CreditUnion1 is offering a $1,000 bonus on its High Yield Savings Plus account. This promo requires a $100,000 minimum deposit held for 12 months, so it has a limited audience, but it does provide an opportunity to understand why some of these flat deposit bonuses aren’t as great as they might seem. Thanks to the readers that sent it in. Let’s start with the fine print:
2 This is a limited time offer available only from 1.17.23 to 3.15.23 and cannot be combined with any other offers. The $1,000 bonus (Bonus) will be deposited into your CU1 High Yield Savings Plus (HYS+) account at the end of the business day on the day you open the HYS+ account by making a minimum $100,000 deposit balance of new money from a competitor financial institution to earn dividends. The $1,000 bonus will start earning interest immediately but not be eligible for withdrawal until the account has a balance of $100,000 or greater for twelve (12) consecutive calendar months from the date of opening of the HYS+ account. Bonus is considered interest and will be reported on 1099-INT. Offer may be cancelled at any time without notice. Account Closure: If the HYS+ account is closed by the member or Credit Union1 or balance drops below $100,000 within 12 months after opening, Credit Union1 will deduct the Bonus from the HYS+ account at closing.
You must deposit a minimum of $100,000 in new money and keep it there for at least 12 months. If you go below $100,000 at any time during those 12 months, you lose the entire $1,000 bonus. Therefore, this is in effect a 12-month certificate with a early withdrawal penalty.
Separately, the base interest rate of 3.75% APY currently is not guaranteed or fixed, as it is a savings account. The rate can change at any time at their sole discretion. What if the Fed lowers rates or CU1 goes through some financial struggles and they decide to make it non-competitive a few months from now? They could drop it to 0% or 1%, but you’ll still be stuck there for 12 months if you want the $1,000 bonus. Note also that the High Yield Savings Plus account is a special account that has a minimum balance of $100,000. It’s different from their “High Yield Savings” account, so they could drop one rate and not affect the others. Not saying they will, but they could.
If the savings account rate does stay at 3.75% APY and you do get the $1,000 bonus on $100,000 held for 12 months, that is the equivalent of a 1-year CD paying 4.75% APY. That is a good rate, but many other banks and credit unions have similar term CDs at similar APYs that are guaranteed. Technically, if rates rise, you could even get more, but you could also easily get less. Personally, if I’m going to be locked in, I want a guaranteed payoff in return. I would rather have a straight-up 12-month CD paying 4.75% APY.
In the end, this is not a bad offer if the term length and deposit size fits your needs, I would personally put my money elsewhere given current options due to the way the promo is structured. Hopefully it is useful as an example of the different variables that go into comparing these offers. I have been a happy CU1 customer so far and look forward to see what other special offers they come up with.