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Should I ditch my checking account to earn credit card rewards?

Summary

It can be tempting when a credit card issuer offers extra reward points for opening a checking account, but watch out for hidden costs and credit score dings before you make the jump

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Question

Dear Cashing In,
I have had my Wachovia (now Wells Fargo) checking account for nearly 20 years, and I have no problems with the bank. I pay no fees for my basic checking account because I use direct deposit, and the tellers are always friendly.

But I have a number of rewards cards from other banks that constantly send me offers of bonus points if I open a checking account with them. Citi’s latest mailing touted 30,000 points. I’m tempted, but is there a catch? Will I lose any particular benefits if I’m a new banking customer vs. one with a 20-year history? Besides the bonus points, is there any other upside? — Fran

 

AnswerDear Fran,
To a big bank, you’re not just a credit card customer. You’re a potential source of revenue for all the other services the bank offers, such as car loans, home loans, insurance products, you name it. Because you’re an existing customer and they already know something about you, they can use that information to target offers to you that you might find tempting.

This cross-selling goes on all the time. Sometimes you receive offers along with your monthly credit card bill. Sometimes they’re separate mailings or phone calls touting, say, credit protection plans. Or maybe you see credit card offers when you walk inside the bank where you have a checking account. Chase, for instance, sometimes offers more points or miles on credit cards when you sign up at the bank.

In your case, Fran, I’m guessing that you have a rewards credit card from Citi that leads the bank to believe you’d be interested in racking up more points.

From what I can tell, this is a targeted offer. It’s not available to just anybody (aren’t you special?), and the terms of the offer are not available on Citi’s website. But let’s examine what are likely to be the pros and cons.

Pros: This one’s obvious: 30,000 points. I believe these are actually American AAdvantage frequent flier miles. If so, that’s more than enough for a round-trip domestic coach ticket, which is compelling. If I’m wrong and they are Citi ThankYou points, that’s worth $300.

Cons: These might be less obvious:

  • First, it can be a hassle to switch checking accounts. You have to wait for all the checks you’ve written to clear. You have to order new checks and a new debit card. You have to enter new online bill pay information, if you use that feature.
  • The bank might conduct a hard pull on your credit. This is probably no big deal, but your credit score would temporarily drop by a few points, just as it does when you apply for a credit card.
  • There might be other hoops to jump through. Make sure you read the terms and conditions. For instance, do you have to maintain a minimum balance? Set up a direct deposit into the account? Use the debit card a certain number of times a month? And how long do you have to keep the account open before the points post?

The bank is not going to want you to park money in a no-fee checking account, reap 30,000 points, then close the account. So the bank is likely to include terms that encourage you to pay fees or conduct transactions that make money for the bank.

I’m aware of only a few public offers for airline miles in exchange for opening checking accounts. BankDirect offers American miles when you set up an account, include a direct deposit, establish bill pay, and that sort of thing. UFBDirect offers an “Airline Rewards Checking” account that gives you American miles when you set up an account and use a debit card.

Like with anything else — cable versus satellite TV, cellphone plans and credit cards — it’s healthy to look around and examine what’s out there, especially if you’ve had the same account for 20 years. If you’re happy with Wells Fargo, you don’t get charged fees and you like its customer service, those are pretty good reasons to stay.

But it’s your call. Good luck!

See related:Reaping miles and points with everyday spending, Switching to a new card from the same bank

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Credit Card Rate Report Updated: April 18th, 2019
Business
15.32%
Airline
17.50%
Reward
17.56%
Cash Back
17.60%
Student
17.79%

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