Bank Bonus - Is this different?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
ARB57
Posts: 89
Joined: Sun Aug 07, 2011 4:00 pm

Bank Bonus - Is this different?

Post by ARB57 » Wed Jun 13, 2018 3:45 pm

There seems to be consensus - I think - that a credit card cash bonus that requires you to make a series of purchases to receive that bonus...is NOT taxable...it's essentially a reward not a bonus. What about a bank (account) bonus that requires you to make a number of debit transactions to get the bonus. Wouldn't that be NON-taxable as well?

Please set me straight. Thanks.
Last edited by ARB57 on Wed Jun 13, 2018 5:38 pm, edited 1 time in total.

User avatar
prudent
Moderator
Posts: 5660
Joined: Fri May 20, 2011 2:50 pm

Re: Bank Bonus - Is this different?

Post by prudent » Wed Jun 13, 2018 3:54 pm

My understanding is that bank bonuses are taxable since they will report the bonuses on 1099 forms. Credit card bonuses are considered a "rebate" and are not taxable - there's no 1099 issued.

bob60014
Posts: 631
Joined: Mon Jul 31, 2017 8:59 pm
Location: The Land Beyond ORD

Re: Bank Bonus - Is this different?

Post by bob60014 » Wed Jun 13, 2018 4:16 pm

Bank "bonuses" are taxable interest, usually stated in their disclosure information that most rarely read. I missed it once! :oops:

ARB57
Posts: 89
Joined: Sun Aug 07, 2011 4:00 pm

Re: Bank Bonus - Is this different?

Post by ARB57 » Wed Jun 13, 2018 4:38 pm

Thanks for the feedback. I can certainly accept the fact that the bonus is taxable, but I'm still trying to figure the rationale. Both the credit card bonus and the bank account bonus require you to make purchases to actually get the bonus. I guess trying to figure out why the tax code is written as it is...is folly...it just seems to me that the two scenarios are identical.

If you hadn't figured it out, I was not the kid who said "OK Dad" when Dad said "Because I told you so." That was never good enough me. I needed to know WHY:)

neilpilot
Posts: 1848
Joined: Fri Dec 04, 2015 1:46 pm
Location: Memphis area

Re: Bank Bonus - Is this different?

Post by neilpilot » Wed Jun 13, 2018 4:43 pm

Last year the FAA was offering a $500 "rebate" if I installed a certain type of radio in my aircraft. Even though the IRS considers a manufacturer's "rebate" non-taxable, the IRS considered the FAA rebate taxable as miscellaneous income since it was from a 3rd party (the FAA), and not the manufacturer. Since it was under $600 the FAA wasn't required to issue a 1099.

Who said our tax code was logical?

dknightd
Posts: 821
Joined: Wed Mar 07, 2018 11:57 am

Re: Bank Bonus - Is this different?

Post by dknightd » Wed Jun 13, 2018 5:08 pm

ARB57 wrote:
Wed Jun 13, 2018 4:38 pm
Thanks for the feedback. I can certainly accept the fact that the bonus is taxable, but I'm still trying to figure the rationale. Both the credit card bonus and the bank account bonus require you to make purchases to actually get the bonus. I guess trying to figure out why the tax code is written as it is...is folly...it just seems to me that the two scenarios are identical.

If you hadn't figured it out, I was not the kid who said "OK Dad" when Dad said "Because I told you so." That was never good enough me. I needed to know WHY:)
I share your curiosity. My thinking is that they are not the same. When you purchase something on credit card the vendor pays a transaction fee. When the credit card company gives you a reward, they are essentially giving you part of the transaction fee. When you buy something on debit card it is more or like writing a check. I don't think the vendor has to pay a processing fee, but could be wrong. So if the bank gives you a kick back, they are essentially give you interest. I did not know banks did this. I wonder what their motivation is. I assume somehow they benefit by you using a debit card.

User avatar
prudent
Moderator
Posts: 5660
Joined: Fri May 20, 2011 2:50 pm

Re: Bank Bonus - Is this different?

Post by prudent » Wed Jun 13, 2018 5:18 pm

dknightd wrote:
Wed Jun 13, 2018 5:08 pm
So if the bank gives you a kick back, they are essentially give you interest. I did not know banks did this. I wonder what their motivation is. I assume somehow they benefit by you using a debit card.
Just as with credit card bonuses, debit card bonuses are offered because they hope you'll get in the habit of using that card all the time, and they will make up the cost of the bonus in time. Most people won't carry more than one debit card. Banks are pleased that almost every new customer they get from offering debit card bonuses isn't just one more customer for them, it's also one less customer for a competitor. With debit cards, banks make money from transaction fees, from the people who overdraft and pay fees for that, and from people who sign up for additional products from the same bank where they have their checking account. Many people will put all their bills on autopay with their debit card. That helps deter customers from switching banks.

Tico_75
Posts: 148
Joined: Thu Jan 08, 2015 5:36 pm

Re: Bank Bonus - Is this different?

Post by Tico_75 » Wed Jun 13, 2018 5:26 pm

I received plenty of 1099s last year related to bank bonuses. I am expecting more this year. It's a fun hobby and made a few thousand dollars, it's a way to store cash reserves while fighting inflation. The taxable liability is written on the small print. There are many sites out there that provide reviews and steps how to accomplish this.

I always wondered why the CC cash back was not taxable as well as rebates. Good post!
"Check ID" is my actual signature.

dknightd
Posts: 821
Joined: Wed Mar 07, 2018 11:57 am

Re: Bank Bonus - Is this different?

Post by dknightd » Wed Jun 13, 2018 6:13 pm

prudent wrote:
Wed Jun 13, 2018 5:18 pm

Just as with credit card bonuses, debit card bonuses are offered because they hope you'll get in the habit of using that card all the time, and they will make up the cost of the bonus in time. Most people won't carry more than one debit card. Banks are pleased that almost every new customer they get from offering debit card bonuses isn't just one more customer for them, it's also one less customer for a competitor. With debit cards, banks make money from transaction fees, from the people who overdraft and pay fees for that, and from people who sign up for additional products from the same bank where they have their checking account. Many people will put all their bills on autopay with their debit card. That helps deter customers from switching banks.
I guess that makes sense. For some reason DW likes to use debit car at grocery store, even though we get no kickback. I'd rather she use credit card for the small kickback. But it is not worth fighting about, or even disusing very often. We both hate fees, so for her it is just like writing a check. Don't spend money you do not have. As long as she sticks to that I don't really care ;)

Post Reply