new money, and even featured affiliate links that directed the reader to the banking sites. This was a whole new wrinkle. I was in! Within a year, I had opened no fewer than 12 new bank accounts — all with a bonus attached.

Of course, there are potholes, tasks, and hurdles involved in this pursuit. With respect to the last, you obviously need money to do all this. Banks generally have minimum amounts you must deposit to qualify. That was less of a problem for me than the significant percentage of banks that required direct deposits to get the bonus.

Without a job, I initially could only apply for those deals that didn’t include that requirement. And I did. But still, I was locked out of about half of the sweet deals.

Then oddly, as the Covid era came upon us, the church where I’d been volunteering faithfully, received a grant, and asked me to work there full time for a salary.

Mostly retired, I really wasn’t looking for a job. But given what was going on in the world — and the fact that they really needed me — I was in. The boss offered that he could send my bi-weekly paycheck to whichever bank I preferred!

Given that a few of the banks offering bonuses didn’t need huge direct deposits, this reality opened up new opportunities. I’d simply open an account with a bonus — and then have the boss send my paycheck to that bank for a cycle or two until the requirement was filled.

When it comes to potholes, they live in the fine print. The applicant must read thoroughly to ascertain for how long the funds must remain deposited, and what fees the bank charges while you’re not looking. And with several accounts, it can be easy to forget and cost yourself money.

Banks offer these bonuses hoping you’ll leave your money with them even after all your requirements have been filled, though it’s not earning interest. And equally, they hope you won’t pay attention to all the rules and cost yourself monthly fees.

It helps for the applicant to make notes (or spreadsheets) and take screenshots of the offers (as they will disappear over time). I’m pretty conscientious about all this. But I have to admit it can be a pain to pay attention to. And I have cost myself a modest amount of cash by not paying close enough attention — to the tune of about 2% of my bonus money. Pretty good all things considered.

One thing I can say on behalf of the banks is that virtually all were good for their word. I didn’t have to make calls to anybody to ask “where’s my bonus?” They all came in as promised.

Overall, I’d give the experience a B+ — if I were to attach a school grade to the entire effort. The reason it doesn’t get an A lies in the work involved in getting those bonuses. The money isn’t entirely free. There is ongoing work in the equation.

Brokerage bonuses are a different but related animal. And if you have a lot of cash, they can be quite lucrative. For reasons not worth describing here, I moved from a full-service broker to a discounter which featured a signing bonus.

But unlike the banks, they didn’t give me that bonus. When I got on the phone to chase my money, an operator told me “you might qualify” in response. That was not to my liking. I definitely qualified.

Not one to take it lying down, I called a competitor to discover that he was willing to give me 14 times as much as the bonus I hadn’t received to move my money into his column!

Wow! Talk about an education. I had no idea I was a bonus baby like that. This was a revelation.

So I signed the papers. But a funny thing happened a day later. A rep from the original brokerage called to ask why I was leaving. And when I told him, he offered to match the competitor’s offer.

Now, you’re not gonna believe this! I told him he not only had to match the offer — but he had to give me the bonus they hadn’t given me initially that they should have — and I wanted it in the next two hours (it was 12/31 and I wanted the money for that year so I could make an IRA contribution to which I would then be entitled based on his bonus)!

And he went for the deal! The point: Be an educated consumer with brokers. They want your money. And they want to manage your money for 1% — a program I don’t go for unless they guarantee results. Which obviously nobody will.

That was all great. But I issue two warnings with respect to this broker bonus game:

There aren’t as many brokerages offering bonuses as there are banks. And it’s easy to burn a bridge.

After a year, I went back to the broker which offered the deal I backed out of at the last moment. And they had placed a black mark next to my name. Not only would they not offer me a bonus. They wouldn’t even accept me as a client under any circumstances. So be apprised there.

And second, some brokerages offer advantages compared to others. Which is to say some platforms lend themselves to day traders more effectively than others. That doesn’t matter to me. But my current broker has a deal with Turbo tax which made my taxes really easy to do this year without requiring that I pay an exorbitant fee to an accountant — especially the one I used last year, who made a couple of significant mistakes!

And of course, if you split your money up among brokers to get the most bonus money (which I am considering currently), it will be much more complicated to do your taxes.

Still, all in all, the brokerage bonus is a good deal. Just like with banks, they want your money — and are willing to come out of their pockets to attract it. Just read the fine print and keep your eyes on the road and it will benefit you nicely. But take the bonus and then forget about it? That could present a problem.