Welcome back. In part one, we looked at the simple idea of how getting a direct deposit payment from a client ought to earn you a bank bonus — in essence, getting paid twice for working once. In part two, we showed the main obstacles people find to trying this for themselves, and the built-in solutions that resolve them.
Now let’s talk best-case scenario: stacking bonuses.
Believe it or not, high-yield accounts still exist. Mine is a checking account with terms that are pretty easy to satisfy, but most are savings, so let’s call it that. In the ideal setup, a High-Yield Savings Account (HYSA) and Dedicated Transfer Account (DTA) work together to harvest bonuses from Banks A, B, C, and D in tandem with client direct deposits. Most of your money is in the HYSA, earning interest, while the DTA does most of the work moving money around. I recommend Doctor of Credit for a great list of options to earn anywhere from 2% to 4% APY. (The higher end, sadly, usually has more requirements and lower ceilings on the amount that earns a high rate.)
The thing with high-yield accounts is they tend to be pretty good at pulling money in; not so great at sending it out. Fortunately, nature in her banking wisdom has provided us with no shortage of online banks with favorable terms that are very good at moving money where it needs to be at no cost. These typically earn interest rates you wouldn’t call high-yield, though surprisingly, they are often above market rate. Ally will give you somewhere around 1% right now while I think most banks are still working with a tenth of a percent. Interest doesn’t really exist in a world with inflation that never dips below 2%, but that’s life. So here’s the relationship that lets you harvest bank bonuses:
How having multiple dedicated bank accounts makes it easy to earn bank bonuses
Let’s start with your new accounts that need bonus terms satisfied. In most cases there’s a direct deposit requirement, which the DTA can usually satisfy. Your actual direct deposit payments from your freelance clients should be your first option, but sometimes they’re slow to pay, and it’s nice to hedge your bet moving a few hundred in from the DTA that counts as a direct deposit even though it’s an interbank transfer.
But you want that money in your HYSA where it can earn you some lunch money, right? Banks A and D, which can transfer directly to the High-Yield Savings Account, do so for no-cost, speedy, direct movement of funds. Banks B and C, which cannot transfer to HYSA without a fee, go through the Dedicated Transfer Account.
You want the HYSA at or near the optimum savings level, which may or may not be the full savings capacity of the account, depending on your needs. (For example, Lake Michigan credit union offers 3% interest on up to $15k. Anything beyond that earns a much lower rate, and is better put to use in a second HYSA or moving between the other accounts to qualify you for bonuses. As for paying bills, all money not in use for qualifying transactions or account minimums is kept in the HYSA anyway, so auto-pay all your bills from that stack of savings where you’re unlikely to forget a scheduled payment or come up short.
Update: As of spring 2023, Ally offers a higher interest rate than Lake Michigan Credit Union, and without the need for ten debit transactions each month. Numerous other banks offer as high as 5.07% at the moment, but Ally is the one I can attest to.
The DTA should be able to pull money from the bonus banks as well as push for no fees. When the bonus banks have fees or limits to pushing money to the DTA or HYSA, the DTA will move the money for you at no cost. I recommend Ally bank or Alliant credit union for these, as both possess the characteristics you want in a dedicated transfer account: easy, no-cost transfers alongside counting as direct deposits most of the time. A Chase account may also serve this function at a lot of banks if you need something with a physical location.
Let’s pause here. If it sounds like a lot, it’s really not. It’s just a few scheduled transfers (I usually schedule the incoming and outgoing cash pulls and pushes at the same time with a few extra business days as a buffer unless the DTA balance is enough to cover it anyway.) Keeping a simple Excel sheet of which accounts require direct deposits and which accounts qualify as such can help shuffle this money where it needs to be. You may not even find this much necessary, but when a lot of the bank accounts can fulfill each other’s requirements simply by sending money back and forth, it’s nice to track and compare. An Excel sheet is a great way to get a full view of cross-account requirements to earn bonuses and avoid unnecessary fees. If I offered you $500 to work on a simple spreadsheet table for ten minutes, you’d take that payday, right?
How to stack credit card & bank bonuses with freelance payments for massive compound payouts
While you can’t churn credit card accounts left and right without dinging your credit score due to factors like opening and closing, and average age of accounts, a couple times a year you’ll luck into a spectacular bonus on a card that can be used to fund a bank account. Before we get into how, the risk is this: if you use a credit card to open an account with, say, a $500 minimum, it has to code as a purchase. If it codes as a cash advance, you’re boned. I strongly recommend checking any bank bonus on Doctor of Credit or r/churning to see if anyone has tried it yet with your particular bank/card combo.
To really maximize returns on a freelance payment, you can combine a bank account that can be funded with a credit card with a new card that has a minimum spend in the first few months. You’ll get two bonuses, often more in total than the actual freelance payment itself. Plus you’ll get interest on that credit card “purchase” if you move the money into a HYSA. So you reap the credit card introductory spend bonus, the bank opening bonus, and then a small amount of interest at the second account — and it’s like someone paid you $505 to keep their money safe for them for a couple months. Oh, and you probably get credit card interest points or cashback for the amount of the initial deposit as well!
You won’t get rich, but you’ll beat or match inflation by the time you give the credit card money back. That’s like getting paid four times!
Recap example: Steps to maximizing freelance payments with bank account bonuses and credit card bonuses
Here’s a sample of how you benefit when every step goes according to plan:
- You open a credit card that gives you a $250 bonus for spending $1000 in the first 90 days, plus 2% interest on purchases. This is actually a low average bonus for $1000 spend if you look at the spreadsheet shot I’ve posted .
- You find a new bank account that offers a bonus of $200 with a direct deposit of $500 and will let you fund it with your new credit card posting as a purchase, so no cash advance fee.
(Or maybe you buy a gift card with your credit card to max out a high-reward purchase category, convert it to a money order, and fund the bank account with that, but that’s a different post). - You fund the bank account at the start of your credit card billing cycle to maximize the time till you pay back the funding charge.
- You transfer the initial funding amount to a high-yield savings account of 4%.
- A freelance client’s payment direct deposits into the new bank account — let’s say that’s the $500 you need to earn the bank bonus, done in one.
- The new bank gives you your $200 bonus for the direct deposit about a month later.
- Your credit card statement is issued three or four weeks after the new bank account is opened, giving you nearly the full length of the cycle before it’s billed and then again before it’s due. Let’s call this 6 weeks from charge to payment since a $1000 transfer from new bank to high-yield bank takes a few days.
- High-yield bank autopays the credit card on its due date and that $1000 vanishes from your account. But you’ve earned 4% annual interest on a borrowed grand in the high-yield account for a month and a half. There are 8.66 six-week periods in a year, so that’s ($1000 *.04) / 8.66 = $28.90. Not a lot of money, but who wouldn’t accept grocery money to babysit a grand for somebody? Additionally, that $1000 buffers your main savings account as other bills and transfers come in and out so you’re never near touching bottom. As long as you realize that kilo isn’t yours and never, ever spend it, it’s just cooling its heels there till it goes home to the credit card company. You didn’t earn it, and it’s not yours to spend.
- Credit card points or cash back drop in your account: $250 for spending a grand + $20 in points for paying off the credit card.
Alright, let’s look at how much we made:
Payment for freelance services rendered: $500
Bank bonus: $200
Credit card bonus: $250
Credit card points: $20
High-interest earnings: $28.90
Grand total: $998.90
If you had simply deposited your freelance payment into your existing bank account, you’d have made $500 for a week’s work. But this way, you’ve doubled your income for the low cost of a few minutes filling out applications and a couple of scheduled bank transfers. And it’s a significant threshold: $500 won’t pay the rent in most parts of the country, while $1000 will cover it in most of them — even this choice part of Manhattan where I live. 2023 update: Not anymore, but it still makes a dent.
Here’s a spreadsheet view of some old offers I compiled when I started doing this:
You could get higher yields, but just as often the stars won’t align for an eligible couple of bonuses, so I consider this a pretty good average of best-case opportunities in a typical year.
There are caveats:
- You have to be earning more than you’re spending so you don’t carry a credit balance.
- You don’t ever touch the borrowed money.
- Set up bill autopay so you don’t lose track of due dates.
- You don’t use the cards after the bonus is met.
These are all different facets of “take the money and run,” which itself is an aspect of the freelancer credo.
Some people store their cards someplace secure till they’re the right card to earn points on. Others cut up the credit cards once the bonus posts. Personally, if you’re going to do the latter, I think you should at least take a photo of both sides or jot down the info.
You generally don’t want to close cards right away, because keeping them open will prevent a second ding on your credit score (it’s going to get hit when you open the card) while, over time, adding to the average age of your credit lines (that’s good!) and increasing the total amount of credit available to you (that’s good!) and turning the debt you do have into a smaller percentage of the total credit (that’s good!) — all good reasons to keep it open.
So while you may wish to close them in time, and not open too many in a short stint, having a lot of credit cards can be a magnificent move for your future mortgage. Building credit now and showing responsible spending pays off beyond the cash rewards. Lenders will see you have periods of borrowing large sums and paying them off immediately.
Anyway, that’s my thoroughly argued case for why freelancers are extremely well-suited to churn bank accounts—and credit cards if you’re smart about it. Doing a little research and a little note-taking can turn that $500 you spent a couple days earning into a grand with less additional labor than it takes to eat lunch. Bank bonuses, band accounts that let you fund with a credit card, and credit card bonuses are a potent combination. Maybe one day I’ll code something that that assembles all the web’s credit card offers into a mighty bonus-stacking bot. But for now, this will turn my pizza lunch into a sushi dinner while I work on freelance assignments late into the night.