Finance 101: Why Banks Want You to Open Accounts

I’m starting a new series here called Finance 101. When the mood stikes me I’ll cover one basic consumer finance topic that I think will help us as we both get out of debt. Let’s begin this series with the most basic thing…why banks need you to open accounts and deposit money in the banks.

Deposit accounts are your typical savings or checking accounts where you deposit money into an account at a bank. They’re sometimes called demand accounts meaning that they have to give you your money when you ask for it. When you deposit money at a bank, the bank now physically has your cash and gives you some note that says they’re holding that money for you. It might be your deposit receipt, your statement or a passbook. So, the bank now counts your money as their asset but also lists that same money as a liability that they owe to you. What’s just happened is that you have effectively given the bank a loan and now they owe you the money whenever you come back and say that you want it or when you spend it by using debit cards or checks.

Now you’re wondering, why the hell does the bank count this as their asset? Well, it gives then the ability to use the money that you have deposited in order to make money for the bank. So your money might be packaged together with other deposits and the bank will give out a loan. It can be a car note or a mortgage or a personal loan – basically whatever will make them money. The way that the bank makes money is in charging fees and interests for the loans that they issue. If you’re lucky and you have a savings account the bank will pay you some form of interest in the hopes that you keep more money in the bank for a longer time. Whatever interest they pay you is a tiny fraction of what they are charging the person who took out the loan. Now you know why banks want you to open accounts and deposit money. Let’s get to how you can use this to your advantage.

So far this year I’ve made $175 in interest from just opening two free checking accounts at different banks. You’re thinking, wow! How did she manage to do that? Simple. Remember that whole banking crisis fiasco? The banks all want to pay back the money that they owe the government and return to profitability. In order to do that they need you to deposit money in the bank so that they can make loans again. They are so desperate that they are willing to pay you to open and fund accounts. Typically you need to open an account with $50-$100 and make 6 direct deposits or make a certain number of debit card purchases. After you have met whatever qualifications they have and had your account open for whatever period is in their offer, they will deposit the “interest” and you are free to do what you want with it.

I did that with Chase by funneling $25 each paycheck into a checking account. I closed the account as soon as had my “interest” payment. I earned $125 from that one. Now I’m on to Capital One and they are offering $200. That’s not too shabby for very little work.

Currently Chase is offering $100 to open the account. Please use this link for the offer. Comerica Bank also has some offers as well. They have too many hoops to jump through for me though. I will add the Capital One offer next week once I verify it. Come back to this post for an update. I’ll also list current offers on the left sidebar.

Do you know of any other offers? Let me know and I’ll share it. Class dismissed!