Why we didn’t open a Chase bank account to get a $1K bonus

IF YOU CAN EARLY VOTE:  GO DO IT!  (Don’t forget regular voting day is Tuesday, Nov 5th!)

Somehow the fact that DH and I are high income has been made known to credit card and bank companies.

Chase banking has been trying to get us to open an account for a couple/few years now.  Usually they’ve offered something like a $200 or maybe $300 bonus offer which we don’t even look at because it’s not worth the hassle to us.  But most recently, they sent a $1,000 welcome bonus offer.

  1.  Open a new Chase Sapphire bank account by mid-November
  2. Transfer $75K NEW money to checking/saving/J.P. Morgan investments (but not cds or retirement or 529 accounts) and hold it for 90 days

We’re not going to be switching our investments to J.P. Morgan when there’s Vanguard and plenty of other lower-cost brokers out there.

If the balance drops below $75,000, a $25/month fee will be assessed each month.

So, ideally we would drop $75K in and then remove it and close the account after the $1K deposit on day 100 or 101 (they say the deposit will occur after 90 days).  This sounds like a hassle, but for $1K we could probably deal with that hassle in a way that we wouldn’t for a mere $200.

But is it really $1K?  No– we have to be aware of the opportunity cost of money.  $75K is a lot of money and it has to come from somewhere.  Unless we’re saving for an unpaid leave, I don’t keep that much in cash (I try to keep a slush fund of $30K in my primary emergency fund which covers the summer even with slow reimbursements or potential DH job-loss).  Selling stocks would trigger tax implications in addition to requiring too much thinking (though I could theoretically undrip dividends– though those are generally quarterly so I may have missed my chance).  I can probably get $75K by temporarily moving our primary credit union emergency fund (we don’t really need that money until summer), moving money from our online high interest secondary emergency fund, closing out our Wells Fargo account (it’s useful for ATMs when traveling and for checks), and then using my next two paychecks, overdue reimbursements, and overdue summer salary.

Ok, let’s then assume that I have gathered all 75K and instead of putting it into the stock market, I decide to go with the risk free alternate option to put it in my Capital One online savings account that pays 1.90% APY (which we opened up because they gave a $200 bonus AND had a good interest rate AND we already had a capitol one credit card).  Holding onto that in my already existing Capitol One account for three months provides total interest of $356.81 according to this online calculator.  Of course, I would actually need to hold it a little longer to make a direct comparison (it takes time to transfer money, time to get the Chase match, time to close an account etc.), though probably not a full additional month (another month in that savings account would bring in $476.13 total), so it will be more than that, say $400 (which is about a third the difference between 4 months and 3 months added to 3 months).  If I were instead to look for the best online rate out there, there’s a 2.75 rate (that may or may not be real) on one of those bank rates websites.  Three months of that would provide $516.18.

How much does the Chase savings account that they want me to put $75K in earn?  .01% APY.  Which is practically nothing.  That’s even less than our Wells Fargo account.  Three months of that is $1.88.  Four months is $2.50.

And, of course, we have to pay taxes on that $1K, minimum 15%, so at least $150, making it really only $850 of free money (though any other method of earning interest will also be subject to tax).

So, yes, there’s a big one-time cash infusion for opening up one of these Chase bank accounts, but it has to be with the strategy of closing it as soon as possible because the interest rates are so extremely low and the minimum required balance to avoid fees is so high.  And it is not worth even $600 to gather together money from all those different sources (while hoping an actual emergency that can’t be cash-flowed doesn’t occur), open a bank account, deal with the paperwork and hassle and so on, then remember to close the account and deal with all the attendant hassle of doing that, and then figure out where to place the money after.  Heck, I might pay $600 to avoid all that potential stress.

Now, I’m not planning on actually putting all those reimbursements and incoming checks into a savings account, not even a fancy higher interest online savings account.  I probably should sit down sometime and figure out a long-term strategy for our money now that we’re doing all the obvious things, but I’m not sure it’s going to be any better than putting money into a broad-based index fund of one kind or another every couple months (is it time to look into munis?  Maybe?).  So until I actually figure out what we’re going to do, that’s what we’ll be doing– keeping our emergency funds full and shoveling any excess money into Vanguard taxable.  Doing so does have higher risk than a Chase savings account, even at .01% APY, but we can chance it.

How much would a bank have to give you as a bonus to make you willing to switch?

12 Responses to “Why we didn’t open a Chase bank account to get a $1K bonus”

  1. yetanotherpfblog Says:

    I’ve found bank bonuses incredibly unreliable and full of gotchas, plus the tax thing which you mentioned, so I don’t even bother with them anymore. CC churning FTW!

    • nicoleandmaggie Says:

      Good to know! We’ve only done bank bonuses twice so far, but they were purposefully the kind where you only have to put a certain amount of money in for a certain amount of time. Anything more complicated we’ve just recycled.

      I also keep CC really simple– two credit cards at a time that offer cash back. Capitol One did give me a cash bonus when I signed up which was bizarre given they’d closed my account on my for non-use a few years prior. (I think maybe Chase also closed my account for non-use a few years later, but they haven’t tried as hard to get me back.)

  2. Michael N Nitabach Says:

    Yeah if you’ve got $75,000 cash to yutz around with, Capital One has some great interest rates. I got 2.7% for a one-year CD.

  3. Abigail @ipickuppennies.net Says:

    Well, there’s no way I could gather $75,000, so I guess it’s moot. I guess $500 would make me consider switching if it were a lower amount (say $10,000, which I have in my emergency fund). But often the switch offers require you to have direct deposit a certain number of times (since it’s usually for a checking account rather than savings). I employ myself as my only employee, so I don’t fuss with direct deposit. So the offers are usually moot for me. Sigh.

  4. Revanche @ A Gai Shan Life Says:

    A heck of a lot more than $1000 with a threshold that high! My absolute maximum that I’m willing to shift around for bonus earning is probably around $10,000 per account. More than that and I have to consider opportunity costs. I took the HSBC and citi banking bonuses this year and that required less than $15,000 in cash across three accounts and about 3 hours of my time total to bring in $600. Most of that was HSBC and I will never ever use them again (unless the bank bonus is ten times more. Maybe I’ll deal with them for $2000. Maybe.) Citi was about 20 minutes total, transfer time and closing account time included. I’d do that again.

    I won’t do anything that requires direct deposit anymore (maybe if the reward was high enough I’d do it in PiC’s name but my company’s HR sucks so I wouldn’t do it under my name), I only do the ones that require my money to go in, sit for a few months, then transfer out.

    • nicoleandmaggie Says:

      It is an insanely high threshhold! Who keeps that kind of money around? I guess maybe if people wanted to buy investments from JP Morgan. And I guess there’s the top % who could cash flow that? But I’d hope they’d be taking better care of that money. Though I guess being rich means you don’t have to actually be efficient with your money. Unlike, say, not being rich. :/

  5. Matthew D Healy Says:

    Nearly all such offers assume many customers will forget to move the dollars back out at the end of the required holding period. Which basically makes them the equivalent for those of us who savings of the even more exploitive tactics of credit card balance transfers as “no interest for X months.”

    As always, ask yourself, “can they make a profit from people who are NOT absent-minded?” And read the fine print: the large print giveth and the small print taketh away.

  6. Debbie M Says:

    I don’t see switching banks. I have added accounts at new banks, but not ones that required auto deposit. In the olden days I would switch banks whenever mine got bought and got worse, but finally I switched to a local credit union and no one is buying them. I also have a far away credit union that I use for savings because of the decent interest rate.

    I did try out new credit cards, some until they got bad, some for the minimum time period, but now I’m sticking with my far-away credit union credit card. Sometimes an offer will make me look twice, but usually there’s something I don’t feel like dealing with.

  7. On the usefulness of concrete numbers | Grumpy Rumblings (of the formerly untenured) Says:

    […] worth doing because it saves/makes less money than you initially thought it did.  Like that $1K Chase bonus that was really less than $600 when all was said and done, and not worth the hassle of opening and closing accounts and back […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

<span>%d</span> bloggers like this: