Beware of Banks Bearing Gifts and Other Offers

Physician's Money Digest, December 2005, Volume 12, Issue 16

FDIC

Consumer News

Fifty dollars cash back is a verytempting offer, and you probablycould use a new computer.Many financial institutionsuse tacticssuch as theseto attract new customers,but are thegifts worth it? Beforeallowing temptation tosway you into switchingfinancial institutions or applying foranother credit card, think twice. offers some suggestionson how you can decide if the carrotdangled in front of you is in fact agolden opportunity.

•Let a gift become a tiebreaker.If you are torn between two identicalprograms from two or more competitors,it's okay for the gift to become adeciding factor. But it's never a goodidea to allow the gift to become thesole reason for opening a new account.

•Don't forget the other gifttax. Did you know that the bankmust report the fair marketvalue for any giftmore than $10 asincome to the IRS?This rule also appliesto multiple giftstotaling more than$10 as well.

•Read the fine print. That $1000computer may be a tempting reason tobuy a $20,000 certificate of deposit(CD), but make sure you look at theterms of the deal. If you need to withdrawany money within 10 years(before the end of the CD's term), thebank can deduct the computer's costfrom the balance in addition to addinga penalty for early withdrawal.