A Shopper's Guide to Bank Products and Services

Does a Great Gift Always Make for a Great Deal?
Banks are offering computers and other attractive incentives for opening new accounts. Don't make a decision based just on the freebies.

You've probably seen bank advertisements offering gifts to people who open a checking account, apply for a credit card or deposit money into a new certificate of deposit (CD). Some gifts are small, maybe a plastic piggy bank. Some are simply a cash bonus, perhaps $50. And others are more substantial, such as a name-brand computer and printer. How can you decide if the offer is worth taking?

If you end up choosing between two accounts with like terms and features that both meet your needs, it's OK for the gift to be the deciding factor. "But don't let a gift alone tempt you into signing up for an account," warned Mira Marshall, a Senior Policy Analyst in the FDIC's Division of Supervision and Consumer Protection. "You may end up paying dearly for that gift by foregoing more beneficial terms and conditions elsewhere."

Here's another reason to first be sure you are getting an account to your liking: It's easy to evaluate a cash bonus, but sometimes difficult to determine the quality or value of a product being offered by the bank.

Let's say a bank is advertising a $20,000, 10-year CD, for which you would receive up-front a PC "bundle" (a personal computer, monitor and printer) valued at $1,000. The $20,000 deposit "must be maintained for the full term of the certificate of deposit [10 years]...or the value of the gift will be deducted from your account balance." How can you tell if that's a good deal for you?

Start by taking into account that you'll pay tax on that $1,000 in the year you receive the computer. Then carefully consider the account terms. If you need to withdraw any of your $20,000 deposit before the end of 10 years—even if it's weeks or months shy of that date—the bank would deduct $1,000 from your account, plus you'll pay a penalty for an early withdrawal from the CD. Remember, too, that you probably won't even have the computer at the end of the 10 years.

"You have to decide whether the interest you will earn on the CD, plus the value of the gift, is worth the risk that you will need those funds before the end of the 10-year period," Marshall said. "You might be better off with a different CD with less risk that your earnings will be reduced."

So, think about the type of account that's best for you, shop around, and always read the account literature before you agree to anything. That's good advice even if there's no gift being offered.