Ignore Freebies Given Just for Signing Up for Financial Accounts (62/365)

Let’s say you’re running a bank. You need to get some new customers signed up for checking and savings accounts so that you have more money to lend out for mortgages and the like. How do you get those new customers?

Well, one option would be to offer better interest rates, or perhaps lower your fees, and then advertise those things. However, those things are going to cost your business at least $30 a year (and likely more).

Another option? Promise everyone who signs up for an account a shiny new toaster! Or a blender! Or something else like that! It costs you maybe $20 a pop, and if they accept the offer, you can throw on another restriction where they have to keep a certain balance for a while or pay a fee.

If you go that route, you’ll get some new customers and some of them will stick around just because your bank is now the bank of choice for them. You don’t have the “upkeep” cost of no fees (which would cost you some every month) or better interest (which would require you to pay out more every month). Your cost – the cost of a toaster – is already paid for.

Ignore Freebies Given Just for Signing Up for Financial Accounts (62/365)

To put it simply, banks don’t give away freebies for signing up for their account just because they’re nice and want you to have a cool item. They do it because it gets people in the door and signing up for that account, and it’s often cheaper to do it that way than it is to actually improve the account in any significant way.

So what should you do as a potential bank customer? Ignore the freebies. Instead, compare the bank offerings based on other things, such as monthly fees, ATM network size, availability of online banking, bank hours, and interest rates. The only time a giveaway should matter is if you’re looking at two virtually identical accounts.

This giveaway rule is true for any kind of financial account.

When I was in college, there were always credit card companies on campus trying to get people to sign up for a card. They’d offer t-shirts, sweatshirts, frisbees, and countless other things to get people to sign up for their credit cards.

Twice, these tactics drew me in. I signed up for one in exchange for a t-shirt when I was first starting college (in fact, it was my first credit card). Later, I signed up for one in exchange for a frisbee. Thankfully, with the latter card, I never used it (much). The first one, though, started me down the path of credit card trouble that would haunt me for a decade and leave me paying bills for years after that.

If I wanted a credit card, my approach should have been to study various card offers and sign up for the one that offered the most benefits to me as a college student, perhaps one that offered me a discount on gas or maybe a discount on my textbooks in some fashion. Instead, I wound up with cards that offered no benefits. But I had a frisbee and a poorly made t-shirt!

Just ignore the freebies. Very rarely does the freebie have any significant value at all, at least not in comparison to the relative quality of the account you’re signing up for.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.

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  1. kc says:

    “To put it simply, banks don’t give away freebies for signing up for their account just because they’re nice and want you to have a cool item.”

    I did not know that!!!

    For laughs: Google “Only 318 days of crap left” or “Trent Hamm’s funniest post.” It appears that not everyone in the PF blogosphere is sitting around singing Kumbaya.

  2. Liz says:

    What kind of podunk bank offers TOASTERS anymore?!?!?!

  3. kevin says:

    Thanks KC – funny reading!

  4. kevin says:

    Thanks KC – funny reading!

  5. Liz says:

    Wait a minute, you said just a few posts down that rules were rarely right… you say the “giveaway rule” is true of all financial accounts.

    *blink*

  6. A Sumner says:

    I though the rules post said they have value but aren’t universal?

    I signed up for a credit card for a gift card. It’s a rewards card with an equivalent to 1%, but in the form of Disney Dollars. I’m going to use them to help pay for our 2015 trip to Disneyland. I wouldn’t have signed up if not for the gift card.

    Interpret that however you like.

  7. Vanessa says:

    Where are my freebies? I have opened up multiple credit cards, checking accounts and savings accounts over almost 20 years and I have never received a freebie.

  8. Andrew says:

    This would have been very useful advice in, say, 1957.

  9. Amanda says:

    ING gives bonuses (in the form of cash) for signing up, usually through a referral link.

    And my credit union gave us a $50 bonus for setting up direct deposit, which also got us free everything.

    So I think there are freebies, but I’ve only seen them in the form of cash!

  10. Johanna says:

    So, in case anybody missed the point of the title, you had to put “ignore the freebies” in bold, twice?

    This blog is rotting my brain.

  11. Temi says:

    I’m gonna have to disagree with Trent on this one. I have taken a family of five on multiple trips around the country on credit card sign up bonuses. I’ve had banks pay me as much as $200 dollars for opening a fee-free checking account and keeping it for six months. They report it as interest, but heck, since no one is actually paying any real interest these days, I’ll take it. Chase bank paid for Christmas gifts this year with a two free flights offer on their Southwest Visa – That bought me $625 in gift cards to Walmart, JCPenneys, Gap…Hey, if you have good credit and you don’t run up credit card debt, NOT taking the freebies is not a financially sound strategy. Yeah…I’ll pass on a T-shirt…but not free money.

  12. AnnJo says:

    Each of the last two years, I signed up for a new bank account. The first year the freebie was $100 cash. The second year was $150. I’m about to sign up for my third (only one allowed per calendar year) for $150 and missed the $200 give-away because I had already set one up last year.

    I read the rules very carefully. I’m required to maintain a $1,500 balance per account to avoid fees or a total of $5,000 in linked accounts. I have to keep the account open six months. I can’t use funds already in the same bank to open the account. Since I have the money already, and it would otherwise have been earning about .25% interest, this has been like buying a six-month CD paying 20% per annum interest.

  13. jim says:

    Heartland bank’s website has an offer to refer a friend and get a free gift. The gift is a “Royal Collection Porcelain Serving Tray!” In January the free gift was an “OXO Extendable Snowbrush” and in April it will be “Fertile Earth Window Garden”.

    Around here banks give out iPods.

  14. Rebecca says:

    I know what Trent is saying – I’ve seen that at a local bank in my town that always offers some little freebie for starting a new account. However I have also used freebies to get an iPod Touch. I was visiting friends in Washington a couple years ago and Key Bank was offering an iPod touch for signing up for a new account (it was advertised on billboards). You had to jump through a couple of hoops – pay 2 bills over $100 out of the account and keep it open for 6 months and keep (I think it was) $25 in the account – that was all. My husband and I both signed up for accounts and after the 6 months was up we closed the accounts and are still enjoying our iPod touch’s.

    Also, with credit cards, many companies offer 30,000 skymiles (or whatever the particular airline mileage program calls them) for signing up for a new credit card and making one purchase. You can bet we have both signed up for many many of those and then cancel them after the year is up. We have taken free trips all over the place using our skymiles but we always pay our credit cards off every month (if we even use the credit card after the initial purchase).

  15. Andrew says:

    jim–I was very disappointed to see that the Royal Collection Porcelain Serving Tray apparently does not have a picture of anyone in the royal family on it–I was hoping for a picture of Princess Diana ascending to heaven surrounded by cherubim and seraphim….

  16. jim says:

    Key bank is the one with the ipods. THey keep doing it. Must be paying off for em.

  17. Kenny says:

    I beg to differ on this point…..

    I have been going after the $100+ freebie options to open accounts, and after their requirements are met, I have closed accounts. Again, I do not do this everyday, but 5-6 times a year. I consider this effort as an effort that leads to a free iPad2 type of reward.

    When we reverse the thinking above (mine), and ask ourselves, what are we willing to put in to get a FREE iPAD2 with 3G, you will think differently and maybe do what I do.

    The logic you are using is wonderful to say that customers like me might be the ones that stay with them, and maybe I will close the account.

    Over the years, I have changed accounts based on these offers AFTER THE FACT and not proactively figuring out the benefits and then going after it.

    For example, TD Ameritrade offered me $100 to pay 4 Online Bill Payment bills worth more than $25 each, and another $100 for doing 4 debit card transactions worth $10 each. It took me approx 15 min to set it up, 15 min to do bill payment, and 25 min to do 4 transactions on Debit card. Therefore, 55 min to get $200, and I do not make anything close to $200 per hour!!!!!!

    My son open 4 bank accounts during the Xmas break and got $725 total, meeting all of the minimums / transactions counts needed at Chase, TCF, MB and ING. Why not? After he plays with all 4 bank accounts, he might decide to close 3 of them, but in the meantime, he is PAID for the efforts of opening the account. This was MORE money than he would have made working part-time at some store at Xmas.

    Hope this viewpoint helps.

    Kenny

  18. Kai says:

    heh, speaking of another bank brochure…

    Perhaps ‘don’t make your big spending decisions based on freebies’. or ‘don’t open accounts, no matter what the perks, if you have no self-discipline’.

  19. Kim says:

    I also received $150 for opening a Chase account. I read the rules/fine print and they worked out to my benefit. My mortgage is with Chase, so I’m able to split my mortgage payment in half and then take that amount from my paycheck – meeting minimum direct deposit requirement. This allows me to even out my bills. My one BIG expense goes to a different account. It simplified my life and I got $150 for it. I think this freebie was worth the time it took to open the account.
    My coworker had a similar offer for Chase, and it was not beneficial for her. The length of time to keep the account open, etc was not what she wanted to deal with.
    So review the fine print and if you can make it work with little effort, I say go for it.

  20. I work for a bank, and all of my accounts are with the bank that I work at. But I just opened a checking account at Huntington to get the $100 freebie, because there were minimal hoops to jump through. I can keep it open 6 months and make 5 debit purchases in 60 days. When that is up, I’ll close it. No problem.

    The problem with freebie offers from the bank perspective is that those accounts are usually junk–they get closed after the requirements are up and don’t generally create good relationships with the customers.

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