In addition to the customer acquisition cost, there is one more thing I'm surprised not that many people have mentioned.
Let's take Chase and HSBC's offers as an example. I think they offer somewhere around $300 to $500 as a "bonus" when you deposit $10,000 in cash and keep it there for a year.
What's $300 to $500 over $10,000? That's about 3% to 5% interest. That may seem high, but if you keep your account there for 2 years, it works out to 1.5% to 2.5% for the bank. And if you keep it for longer ... you can do the math. And how many folks are going to leave the bank once they deposit their money there, even after a year?
According to Bankrate.com, a 5 year CD (certificate of deposit) rate is about 1.27% (May 2018), though it's not uncommon to see around 2% to 3% at some banks. So it does seem that the interest rate the banks are giving you in the form of a "bonus" are on par with or better than CDs.
Bond yields are at over 3% now, so you could technically get a better interest rate investing in bonds. Equities are supposed to produce over 5% year-over-year in terms of returns, and that seemed true circa 2011 to 2017, but this year has been a down year, and it's hard to say.
What's in it for the bank?
Finally, what's in it for the bank? The bank makes revenue lending your money to others who need to borrow the money. Let's take some examples of how the bank uses the money you deposit to make money for itself.
- Credit cards: 5% to 20% APR
- Mortgage rates: 4% to 6% APR
- Loans against your residence (sometimes called a second mortgage): 5% to 7% or higher
- Personal loan: 7% to 20%
So you see, if a 100 people take advantage of this "offer" and deposit $10,000 each, the bank now has liquid assets of $1 million to lend out. Sure the bank has to give away $350 to each person, but they probably more than make up for it with the loans and other lines of credit they open for their other customers.