Evaluating checking account signup bonuses

Often times you’ll receive teaser offers from banks for signing up for various products they offer.  Being that the market is currently overvalued, as I grow closer to financial independence I find myself becoming more conservative in my investments and to be honest, sometimes it’s nice to make a quick buck or two.  Chase has a few offers that have recently been circulating in some early retirement circles I participate in, so let’s have a look:

Chase Premier Plus Checking <- $300
Chase Total Checking <- $200 (there is a $150 offer here for a savings account we’ll ignore for this exercise)
At first glance the $300 sounds like the best deal because it pays out the most, but maybe we should look at what checking account pays out the best interest rate before we make our choice?

First the details….

Chase Premier Plus Checking
– To avoid a service fee of $25/mo you need to keep an average daily balance of $15,000 or more in any combination of qualifying Chase checking, savings and other balances OR have automatic payments to your qualifying linked Chase mortgage from your Chase account.  I don’t have a Chase mortgage, so the $15,000 is the important figure here.
– To qualify for the $300 bonus you cannot be a current Chase customer within the past ninety days or have a negative balance.  Also you need to deposit $25 when you open the account AND set up direct deposit of your paycheck/pension/SS benefits within 60 days.  Now here is the gray area, Chase does not specify if the direct deposit needs to be your entire paycheck (how would they know?) or a specified amount, nor do they specify if the deposits need to continue the entire time you have the account.  I doubt the last bit as it references a singular direct deposit, not “direct deposits.”  But for the sake of your payroll team at work, it’s probably best not to mess with your direct deposits too often.  You could delay the start of your direct deposit for up to two months also, but your call if you want to play games.
– If you close the account within 6 months of opening the account, you lose the $300 bonus.

Chase Total Checking
– To avoid a service fee of $12/mo you need to deposit at least $500 a month to this account OR keep a minimum balance of $1,500 OR keep a balance of $5,000 combined in all your Chase accounts.  I don’t have any other Chase accounts and $500/mo adds up pretty quickly so I’ll focus on the $1,500 minimum balance here.
– To qualify for the $200 bonus you cannot be an existing Chase checking customer, been one within the past ninety days, have a negative balance or have fiduciary (accounts managed by others) accounts.   Also you need to deposit $25 when you open the account AND set up direct deposit of your paycheck/pension/SS benefits within 60 days (please read about the gray area mentioned above).
– If you close the account within 6 months of opening the account, you lose the $200 bonus.

*Be mindful you can only receive one new checking account related bonus from Chase per calendar year and only one bonus per account.  Also whichever lovely bonus you choose, it is subject to federal income tax.

Now the calculations….

What we’re dealing with here is a simple interest calculation.  We’re lending our money to the bank for a set period of time, and they give us money for the time we lent it to them.  Right now you might be saying “we’re making a loan to the bank with a checking account?  Huh?”  Yes, that’s the beauty of living beneath your means where you don’t immediately need this money and you’re not living paycheck to paycheck.  If you live beneath your means too, why not get in the holiday spirit and let someone else use it (for a fee)?

When we loan money to to a friend, we set an interest rate in the beginning to avoid confusion, but we may want to know how much we’ll make off this agreement for the trouble.  That calculation looks something like this:

How much money will I make = How much is loaned out x Interest rate x How long does my friend need the dough

But in our situation, we know how much money we’ll make, but we want to know if the interest rate is worth the trouble of setting it up.  That calculation looks like this:

Interest rate = (How much money I will make / How much is loaned out) / How long does my friend need the dough

Let’s assume we are going to direct deposit $50 from our bi-weekly paycheck or $100 a month from the get-go to keep the bank happy, and we’re not going to change where our paycheck is deposited for the entire 6 months we need to in order to safely retain our bonus and keep payroll happy.   With that said, here is what the calculations looks like:

Chase Premier Plus Checking
($300 bonus / ($15,000 minimum balance + $600 from direct deposits )) / 0.5 year = 3.85%

Chase Total Checking
($200 bonus / ($1,500 minimum balance + $600 from direct deposits )) / 0.5 year = 19.05%

So which checking account do you open, the one with the best interest rate or the one that pays out the most?  It depends.  If you have $15,000 to loan out today and you go with the Chase Total Checking, you’re losing out on $100, but you’re only committing $1500 in the beginning.  This means you have $13500 leftover to put to work elsewhere for the next six months.  If you can earn more than 0.75% ($100 you’re missing out on / $13500 you have to play with) on those leftovers in half a year, the Chase Total Checking is for you, if not Chase Premier Plus Checking it is!

*I am not compensated in any way for you signing up for any sort of Chase checking account.

 

 

 

 

 

 

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