Is it worth switching banks for a sign-up bonus?

A bonus is almost always a good thing — but what about when one requires switching banks to earn? 

Lately, "banks are offering bigger cash bonuses," said The Wall Street Journal. More specifically, banks are promising "cash bonuses and promotional interest rates for opening new accounts." For example, "Chase and Wells Fargo now offer $300 bonuses to customers who open new checking accounts and set up direct deposits," while "Bank of America offers $200, and Citi has a promotional rate of 5% on new savings accounts for the first 90 days."

Before you jump ship on your current bank, here is what to consider.

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What exactly are bank bonuses, and how do they work?

Bank account bonuses are kind of like "credit card welcome bonuses," said Experian. These promotions are clearly meant to "incentivize new customers to open an account." They can come in the form of either promotional annual percentage yields (APY) or as a cash bonus, often ranging in amount from "from $100 up to $1,000."

To earn the bonus, you generally just have to "follow the rules that a bank has set to earn the bonus," and then "after you complete its requirements, the money will be sent to your account," said Business Insider.

The specifics of these requirements will vary depending on the bank and the promo offer. For example, "you may have to set up a direct deposit, meet a minimum account balance, or maintain a certain average daily balance," said Business Insider. Or, you may simply need to be a new customer — meaning you have not banked with the institution before (note, said Business Insider, that "there is often a time limitation after which you are considered a 'new user' again").

Are there any drawbacks to bank bonuses?

So what's the downside? There are at least a few, as it turns out:

You will have to jump through hoops to get that bonus. Often, you have to "complete one or more qualifying activities to receive a bonus, and those requirements may be difficult for many to achieve," said Experian. And it is generally the most generous bonuses that "have very stringent requirements for earning them, such as significant deposit requirements."

You may owe taxes on your bonus. Banks can "report any bonus they disburse to the IRS as income," which means that "you're responsible for paying the taxes on any bonus you receive," said Experian. Further, said Business Insider, depending on the size of the bonus, it "could bump you into a higher tax bracket."

You might face fees that could cut into your bonus earnings. You may jump on an account too quickly to see the strings attached if you only pay attention to the bonus value. But, there's a chance you could end up paying fees, such as "a monthly service fee on a checking account that doesn't meet a minimum balance requirement or receives monthly direct deposits," or even a fee if you "close your bank account too soon after opening it," said Business Insider.

When is it worth chasing a bank bonus offer?

While there are some people out there who make it a hobby to "chase bank account bonuses, opening many new accounts with no long-term intention to use the bank," said Money, it is generally not an activity worth pursuing unless it will actually pay off for you. As such, "before jumping on any offer, your first step should be doing the math," said the Journal.

"You do have to weigh the opportunity cost of putting your money in a higher yield savings account versus chasing the bonus, which maybe has no real APY but it does pay out a promotion, and kind of see what the difference is," said Ryan Johnson, the editor-in-chief of ProfitableContent.com, to Money.

Consider if the APYs the bank offers are consistently competitive, or just a flash in the pan.

Beyond that, take a hard look at any fees or requirements associated with the account. If an account suits your needs, you can easily meet the bonus stipulations, and you were thinking about switching to a new bank anyway, then you should consider an account bonus just that — a nice bonus.