Banks often give bonuses to new account holders for opening checking accounts. While this is an incentive in and of itself, it gets even better when you can fund the account with a new credit card that also has a sign-up bonus. By funding a bank account with a credit card, you can reach the spending requirement without actually spending any money.
Doctor of Credit created a comprehensive list of which banks support credit card funding. It’s important to note that some credit card companies may code funding of a bank account as a cash advance. Doctor of Credit’s list is clear about which cards should work without being coded as a cash advance. Just in case, you should call your credit card company to change the cash advance limit to zero or as close to zero as possible (the minimum limit varies by bank).
Here’s what you need to do to meet a spending requirement by funding a bank account:
1. Find a bank that offers credit card funding AND has a sign-up bonus
You can check this list of current bank offers courtesy of Doctor of Credit to find one that allows credit card funding.
I received a targeted offer from Santander for a $350 bonus for opening Premier Plus Checking. This wasn’t a good option for me because it required $6,000 worth of direct deposits within 90 days. However, the fine print showed I could received $225 by opening Simply Right Checking and receiving $500 in direct deposits in the first 90 days. The bonus was less but this requirement is much more doable. Santander has a similar public offer for Simply Right Checking with a $150 bonus through 12/31/2016.
2. Open a credit card that can be used to fund the account
Again, check this list from Doctor of Credit. There are some good options from Citi, Chase, and Bank of America. I opened the Bank of America Travel Rewards card to fund my account.
3. Understand what you need to do to get the bonus and avoid fees
For this bonus you need to:
- Open a Simply Right Checking account by the offer expiration data (12/31/2016 for the public Santander offer).
- Have $500 or more in direct deposits within the first 90 days. This can be achieved by having your paycheck sent to this account. See Doctor of Credit’s list of other methods.
- Keep the account open for at least 90 days.
- Wait up to 30 days for the bonus to post.
This account has no minimum balance required. To avoid the $10 monthly fee, you need to make a transaction (deposit, withdrawal, transfer or payment) during the calendar month.
4. Depending on the bank, you may want to open another account at the same time
Since Santander only allows funding up to $500 per account, I opened a savings account at the same time. There is no bank account bonus for doing so, but it was an easy way to cover my entire spending requirement. This account has a $1 monthly fee that is waived by having a Checking account (check!) or $100 average daily balance.
5. Open the account(s), use your card to fund it, and meet the checking account bonus requirements
This step is simple. Just follow the online application prompts. I applied for my Santander accounts on a Wednesday, they were approved by Friday, and the Bank of America funding posted the following Tuesday. Now I just need to get my $500 direct deposit in within the 90-day time frame.
Final Thoughts
With this method, I’ll end up with $225 bonus from the checking account and sign-up bonus worth $200 from my Bank of America Travel Rewards card. While credit card bonuses are not taxable, all bank bonuses ARE taxable. You will receive a 1099-INT form from the bank since the bonus is reported as interest. You’ll need this form when completing your taxes. While the tax thing isn’t ideal, I mainly value this method because it lets me get my credit card bonus without spending money. Even though my bank bonus is less due to taxes, it’s all good in my book!
