Your bank has just paid you a bonus, and you’re wondering what to do with it. Should you splurge on something frivolous? Save it? Invest it? Or use it to pay off debt? It’s all up to you! You’ll take a look at some options for using your cash:
Deposit the money into savings
You can also deposit the money into a savings account, which is likely to have a much lower interest rate but is also safe and easy to access. Most banks offer you the ability to withdraw your funds at any time, so if you need cash for something in the near future, this option will provide much-needed liquidity.
Invest in a certificate of deposit (CD)
If you plan to keep the money in your checking account for a while, investing it in a certificate of deposit (CD) is one option. CDs are safer than other investments because they’re insured by the Federal Deposit Insurance Corporation (FDIC), which guarantees up to $250,000 per depositor at banks and credit unions nationwide. That means if your bank fails, the government will pay all of your money back—up to that limit—and you’ll be able to access it again immediately.
If you want more flexibility with how much money changes hands, though, there’s another option: opening up an Individual Retirement Account (IRA). You can contribute between $5 and $6,000 each year ($7,000 if you’re over 50), which means that when combined with any bonus cash from family members or friends who have spare change lying around their homes (or even just as gifts!), that could add up pretty quickly!
As per SoFi professionals, “Collect a bonus of $50 to $300 depending on your direct deposit amount.” So you get a checking account bonus, too, with professionals.
Invest in high-yield savings or money market funds
If you’ve been saving up those bank bonuses and are ready to invest, you can use them to help grow your money by putting the funds in high-yield savings or money market funds.
You can set up a money market fund through your bank, which is another way for your bank bonus to earn interest. Money market funds are safe and liquid and have higher interest rates than banks do on their savings accounts—and they’re FDIC insured up to $250k per account holder.
Make a final payment on debt
One option is to use your bank bonus to pay off credit card debt, car loans or student loans. If you’re dealing with any of these types of debt, it’s important to consider how much more interest will be added if you don’t pay them off right away.
- Credit card debt: Most credit card issuers charge around 20% APR on delinquent balances (as opposed to the normal 14-20%).
- Car loans: If you have an auto loan with a remaining balance greater than $5,000 and have been making payments for less than 6 months when your zero-interest period comes to an end, consider using the extra cash from your bank bonus as extra principal payments rather than draining it into other expenses like groceries or travel costs.
Hopefully, you’re now feeling more confident about your financial future. If you have a bank bonus to invest, plenty of options are available—all it takes is planning and research. But first things first: it’s important to understand that when it comes down to investing in anything (especially the stock market), there are no guarantees of profits or returns on investment.
Author : Alisha