Chasing points through bank account bonuses

Last year, I had a good deal of success with bank account bonuses and I posted my year-end tallies. A recent question in Frequent Miler Insiders about bank bonuses paid in miles and my own temptation with the current Wyndham points sale have each made me realize that it is worth revisiting bank bonuses in terms of points. One of the reasons I love bank bonuses is because they provide the flexibility to buy points if and when I need them.

Bank bonuses in brief

For the purposes of this post, I’m using the term “bank bonuses” to broadly refer to bonuses for opening and meeting requirements for checking, savings, and brokerage accounts. Financial institutions often offer bonuses for opening accounts and meeting minimum requirements.

Minimum requirements to earn a bank bonus may include things like maintaining a minimum balance, processing a minimum number of debit card transactions, or receiving some amount of direct deposit activity. While account terms typically stipulate that any direct deposit requirement must be met with funds from an employer, pension, social security, etc, the truth is that those requirements can often be met more easily than it seems. Doctor of Credit maintains a fantastic resource about what works for various banks.

It is not uncommon to see bonuses in the $100-$500 range for a new bank account. These can add up to a nice chunk of change for a couple playing in 2-player mode. Sometimes, a single bonus can be a significant chunk of change. We saw a deal from HSBC that ended in January that provided $1300 for a 2-player household (today you can still get $600 each, though the payout and direct deposit requirement are extended). Other accounts have quite simple requirements (I’ve opened a few with $500 direct deposit requirements that paid out $200 or more as a bonus). Doctor of Credit maintains an incredibly comprehensive resource list of current bank bonuses and requirements here.

Why bother with bank bonuses?

On the surface, the answer to this question is money. Bank bonuses represent the possibility of easy money that requires low effort. Whereas a cash back credit card offering a $500 bonus likely requires $3,000-$5,000 in spending, bank bonuses only typically require cash inflow.

However, bank bonuses do require some amount of time and organization. Juggling multiple bonuses at once might require shuffling money around several times a month. If you don’t time transfers properly, your money can be tied up when you need it. And at tax time, bank bonus chasing can lead to a lot of forms. Still, I find bank bonuses to be well worth the time and effort.

Thanks to bank bonuses, I’ve been able to invest more in my future since a number of the bonuses I’ve earned have ultimately made their way into investment accounts. Lucky for me, the market has been booming ever since a steep crash at the beginning of the pandemic, so the value of the bonuses I’ve earned has grown.

Furthermore, picking up bank bonuses has meant that I am well-positioned to take advantage of points sales if and when I need points for future travels.

Thinking of bank bonuses in terms of points

Last week, in our Frequent Miler Insiders Facebook group, a reader named Mike asked the following question:

Other than applying for more cards, is anyone aware of any promotions offering miles or gift cards for making large deposits at brokerages or banks? There used to be a lot of them in the past, but haven’t seen any for a long time. Thanks.

As Mike implies, we have seen times in the past where you could earn miles for opening bank or brokerage accounts. We used to see offers for American Airlines miles with a new Fidelity brokerage account. We sometimes still do see Citi offer American Airlines mileage bonuses for new accounts and Bask Bank pays out American Airlines miles monthly instead of interest (we wrote about that account when it debuted, but I don’t think they have a bonus now). I’m not aware of other tie-ins offering miles for bank accounts, though I expect there may be some other similar options on the market.

However, in response to Mike’s question, I reiterated a point I’ve made before: don’t sleep on the bank bonuses. Major airline programs often put miles on sale for around 2 cents per mile or less. Some airlines, like Avianca LifeMiles, put them on sale even more cheaply (currently about 1.27c per mile). A $500 checking account bonus could buy:

• 25,000 airline miles at 2c per mile
• 39,000* Avianca LifeMiles at 1.27c per mile
• 62,500 Marriott or Choice Privileges points at 0.8c per point (frequent sale price)
• 100,000 Hilton Honors points at 0.5c per point (frequent sale price)
• 100,000 IHG Rewards points at 0.5c per point (frequent sale price)
• 45,000 Wyndham Rewards points with its current sale (with money left over since Wyndham is charging 0.975c per point but limits you to 45K purchased points)

The asterisk on the Avianca LifeMiles example above is because the current sale only offers the best price (1.27c per point) if you buy 130,000 miles or more (50K pre-bonus, which requires $1650). However, we sometimes see similar sales without the high minimum threshold. Furthermore, we sometimes see miles on sale even more cheaply than shown above; American and Alaska periodically put miles on sale at around 1.85c per mile and we’ve seen Air Canada Aeroplan and Avianca LifeMiles offer miles as low as 1.2c per mile (or even a bit less in Avianca’s case). Hotel points can often be purchased for less than a cent and may get even cheaper at times. It is possible to get credit-card-sized welcome bonuses from checking accounts in some cases.

However, note that my numbers above do not take into account the fact that a bank bonus is taxable and therefore a single $500 bonus does not actually net $500 after tax. I picked that number as a round number that could pretty easily be achieved with just one or two decent bank bonuses, but you can adjust up or down depending on your situation. The point is that bank bonuses can yield points — and rather than being stuck with points in one specific program, you can have the freedom to pick the program and price point that makes sense for you.

That flexibility is huge. Had a bank offered a checking account bonus of 45,000 Wyndham points last year, I wouldn’t have given it a second look. However, now that I have booked my first Vacasa vacation rental (where 45,000 points got me a rental that would have cost $1400) and I’m eyeing more Vacasa bookings, I think I may turn some bank account bonus money into Wyndham points with the current sale. A member of our Frequent Miler Insiders Facebook group named Stephen reported yesterday that they bought $292.50 worth of Wyndham points and used them to book a vacation rental with a sticker price of $960. Earmarking bank bonus money to take advantage of opportunities like that makes a lot of sense to me.

Is it worth the trouble now?

A pertinent new question that came about for me this week is whether it is worth the potential hassle down the road given changes that may be coming. Yesterday, Doctor of Credit highlighted a post from Forbes magazine about a bill in Congress that would require banks to report inflow and outflow for each account (as opposed to just reporting any interest earned). The goal is to catch those taxpayers who are underreporting self-employment revenue, but the impact on bank bonus chasers may be increased odds of an audit and/or the need to explain the origins of money flowing in and out to meet direct deposit requirements (not to mention a potentially more watchful eye on what counts as a direct deposit).

For example, in my case, I have sometimes juggled four or five banks at one time that each require monthly direct deposits. If I were simply to move a few thousand dollars of savings from one bank to the next in a loop, it might look like a high amount of combined inflow into my accounts. The outflow each time being to another bank account I own may look like the type of behavior the IRS is looking to catch even though in my case it wouldn’t be a business revenue shell game but rather just my own money moved between banks.

I could see some potential hassle if inflow & outflow reporting becomes required. For the time being, I’ll just endeavor to keep things more organized so that I have detailed records of any transfers. It won’t impact my bank bonus plans yet, but perhaps it could in the future.

And that complication is the downside of chasing bank account bonuses. When such bonuses have come up in discussion on Frequent Miler on the Air, Greg has noted that he is interested in simplifying his finances rather than complicating them. Bank bonuses do not help simplify things. While I find bank bonuses to be low effort overall, juggling multiple at the same time has sometimes required more time and effort than I’d like. Still, with the ability to automate transfers in some cases, it doesn’t have to be terribly painful. To each his own in terms of pain tolerance.

Bottom line

Bank bonuses can be a source of points and miles if you’re able to squirrel away the points with an eye toward future travels. With the current Wyndham points sale, it wouldn’t be difficult to leverage a single bank bonus into a couple of nights in a vacation rental that would have otherwise cost much more. When LifeMiles are on sale, a bank bonus could buy you a ticket to Europe in business class. Having the extra cash on hand and perhaps even earmarked specifically for points sales can help you get outsized value from bank account bonuses. But an even stronger point in favor of earning bank bonuses is the flexibility. Rather than being stuck with a single made-up pseudo-currency, you have the power to only buy points if and when you want/need them or the ability to instead invest that cash for greater future returns. My wife and I chased down about $4700 in bonuses last year and in 2021 we are on track to potentially do a bit better. If and when we need points, we can easily buy them with cash earned from bank bonuses. And if we don’t get right back in the saddle in terms of travel in the near-term, we’ll let that money grow in investments waiting to cherry-pick the right opportunity down the road.

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