Can Too Many Bank Sign-Up Bonuses Damage Your Reputation?

The best bank sign-up bonuses can give you hundreds of dollars for opening a new checking account or savings account. Some enterprising people might think, “Why not open lots of bank accounts all at once — or one after another — to chase sign-up bonuses?”

Here’s the problem: Opening too many bank accounts too quickly (also known as “bank account churning”) can hurt your reputation in important ways behind the scenes of the banking system.

In the same way that having a bad credit score can make it harder to get approved for new credit cards, getting a reputation as an “account churner” can make it harder for you to open new bank accounts in the future. A negative banking reputation is not worth it for a few hundred dollars.

Let’s look at why pursuing too many bank sign-up bonuses can be a bad idea — and what you could do instead.

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How opening too many bank accounts can hurt your reputation

What if you could get a $200 bonus for opening a new savings account at one bank, and then move that money to a new checking account at a different bank for another $300 bonus? What if you could do this several times per year, as banks announce new bonuses, and make $1,000 or more?

Here’s why this is a bad idea: When you open a new bank account, it gets reported to ChexSystems, a bank account reporting agency. And applying for too many bank accounts too recently can show up as a negative item on your ChexSystems report.

How too many bank bonuses can hurt your ChexSystems report

ChexSystems is kind of like a credit bureau, but for bank accounts. You might not have heard of it before, but if you have a bank or credit union account, you probably have a ChexSystems report on file, just like you have credit reports. Your ChexSystems report does not usually have the same level of impact on your financial life as your credit score, but it matters.

If you rack up negative items on your ChexSystem report, you could be denied bank accounts in the future. Opening lots of bank accounts in rapid succession can be a red flag for banks. Another issue that can happen from bank sign-up bonuses is if you fail to manage your accounts properly. For example:

• If the bank has to close your account involuntarily
• You have unpaid fees or negative balances
• You otherwise behave like a less-than-responsible bank customer

All of those negative items can go on your ChexSystem report — and can keep you from being able to open a bank account when you really need one. Do you really want to take that chance? Instead of churning bank accounts, why not just leave your savings in one of the best savings accounts for the long term and find a higher-paying side hustle to increase your earnings instead?

Bottom line

Chasing after multiple bank account bonuses is not illegal, and you might be able to collect multiple bank bonuses with no big issues. If you read the fine print, keep your promises, leave the correct minimum amount of money deposited, leave your account open long enough, and otherwise follow the bank’s rules, you might be fine.

But if something goes wrong with your bank account, it can cause big problems for you in the future. The hassle, stress, and inconvenience of having a bad ChexSystems report can far outweigh whatever small amount of money you might get from a one-time bank account bonus. Why take that risk just for a few hundred dollars? Having a good reputation as a bank customer can be worth more than that.

Right now, the best savings accounts and money market accounts are paying 5.00% APY or higher. Instead of chasing bonuses, let your cash stay put and grow with higher yields.

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