New bank account bonuses can feel exciting and tempting. After all, it's "free money" for opening a new account, right? The problem is, some bank bonuses from major national banks come with big strings attached. You have to deposit many thousands of dollars -- and leave your money in a near-zero interest savings account for several months -- just to get a few hundred bucks.
Let's look at a few bonuses and see why the best CDs (with rates at 5.00% APY or higher) are a better place to put your money.
TD Bank savings account bonus (minimum $10,000 deposit)
The bank bonus: TD Bank is offering a bonus for new savings account customers. If you deposit $10,000 you can get $200 of cash. Offer valid through June 30, 2024.
The strings attached: You have to deposit your $10,000 within 20 days of opening your new account, and leave that amount deposited for at least 90 days. You also must leave the account open for at least six months -- the bonus will be paid on or before 180 days of account opening, and if you close the account before six months are up, TD Bank can claw back the bonus.
So let's assume that you have to leave your $10,000 in a TD Bank savings account for six months to get that $200 bonus. The best TD Bank savings account (TD Signature Savings) pays 2.00% APY on balances of $10,000 to $24,999.99 -- and you must also open another linked TD Bank account to get that 2.00% APY as a higher "relationship bump rate."
Is it worth leaving your money in a 2.00% APY savings account to get $200 extra dollars? Let's see how this offer stacks up to the best CDs.
| TD Bank savings account bonus | Best 6-month CD | Best 1-year CD | |
|---|---|---|---|
| Deposit amount | $10,000 | $10,000 | $10,000 |
| Bonus amount | $200 | $0 | $0 |
| Account APY | 2.00% APY | 5.25% APY | 5.15% APY |
| Total yield after six months | $299.50 (assumes six months of interest at 2.00% APY, with $200 bonus paid at six months) | $259.14 | $254.27 |
| Total yield after 1 year | $401.99 | $525 (assuming you can roll over your cash into a new 6-month CD with the same APY) | $515 |
Data source: Author's calculations
Verdict: If you can leave your cash in the TD Signature Savings account for only six months (and then move it to a higher-yield account somewhere else), this bank bonus pays better in the short run than the best CDs. But if you leave your cash in a 2.00% APY savings account for a whole year, you are missing out on better earnings.
U.S. Bank savings account bonus (minimum $15,000 deposit)
The bank bonus: U.S. Bank is offering $200 to new customers who open a U.S. Bank Standard Savings Account. You must open your new account by June 27, 2024 and deposit at least $15,000 by July 17, 2024.
The strings attached: You must keep your $15,000 deposited through Oct. 31, 2024 -- so a minimum of 3.5 months. And the interest rates on the U.S. Bank Standard Savings Account are terrible: 0.01% (as of 3/24/2023).
Instead of locking up your money in a near-zero interest account for 3.5 months (or more), let's see how much more interest you'd earn with a three-month CD, or the best 1-year CD.
| U.S. Bank savings account bonus | Best 3-month CD | Best 1-year CD | |
|---|---|---|---|
| Deposit amount | $15,000 | $15,000 | $15,000 |
| Bonus amount | $200 | $0 | $0 |
| Account APY | 0.01% APY | 5.00% APY | 5.15% APY |
| Total yield after 3.5 months | $200.44 (assumes $200 bonus is paid immediately after 3.5 months) | $214.98 (assuming you can roll over your cash into a new 3-month CDs with the same APY) | $221.32 |
| Total yield after 1 year | $201.52 | $750 (assuming you can roll over your cash into new 3-month CDs with the same APY) | $772.50 |
Data source: Author's calculations
Verdict: Even in the short term, this bank bonus is a worse deal than the best CDs.
Wells Fargo savings account bonus (minimum $25,000 deposit)
The bank bonus: Open a new qualifying Wells Fargo savings account by June 25, 2024 and deposit at least $25,000, and you can get a bonus of $525.
The strings attached: You must leave your $25,000 deposited for at least 90 days. And the best Wells Fargo savings account pays only 0.26% APY for balances of less than $100,000 (and that's with a higher "relationship rate").
A $525 bonus sounds impressive, but that 0.26% APY will drag down your earnings. Let's see how this bonus stacks up to the best 3-month CDs and 1-year CDs.
| Wells Fargo savings account bonus | Best 3-month CD | Best 1-year CD | |
|---|---|---|---|
| Deposit amount | $25,000 | $25,000 | $25,000 |
| Bonus amount | $525 | $0 | $0 |
| Account APY | 0.26% APY | 5.00% APY | 5.15% APY |
| Total yield after 3 months | $541.23 (assumes $525 bonus is paid immediately after 3 months) | $306.81 | $315.84 |
| Total yield after 1 year | $591.02 | $1,250 (assuming you roll over your cash into new 3-month CDs with the same APY) | $1,287.50 |
Data source: Author's calculations
Verdict: In the first three months, this Wells Fargo bonus beats the best CDs. But beyond that, you're missing out on better earnings.
Bottom line
Sometimes a bank account bonus is a missed opportunity for your money. You can earn higher APYs with the best CDs, savings accounts, and money market accounts. Don't get distracted by a bank account bonus: focus on APY and total yield instead.
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