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Some banks offer a bonus (e.g. $50) when you open an account with them and deposit a minimum amount of money with them (e.g. $5000) for a certain amount of time in the beginning (e.g. 60 days).

Are there any downsides to opening such an account, getting the bonus, and then withdrawing the money and closing the account afterward? I'm thinking anything from adverse effects on my credit score/history to IRS audits for the bank transfers, trouble dealing with taxes later, etc.

  • I've done this a couple of times. Factoring in the admin time hassle, the investment returns lost by placing the money at low rates, the opportunity cost if you tie up the money, the taxes you'll likely have to pay on the bonus, I generally came to the conclusion it wasn't worth it, even if it looks like free money. – Brad Thomas Apr 21 '17 at 21:19
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    @BradThomas: I actually finally ended up doing this myself not too long ago, and got a decent bonus out of it which seemed worth it. I think it depends on how much you have to put in and how much you get back (and how much you value your time :P). The tax forms probably took me an extra 10-15 minutes at most so if you're organized and you don't have a complicated tax situation it shouldn't be an issue. – Mehrdad Apr 21 '17 at 21:40
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The bonus of cash or gift will be reported to the IRS under either 1099-INT or 1099-MISC. You are likely to have to pay taxes on the bonus. If the bonus is a piece of merchandise, because they will report the fair market value of the item.

If we are talking about bank accounts, there isn't a risk of your credit score being impacted.On the other hand, opening credit cards for the bonus does have some impact on your credit score.

There is a risk if your employer requires you to report your financial info on a yearly basis: the number of bank accounts could make them concerned. Large number of these types of accounts could complicate your application for a mortgage.

There are opportunity cost issues. For example: you don't want to pull that $5,000 out of the bank to fix the transmission because it will cost you the $100 bonus; if only we can limp through the next two weeks we will be fine.

Assuming you aren't making large cash deposits, the IRS won't be concerned about the transactions.

If the bank requires direct deposit, then asking HR to adjust the direct deposit forms could make the person responsible for doing it very grumpy.

  • @Eric I don't think they are because generally checking and savings accounts aren't reported to the agencies, and they can't include it if they have no information on it. In my reports, none of my bank accounts are included, and they don't seem to affect my average account age. – briantist Aug 7 '15 at 6:06
  • Some banks have a 6 month period where you must keep the account open to not lose the bonus. That plus the account minimums to avoid service fees could dramatically increase the opportunity cost. – iheanyi Feb 9 '17 at 0:35

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