Churning Bank Accounts
Many people churn credit cards, but churning bank accounts is also an easy way to make some extra income, mostly from home. This guide to churning bank accounts will help you get started. The usual steps are simple: open a bank account, fulfill a few requirements, get the bonus, close the account after six months or so, and then apply again once you become eligible in the future.
So what stops us from opening every bank account that offers a bonus? Usually ChexSystems, and sometimes the ability to meet the required activities. Today, about 80% of banks and credit unions in the United States use ChexSystems to verify new accounts. When you read about a bank doing a soft pull, it usually means they are checking your ChexSystems Consumer Score.
If you open too many bank accounts in a short period of time, you may start getting declined for new applications. Too many applications can raise red flags because banks are mainly concerned about a type of fraud called check kiting. This happens when people with multiple bank accounts write checks with insufficient funds between different banks in order to temporarily take advantage of the bank’s funds availability policies.
I’ve opened many bank accounts over the years, and besides earning bonuses, there’s another benefit. You quickly realize that not all banks are the same, and your current account may not offer the best perks or customer service. The differences between banks are often small, but if you deposit a lot of checks or make frequent transfers, those differences can add up over time.
How to pick your bonuses
A good rule of thumb is that you should go for bonuses of $100 or maybe $200 and up. Then take into consideration the requirements for the bonus. If you’ll need to keep a few thousand dollars tied up for a few months, then maybe a $100 bonus isn’t enough. Also think about monthly fees and what it takes to have them waived, since those can quickly eat into your profits if you’re not careful.
Another reason to hold out for higher bonuses is because you cannot open endless bank accounts. Eventually, you will start getting declined. Normally, you would probably be safe with about 10 accounts per year, but there is no guaranteed “safe” number. Banks look at your overall banking history differently, and some are much more sensitive than others. I usually apply for over 10 accounts per year, sometimes closer to 15.
When you apply for a new account, you should also always check whether the bank does a soft or hard pull. If the bank does a hard pull, then the bonus should probably be a few hundred dollars to make it worthwhile. Otherwise, you may be better off applying for a credit card with a signup bonus instead. Hard pulls can temporarily lower your credit score and will remain on your credit report for up to two years, so they’re generally not worth it for smaller bank bonuses.
Be organized and read the fine print
Once you start opening bank accounts, for yourself an maybe family members, you’ll soon realize that keeping track of everything becomes overwhelming. If you’re just starting out, you should create an excel file or any type of list, where you can note opening dates, requirements, monthly fees and requirements to avoid them if possible, closing dates, whether you’ve received the bonus and when and possibly other things.
Closing dates are helpful because you’ll need them to figure out if you’re eligible for an account bonus which you’ve already received in the past.
Being able to change your direct deposit often is a great plus in bank account churning. You might want to start going out for drinks with that HR buddy even if it seems like you have nothing in common. However bank transfers will usually qualify as direct deposits.
Use Mint, Google Calendar and tools to keep track of balances, deposits, dates etc. because things can get messy quickly and service/insufficient funds fees will add up.
ChexSystems
ChexSystems, Inc. is a consumer reporting agency (i.e. similar to a credit bureau) that collects data from banks and credit unions on checking and savings account activity. It uses this information to create tools, including consumer reports, for screening bank account applicants.
Unlike other consumer credit reports, which contain both negative and positive financial information, Chexsystems reports only reflect negative information. If you have no ChexSystems report then you either have no deposit account history or you’re in “good standing” status. If a person commits check fraud or leaves their account with a negative balance, it will be listed there. In addition, the simple act of opening or closing a bank account may be recorded in their database. And this is what should make you a but selective on the bank accounts that you chose to open. You can read all about ChexSystems here.
Can you open a bank account with a ChexSystems record?
Not all banks use Chexsystems to open accounts but they may run a credit report, use EWS or Telecheck. A No Chexsystems bank may also have a Second Chance Account allowing consumers with Chexsystems records to open accounts. Such accounts would be Discover Online Savings, Capital One 360 Checking etc..
Chexsystems Facts
- You’re entitled to a free copy of your report once every 12 months
- If you’re denied a bank account due to negative records on ChexSystems, you have the right to receive a free report at that time
- A ChexSystems Consumer Score ranges from 100-899
- ChexSystems removes negative bank account records after 5 years
Helpful Tools
- List of available bank bonuses
- See what transfers qualify as direct deposits for each bank here
- Request your free ChexSystems report here
- See Options For Closing Bank Accounts here
Guru’s Wrap-up
These tips will help you get started with bank bonuses. It might look scary at first, but once you get one or two bonuses done, you will see that it is in fact easy money. Be organized, read the fine print, make sure you complete requirements and keep reading the site 🙂
Have any thoughts, advice, corrections? Let me know in the comments if I should add, remove or correct anything listed in the article.
