I met the blogger Frugal Professor last week when he traveled to my area for a family gathering. I learned from his blog post that he earned over $5,000 tax-free by transferring a Roth IRA to Robinhood.
That specific promotion has since ended. I knew about the promotion when it was active but I didn’t jump on it. I would’ve done it years ago but not anymore. I stopped chasing these promotion bonuses from banks and brokers.
A bank account promotion usually asks you to deposit a minimum sum to a new or existing account and keep the money there for a minimum number of days or months. Sometimes the account requires direct deposits, sometimes not. You get a promotion bonus credited to your account when you have met the requirements. The bank account bonus is taxable.
A credit card promotion usually asks you to sign up for a card and spend a minimum amount in the first X statement cycles. You get bonus points after you fulfill your end of the deal. Some cards have an annual fee. The value of the signup bonus is higher than the annual fee. You close the card before the next annual fee hits. The bonus points earned on a personal card aren’t taxable because they’re treated as a discount on your purchases.
A brokerage account promotion typically asks you to transfer assets into a new or existing account and hold them there for some time. The assets transferred can be existing holdings. You’re only changing where those investments are held. You don’t trigger taxes when you don’t sell your holdings. Whether the bonus credited to your account is taxable depends on the account type. It’s taxable if it’s credited to a taxable account. It’s tax-deferred if it’s credited to a Traditional IRA. You pay tax eventually when you withdraw from the Traditional IRA. It’s tax-free if it’s credited to a Roth IRA.
The promotions are legit. I did many of them in the past. It wasn’t difficult to follow the terms of the promotions and they all paid as advertised. I was never cheated out of a bonus. Based on his comments in the blog post, Frugal Professor sets the threshold to make a move at $1,000:
[M]ost promotions below $500 aren’t worth my time. At $1k, I start to get a little interested. At a few thousand, they are usually worth the effort. These days, checking account (or most CC [credit card]) bonuses don’t get me interested, but brokerage bonuses seem to be pretty lucrative. Move $250k from broker A to broker B, collect a $2.5k bonus (taxable), netting $1.75k after-tax, leave for 90 days. Rinse, repeat. Probably a few hours of effort yielding an attractive after-tax dollars per hour.
$1,000 is a good threshold. He expects to make at least $5,000 a year from these bonuses. $5,000 is a lot of money. My wife bought a mountain bike recently for $2,500. $5,000 would give us two mountain bikes. That’d be nice, right? And every year? I see many new toys.
At around the time this Robinhood promotion was going on, my phone popped up this photo I took when I left the building on my last day of work six years ago:
It reminded me that I didn’t leave my full-time job to make more money. I would’ve earned much more by staying at that job if I had wanted more money. If I must do something now to make some money, I want it to be useful to other people as well, such as publishing a new edition of my books or doing a better job at maintaining the Advice-Only Directory. It takes more time and it isn’t as lucrative as getting a bonus from a bank or a broker but I feel I’m adding more value. Of course I can do both but I’m using this self-imposed boundary to focus on a mission.
I don’t mean to make it sound like “Holier than thou.” Life comes in stages. I went through the stage to make money and shore up my investments. That was the right choice at that time. Now I choose to be less “efficient” and say no to opportunities I used to jump on. It’s a pure personal choice.
Everything has its time. There’s nothing wrong with earning promotion bonuses from banks and brokers. I did it many times in the past. The time has passed for me but that doesn’t have to be the case for everyone else. You’ll get the promised bonus if you follow the terms of the promotion. It doesn’t take that much time. It gets easier after you do a few of them. The bonus can fund many nice-to-have toys and experiences.
If you’re interested in these bonuses, you can follow these for the current offers:
- The Final, Definitive Thread on Brokerage Transfer Bonuses on Bogleheads (jump to the last page and read backward for the latest active bonus offers)
- Best Bank Account Bonuses, Best Current Credit Card Sign Up Bonuses & Offers, and Best Brokerage Bonuses on the Doctor of Credit blog. Many of these promotions fall below the $1,000 threshold set by Frugal Professor.
I have some pointers for you in Brokerage Transfer Bonus Made Easy for Total Beginners if you’ve never done a brokerage transfer bonus before.
If you don’t chase them, that’s OK too. I’m going for simplicity these days. Fewer accounts, fewer movements, everything on autopilot. I want to see a perpetual motion machine.
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TJ says
I know I had left a comment on one of your older posts why you are no longer interested in chasing bonuses, interest rates, and “doubling the bond yield”….
It is a little interesting – because you chased the bonuses when you were a high earner, but nowadays they are perceived as not as valuable to you, even though you would not be taxed as highly on them, they might fill up your 0% tax bracket, and they would presumably preserve your invested assets longer. It sounds like you just have enough and rather spend time on other things.
Certainly the bank, brokerage and credit card bonuses require a teeny tiny fraction of effort compared to your former full time job.
I guess I almost see these incentives as a little bit of a fun game to play. I see it as “free money” and the effort is so small that I think, “why not?”
Harry Sit says
It’s more of a “no video game before finishing homework” thing for me. The money is real. I know how to do it. It doesn’t take that much time. I can always keep it in my back pocket as a way to give my invested assets a boost when I see the need.
MikeG says
I have come to be largely of the same view as Harry.
I used to chase bank bonuses and CC bonuses and have done a few brokerage transfer bonuses too, but I don’t pay attention to them anymore. My view changed as I have aged (now in early 60’s). I used to view this as a sport and easy money to pick up for a little effort. But now I more highly value simplicity and don’t want our money/assets spread over more places than is necessary.
From time to time, I even think about scaling down our CC usage to one or two CC’s. Instead of spreading purchases around across several, put the spend on our general purpose CC paying 2.625%. Switch the gas card (currently earning 5% CB) and I would give up around $50 a year. Switching the grocery card (currently earning around 4.5% net of the annual fee) and I would give up around $100 a year. I often ask myself why are we bothering with these. The biggest reason I have not made these changes from is a desire to not materially negatively impact my FICO score (from the reduction in revolving debt capacity). But that is a story for another day.
Michael says
I join you and Harry on the simplicity front. It’s not just the move itself, but also doing beneficiary designations etc in the new account. Once we’re eligible to leave the last bank account we joined for a sizable bonus, we’re done switching unless it’s intended as a longer term move.
Harry Sit says
We’re down to 3 credit cards. I have a card in my name, my wife has a card in her name, and we share one card as a backup. We don’t see any meaningful negative impact to our FICO scores.
Sharon says
Thank you for the post! It’s always interesting to hear your take on a subject.
ros says
My husband and I and my sister and her husband did the bank promotions one year. The 4 of us each made $4,500 that year.
My husband and I kept enough to pay taxes on the money and gave the rest to my sister who had cancer and one of her treatments cost over $49,000. She had 90/10 insurance but her share for that on treatment was nearly $5,000 and the injection that had to be given I think 3 weeks after most treatments for red blood cells was nearly $10,000.
Shortly after we did that I heard about compassionate illnesses on Washington Journal on C-Span that I taped every day while working and I called Medicare and she qualified. I drove the 30 miles into town that night to tell her about it. I stayed the night took a day off work after calling my boss. I forget the rules now but she made it by 5 days when we called. She was immediately put on disability and received disability from the day she was diagnosed and put on medicare and was able to get a supplement at that time for $99 a month at that time.
I am in in my 80’s now and have chased the best deal from 1st grade with my first allowance and walked 1 1/2 miles to the bank every Sat to put my quarter in the Christmas club to get a free quarter on the 50th week. The 51st week the check was mailed. We had no car until 1952.
Also we built our home 2nd home starting it in 1973 with 2 children and filled a 2,000 gallon oil tank for 17.9¢ a gallon from the farm bureau. When it went to over $3 a gallon in the 80’s we used 3-4 credit cards that had promotions if you spent $500 in 3 months they paid you $500. The oil driver would put $500 on each card. We did this until my husband built a wood boiler that hooked up to our oil boiler that we used for heat. When we were not home to feed the wood boiler the oil boiler took over when one of the 4 zones called for heat if there was not enough wood in the wood boiler to heat the house. He used an old hair dryer for combustion air and a rheostat for the water temperature. When the water temperature got down to 80º the hair dryer would go on to blow more air in the firebox and when the temperature got to 120º the hair dryer would go off.
He had a copper pipe if the water go too hot if none of the zones called for heat on a sunny day and at 180º some of the water would drain and be refilled by fresh water from the hot water set at the lowest degree. The water would drain on the cement floor by the drain in the garage floor and go in underground pipes to the hill behind the barn and into the field if the water got too hot. We heated a 2400 sq feet home plus the walk out basement that way for years. We had 58 acres and 26 acres were woods. We had plenty of old trees to cut down. I still chase rates and got out of the market in 1999 and could not sleep with the market going so crazy since I got in it in 1996 and getting 20-30 and almost 40% in mutual funds, I got out . My husband was put on 100% disability in 1995 and I was working 2 jobs at that time. I worked in a bank and the broker thought I was crazy and tried to talk me out of it. I bought 8-9-and 10% CD’s and even one was for 15 years that my boss let me purchase. One was 10 years and the rest from 5 to 7 years. I could not get internet then and went down to the library and the WSJ on the back page of the 2nd section I think it was had the best rates on CD’s in the country. At that time I had to call from the bank on my lunch hour or on Saturdays from home when long distance was expensive to arrange for the paperwork. No dial up internet even where we lived. I still chase rates, and convert to a Roth since the law allowed or I found about it in 2012 when I husband passed. I was able to contribute to Roth for 10 years before I had to retire to care for my husband. MY kids are now in their 60’s and have to pay taxes on my husbands IRA’s traditional IRA’s that I funded since 1 that I disclaimed when he passed. They can take the RMD’s until they die and not spend it 10 years like they would mine. I do not want them into the IRMAA situation because of my IRA’s. One is a doctor and the other is a senior executive for a healthcare company. We were married at 18 and 20 and the doctor was born 9 months to the day after we were married. Both graduated college debt free. I worked 2 jobs and each worked during the summer. One worked 107 hours and the other 96 hours. My husband before being put on disability worked a lot of overtime in construction.
I still chase rates but don’t do promotions that are not that good any more but I tell all the college kids working at my grocery store and the older people at Costco about how to get the best rates for their money. Many of the kids ladder CD’s for 3 or 6 months for tuition and books or get no penalty CD’s. Some use the 5% or more savings accounts.
I just tell them to make every penny work for you and most have reward checking accounts and use the self checkouts for each of their debits.
RH says
If you are going to do a bonus offer of any kind, at least check Doctor of Credit first. Sometimes they have better promo codes there for the exact same terms.
e.g. last year Merrill Lynch offered bonus if someone opened account bringing over new assets. The public bonus on ML website and in direct mailers was max $600 but the link via DOC was a different promo code offering $750 instead, more money for the exact same terms and amounts required etc.
Eloise says
Great read Harry. As always I find your posts to be very valuable. Thank you for sharing these insights.
KD says
What I discovered is that sign up bonus loses it’s sheen after jumping through hoops so many times. I pivoted to pursuing aspirational things that I wouldn’t pay cash for – such as long haul business class like Qsuite on Qatar Airways that can cost 6K+ for a 15 hr flight. I don’t need it every time I fly but it is a nice bonus when you get it on points accrued through sign up bonuses and spending. But like you I may feel blasé about it eventually.
Larry S says
Hi Harry,
Another terrific read. I agree with you that life comes in stages. There was a time when I too chased promotional and reward bonuses and I enjoyed doing it. But now that I have fewer years ahead of me than behind me, I place a higher value on my free time than I once did.
I believe it’s true that our younger days selves often traded our time for money and now I look to trade my money for time.
calwatch says
I agree with you Harry, especially as you get older, there is more mental organization needed and more chance of something bad happening. My threshold has gone up and I also try to chase bonuses for companies which I wouldn’t mind staying in, rather than the hit and run type bonuses.