Hey everyone! Today, we're diving into a topic that might sound a little unconventional but can be surprisingly lucrative if approached correctly: Bank Churning.
What Exactly Is Bank Churning?
Simply put, bank churning is the practice of opening new bank accounts specifically to qualify for and receive welcome bonuses offered by various financial institutions. Banks are constantly vying for new customers, and one of their most effective tools is offering cash incentives for opening a new account and meeting certain requirements.
These bonuses can range from $100 to $1,000 or even more, representing a relatively easy way to earn some extra cash. For those committed to the process, it's possible to make around $6,000 per year through bank churning. Personally, I've already made about $3,000 this year alone from utilizing these offers! Here's a promotion with US Bank:
It's important to note that bank churning, as discussed here, is primarily for customers in the United States. While some countries may have similar offers, the volume and types of bonuses are most prevalent in the U.S. banking landscape.
How Does it Work? The Basic Playbook
The process usually involves these steps:
Find a Bonus Offer: Keep an eye out for promotions from banks, both online and brick-and-mortar. These offers clearly outline the bonus amount and the conditions you need to meet.
Open the Account: Apply for the checking or savings account. Often, you'll need a minimum opening deposit.
Meet the Requirements: This is the crucial part. Common requirements include:
Direct Deposit: Many bonuses require you to set up a certain amount of direct deposits (e.g., $500 or $1,000) within a specified timeframe (e.g., 60 or 90 days). Traditionally, this means deposits from an employer or government benefits. However, a fantastic resource for bank churners is the website "Doctor of Credit." This site provides data points from other users detailing which banks will count simple ACH transfers (money you "push" from another one of your bank accounts) as a direct deposit. This can be a game-changer, as it means you might not need to alter your payroll to qualify for many bonuses.
Receive the Bonus: Once you've met all the conditions, the bonus cash is typically deposited directly into your new account within a few weeks or months.
Maintain or Close (Strategically): After receiving the bonus, you have a choice. You can keep the account open if it serves your financial needs (e.g., no monthly fees, good interest rate). However, many churners will close the account after a certain period (often after the bonus posts and any required minimum holding period has passed) to avoid potential fees and to be eligible for future bonuses from that bank or another institution. Be sure to check the terms and conditions, as some bonuses require the account to remain open for a minimum number of months to avoid a clawback of the bonus.
Is Bank Churning Legal?
Yes, bank churning is legal. You are simply taking advantage of legitimate promotional offers provided by banks. It's not illegal to open and close bank accounts. Please don't forget that this form of income is taxable via a 1099-INT form, which the banks will send you.
Another note: banks are aware of this practice and may have their own internal rules to prevent individuals from perpetually churning bonuses. Some banks may have "once per lifetime" rules for specific bonuses, or restrictions on how often you can receive a bonus within a certain period (e.g., 12 or 24 months). For most banks, you usually only have to wait 12 months before churning the promotion again, so I advise keeping tabs of which promotions you've taken. Here's an example of how I personally keep tabs:
Have you ever tried bank churning? What were your experiences? Share your tips and insights in the comments below!