What is a bonus?

Many of us will tend to associate bonuses as good things. If we get a bonus at work then we expect to receive a little bit of extra money in our pay packet.

The bonus is often provided as a "thank you" for helping the company to perform well.

When we talk about bonuses in investment terms, the theory is very similar to the type of bonus that we might receive in the workplace.

A bonus from an investment is often a little bit of extra interest or cash that is paid if we meet the terms of the investment product. The reasons behind us receiving a bonus could vary considerably but some typical examples might include us being rewarded for having stayed with a particular company for a long time, or for generally being recognised as being a good customer.

If you're looking at a financial product that makes mention of bonuses then it's worth reading the small print to find out exactly what is expected of you before the bonus becomes available.

By ensuring that you know exactly what is involved, you can put yourself in a stronger position to make a decision about financial products.

As with all financial decisions, if you are not sure on the best course of action then you should seek independent financial advice.

Finance Facts also offers information on loans and financial terms.