Learn how you can earn thousands of dollars per year by harnessing the power of the money you already hold in your bank account. If you like making money by doing next to nothing, the oft-overlooked art of Bank Jumping might just be the strategy for you.
Introduction
The financial independence community loves to talk about the travel hacking / credit card rewards game. Rightfully so. The ability to globetrot around the world for free is an appealing carrot. I’m with it.
But the topic has been beaten to death. Hell, there are entire sites dedicated to the craft of point optimization and card churning. I can’t tell you anything earthshattering that hasn’t already been covered by the broader credit card community.
On top of that, churning credit cards for points becomes a labor intensive venture once you level up beyond 3-4 cards and truly dig in. That’s why I advocate my barebones, dummy proof approach to credit card rewards. I’d rather pick the low-hanging rewards fruit, and dedicate the rest of my time to business ventures and investments with the potential for outsized returns.
Hunting for More
Until recently, the extent of my overall rewards plan was the dummy proof two credit card strategy above. But naturally, like the wildly nerdy financial optimizer that I am, I kept a lookout for opportunities to do more.
That’s when I stumbled across the concept of “Bank Jumping.” It’s essentially the natural extension of credit card hacking into the world of checking and savings accounts, but it takes even less effort. Sign me up!
Post Structure
First, I’ll provide context on the banking landscape more generally. Then, explain the idea behind Bank Jumping and how it can fit into your broader financial strategy. Finally, I’ll wrap with a personal case study on my first foray into the Bank Jumping world. I’m currently experimenting with this for the first time myself!
The Banking Background
In a nutshell, a bank’s business model is the following:
- Gather a large pile of money deposited by everyday customers like you and me
- Loan that pile of money out to businesses, homeowners, developers, etc., charging interest on these loans based upon individual or business risk
- Make interest payments to everyday customers in exchange for the privilege of lending the individual savers’ money out to these other borrowers
- Profit on the spread between the higher interest rates charged to borrowers and the lower interest rates paid to customers
That’s all well and good. We’ve had a system founded on these principles for many years. Everyone theoretically benefits from this efficient allocation of capital.
Entrepreneurs, homebuyers, businesses and other borrowers pay a higher rate to access money that they need to take calculated risks. This stimulates the economy with spending, job creation, etc.
Bank customers gain a safe place to store their money and the ability to access it easily with debit cards, checks, and electronic transfers. They also receive interest payments while their money sits with the bank.
And of course, the bank makes money for serving as the intermediary that facilitates this more optimal allocation of capital throughout the economy.
Recently, however, interest rates have hovered around unprecedentedly low levels. As a result, the interest rates that banks can charge borrowers is minimal. In other words, the income that banks can generate through lending is shrinking. To maintain some semblance of profitability, banks must pass these reduced rates along to individual savers.
What’s the takeaway? It’s a tough time to leave a lot of money sitting in a bank account as an individual saver. To illustrate this with numbers, consider the following:
- At some points in our history, you could’ve earned 10% in savings account interest payments (that’s $2,000 on a $20,000 balance)
- Today, you are lucky to earn 0.5% in interest (that’s just $100 on the same $20,000 of savings!)
So although it’s prudent to build excess liquidity in an emergency fund stored at a bank, this feels unappealing when you’ll earn near-zero interest on this cash.
Bank Jumping Overview
How can the individual saver still find a way to win?
Enter Bank Jumping.
Since rates are ridiculously low due to factors beyond banks’ control, they have had to find more creative ways to entice customers to sign up. After all, banks still need money to loan if they want to stay operational.
Given this fact pattern, many banks took a page out of the credit card companies’ playbooks, introducing a variety of sign up rewards and bonus programs. Typically, bank customers receive some sort of bonus payment for parking a set dollar figure into a savings account and / or linking employer direct deposits to a checking account. Sometimes these bonuses are tiered based upon the total sum of money deposited. Other times, a flat reward is paid simply for opening an account and depositing anything.
The beauty of this trend for someone who’s more financially focused and organized than the Average Joe (I hope Cash Snacks has helped you become this type of person) is that there is a ton of room to exploit these rewards systems. You’re likely already saving aggressively and building excess cash reserves to increase optionality and financial flexibility. Perhaps you’ve fully funded an emergency fund and continue to save aggressively for a large asset purchase like a rental property.
By investing an hour of time one lazy Sunday afternoon, you can transfer this cash across 3-4 different bank accounts with lucrative signup rewards. If you have enough cash lying around, you could rack up an additional $1,000-$2,000 in bonuses while watching Office reruns on Netflix.
The best part? You can rinse and repeat the process into another batch of accounts, earning even more the next time you find yourself woefully bored on a Sunday afternoon.
The Fine Print on Bank Jumping
Now, I know this sounds too good to be true. It’s not, but there are a few small details to keep in mind.
Oftentimes, you’ll need to park savings in an account for a minimum duration of time to earn the bonus. Most that I see fall somewhere between three to six months.
Additionally, many banks require the account itself to remain open for a set period of time. For instance, you might earn the bonus after 3 months, but the bank could reserve the right to claw that bonus back if the account closes within a year of the reward’s payout.
Also, watch for hidden maintenance or service fees that many banks attempt to sneak into their account policies. You can typically avoid these by keeping your balance above a defined threshold or linking direct deposits to the account.
None of these are deal breakers. But please skim the fee schedules and fine print on all of your bank documents during the hour you spend putting this plan into motion. Sure, this demands a shred of incremental effort, but that’s the price you pay for earning a couple thousand bucks while you watch Netflix.
My Bank Jumping Case Study
Like I mentioned, I just discovered this Bank Jumping world myself. Below, I’ll outline my personal experience putting Bank Jumping into action.
My $500 Chase Bank Bonus Offer
Since I’m an existing Chase customer through my Sapphire Preferred credit card, I received the above offer in my inbox. I figured this represented an easy entry into Bank Jumping.
The offer pays out under the following structure:
- Open a new Chase checking account and link it to your employer’s direct deposit payments
- Earn $200
- Open a new Chase savings account, fund it with at least $15,000, and maintain that balance for 90 days
- Earn $200
- Open both accounts, complete all qualifying bonus activities
- Earn additional $100
So I opened both accounts. Then, I went into my employer’s payroll processing system and linked up the checking account to direct deposit. Finally, I transferred $15,000 from my Bank of America account (a combination of emergency fund savings and partial savings for a rental property) into Chase’s savings account.
That’s it.
The entire process took me about 45 minutes. While I didn’t enjoy filling out the Chase paperwork or verifying my identity, technology made the process relatively seamless.
I haven’t received the full payout since my savings haven’t sat in the account for 90 days yet. But all that’s left for me to do is wait for a $500 reward to hit my statement.
To avoid any bonus clawback, the accounts must remain open for over six months. After this period, there’s nothing preventing me from closing it out and transferring to another bank offering a new bonus.
Key Bank Jumping Takeaways
By no means will you somehow Bank Jump your way to millionaire status. But these small financial wins do compound.
Opportunities to make previously earned money work harder for you in the future abound. The more money that you accumulate, the more these opportunities will present themselves.
Even better, the bar for capitalizing on these opportunities is shockingly low. All it takes is a willingness to look and the motivation to follow through. Happy jumping my friends.