Several months ago I discovered a new source of income that involves little to no work on my end and comes with little to no risk – a stingy person’s heaven, if you will. Having done little to no research (you see a pattern of little to no effort here?), I decided I was probably the only person in the entire world who had discovered this source of income and therefore was entitled to naming privileges. The outcome? Bank account hacking. There’s a nice ring to it, isn’t there?
Giving credit where credit is due, the idea and name were both spin-offs of credit card hacking. Some of you may be familiar with credit card hacking – where an individual opens multiple credit cards to obtain sign-up bonuses and then oftentimes closes the cards soon after. This method is also referred to as “churn and burn,” and is a legal and popular pastime of travellers looking to obtain free or low-cost flights, hotel stays, and reduce other travel expenses. The credit card hacking game is quite complex, so I’m not going to try to cover its nuances. However, if you’re interested in learning more I suggest you check out the websites of travel gurus such as The Points Guy and Million Mile Secrets.
CAVEAT: Credit card hacking is only recommended for those who pay off their credit card in full each month. Further, credit card hacking can negatively influence your credit score, as banks fear an individual opening multiple credit cards in a short period of time is someone low on money and looking for free credit to use. On the other hand, I started credit card hacking about four years ago and have been able to maintain a credit score above 700 throughout all of my new account openings. Furthermore, if you know you won’t be taking out any sort of loan in the next few years, you may not be worried about a temporary 50 point dip in your credit score.
So what am I talking about when I say bank account hacking?
No, I’m not talking about using computer software to break into a bank’s cyber space and illegally obtain money. What I’m referencing is a spin on credit card hacking – this version involving less spending and less risk to your credit score. Interested? Let’s dive in.
The idea for bank account hacking came to me after I had returned from a five-month backpacking trip to South America. At the time I was without a job and unsure as to how I could financially support myself. Luck was on my side several times over – I successfully found part-time employment through four companies, plus JP Morgan Chase had recently expanded its branch locations to Washington, DC.
To incentivize the good people of the metro Washington area to open Chase accounts, thus leaving banks to which they had been loyal for decades, Chase was offering a $600 sign-up bonus to its customers. The offer was comprised of a $300 incentive to open a checking account, $200 to open a savings account, and an extra $100 to open both.
Not to be outdone, other banks in the area began doling out their own offers to new customers, providing anywhere from $300 to $500 as a sign-up bonus. And then it hit me – rather than opening up a singular new bank account, why not take advantage of multiple offers? So for the past few months I’ve found myself with several new and recently-closed bank accounts as I circle the financial institution circuit.
Let’s walk through the basics:
- Income: Checking account sign-up offers often require direct deposits to be set up to the new account. Some have minimum amount specifications, and these direct deposits usually must be met within the first 90 days of account opening.
- Investment: Savings account sign-up offers require a deposit of new money (each institution defines this differently, but usually it’s money that has yet to “touch” the bank through other accounts at that same bank) ranging anywhere from $5,000 to $20,000. Generally you have 20-30 days to make this deposit after account opening.
- Time: Banks aren’t stupid. They know very well that you could open up the requisite accounts, receive the initial bonus, and then close your account and skedaddle out of their lives. So they’ve placed a minimum period of time you must hold the account open and in good standing in order for the bonus to truly be yours. Typically the time period is six months, meaning that if you were to close your account prior to this time the bank would deduct the sign-up bonus from your accounts. You wouldn’t lose any money that you transferred into the bank, but you wouldn’t make any money, either.
Financial institutions include a lot of fine print in each of these offers, so it’s important to read everything carefully. I personally prefer to open my accounts in person, allowing the opportunity to ask any questions of the bank associates prior to opening the account. It’s also a good idea to keep the original offer paperwork and any subsequent paperwork that results from account opening, as well as any notes you’ve taken in the process of opening the account.
After I’m done with my requisite time at each bank, I wait a month or so after the minimum account duration – so as not to set off alarm bells with anyone at the bank and to allow myself a bit of wiggle room if I miscalculated the opening date – and then call the financial institution to close my account.
I have also run the math on rate of return. Let’s say we take the maximum amount of money I’ve seen required as a new money deposit, which is $20,000, and compound that interest daily on the account with an APY of 2%, which is fairly high for a savings account but can be found in certain online high-yield savings accounts. At the end of six months the account would have earned $201 in interest. As sign-up bonuses for new bank accounts usually range from $300 to $500, they are more lucrative than simply stocking money away in a high-yield savings account, but are less lucrative (yet more stable) than the stock market.
In sum, bank account hacking isn’t for everyone – it wouldn’t suit those who don’t like to read fine print and the process requires organization to track direct deposits, opening dates, and other requisites for each bonus. However, it’s an option for those, who, like me, are looking to make a little more money from their money.