I understand that if we give new customer's $25.00 to open up a free checking account there cannot be any strings attached. (minumum balance, length of term) But if we require the customer to use our direct deposit service, is this a "string"? Thanks.

IMO, yes. Requiring direct deposit could be seen as requiring a minimum balance in the account (greater than zero). Also, if the free checking is a demand deposit account, you run into Reg Q problems with a bonus (premium) greater than $10. Click me.

I have seen this argument (GuitarDude's) before, from other posters. I don't think a balance greater than zero requirement even exists if the requirement is that the depositor sign up for direct deposit. Nor do I think that a $25 incentive predicated on direct deposit will run afoul of Reg. Q, since it has nothing to do with the balance or duration of the deposit account if there are "no strings."

I think the incentive is acceptable, and I think you can call the account "free" even with the direct deposit requirement. If there is a bank out there that has been cited for using "free" conditioned on direct deposit, I'd like to hear from it.

Thanks to Randy, Ken and John, I think I finally have this straight in my head. Here is the thread where they helped to clarify this for me on ancillary products/services being offered.

John-according to Reg DD can they give $25 for OPENING the account without it being a bonus? (according to the previous thread?)

To give a bonus that's not subject to 217.101(a), the bonus must be given without it relating, directly or indirectly, to the amount of the deposit or to the duration of the deposit, or both. See 217.101(b).

Thanks John!

If you steer clear of the Reg Q issues, you still would have a bonus under Reg DD if you gave the $25 for opening the deposit account - including triggering 1099INT reporting. The only way around that is to tie it to the signing up for the direct deposit. If you can't have the account without the direct deposit, I think you would have a hard argument that the $25 was for that reason.