Last week I said I would start sharing with you many ways you can make money with Australian banks. If done right, you don’t need to pay fees, you can earn interest, save interest and even get paid to join!
That’s right, at the moment some Australian banks are paying you to join them, or to have your pay deposited into your savings account, that sort of thing. I know over the last few months ING offered a $100 bonus if you had more than $2,000 go into your savings account for 3 months. It didn’t have to stay in there, just $2,000 needed to have been moved through it. HSBC I think it was offered similar with $10 for every month you did it, up to $100.
If you look around, there are quite a few. If you choose to do this there are a few things to consider:
1.) Avoid credit card opening bonuses
Do not sign up for a credit card because they are giving you something. If you plan on using a credit card as part of your wealth building strategy, find the one that is most suite to your needs and use that. Do NOT go hopping from credit card to credit card just to get the free $50 or $100 the bank wants to give you. Credit cards have annual fees, interest and are easy to get, then rack up huge debt on. Australian banks know if they can get you to get a card with them, you are likely to end up in debt and the $100 they gave you to join will turn into hundreds, even thousands of dollars in interest for them
Also, every credit card you have lowers your borrowing power. So if you want a home loan and have 5 credit cards, it is going to be a whole lot harder to get the loan. Australian credit ratings are not done like FICO scores, so closing a card will not affect you, but having too many or opening and closing them just for bonuses is not a good idea.
Of course, if you have done your research, know the card you want and will use and it has a bonus, by all means utilise the bonus. Just don’t credit card hop for bonuses alone. (I’ll be posting more about how to use your credit card for wealth building another time). Savings account opening bonuses are better, so look for them instead.
2.) Only open accounts you will actually use
You do not want to have 10 accounts open just because you get a bonus for opening it. If the bank wants $2,000 to move through the savings account each month it is not worth it to have a few accounts and move the money through it, transferring every few days to get a $10 bonus. If it is a straight up opening bonus and you like to use bank accounts like you do a cash envelope system (that is where you have different accounts for different purposes e.g. bills, groceries, Christmas, school fees) etc. that’s ok.
Remember though, that any interest or bonuses earnt through theses sorts of things is taxable and the ATO will know how many accounts you have. If you have quite a few, it can confuse things more than necessary at tax time. Keep things simple, use the bonuses for accounts you will actually use and close the rest that you don’t need.
3.) Watch out for fees
Some Australian banks will offer you a bonus to sign up to certain accounts, but hit you with a monthly account keeping fee, excess atm withdrawal fees or other fees in an attempt to claw back that money and then some! Before opening any account, research the fees thoroughly to make sure you won’t be hit with unexpected fees and that it is actually worth doing.
One month I opened a few accounts with my current bank when they were offering bonuses. I had wanted to set up an account for bills, another for savings and another for fun money. I pocketed $300 for things I was planning on doing anyway. If you are in a similar position, opening or account keeping bonuses can be really good. But don’t just do it for the bonus.