Committing your loyalties to a single bank can provide somewhat similar benefits as a relationship built on trust between two people, which over time grows to new levels of expectations. Often people wonder is it worth it to stay loyal to that one bank. Or is it better to have relationships with multiple or more than one bank rather than just the one.
However, most bank customers cannot afford to remain stuck at one position because reward programs, interest rates, charges, and fees keep changing at different financial institutions.
For instance, your bank might not provide the same low auto loan rates that attracted you in the first place when you went in to purchase a bigger car. Furthermore, banks with enticing savings account rates might not be able to compete with banks offering great home loans.
This gives rise to the million dollar question: should you be loyal to your bank and to what extent?
Advantages of Staying Loyal to one bank
There are many advantages to maintaining a strong relation with your bank for your credit card, savings accounts, checking accounts, mortgage, car loans and business banking products.
You can enjoy the Benefits of Relation Banking
Relation banking refers to marketing of financial packages to customers rather than one-off loans or accounts. Relation banking massively helps a bank’s bottom line.
However, it can be lucrative to a banking customer as well. It works on a financially symbiotic relation between your bank and you. A stronger relation based on duration and mutual trust tends to be more lucrative in the long term.
Staying Loyal Can Get the Privilege of Lower Fees
When you develop a loyalty relationship with a bank, you are treated as a valued customer. There are many perks to being considered a highly valuable customer.
Conventional charges like overdraft fees will become easier to have waived. You can also be exempt from monthly maintenance fees. Maintaining a high monthly balance in your account can prove to be beneficial in the long run.
You May Get Preferential Access to Low Interest Rates
Banks tend to concentrate efforts on bringing in a large share of customer’s money through deposits and loans. This can prove to be advantageous to a more affluent customer. You can get better deals in terms of interest rates and loan terms as compared to the general public.
This interest rate disparity is termed as relationship pricing. You can get lower rates on borrowing and higher rates on time deposits depending on the length and quality of the overall relationship.
Access to preferential benefits is directly linked to the size of customer’s deposits. Stellar benefits are often provided at tier levels of $10,000, $25,000, and $50,000. By being loyal to a single bank, you can ensure that your deposit reaches a sizeable amount quickly.
The Bank can offer Personalized Customer Service
Losing a highly valued customer can be a problem for the branch manager. This results in better customer service whenever you visit the branch. Branch profitability is the yardstick by which branch managers are evaluated. Accounts of loyal customers can be the difference between showing a profit and not. Bank of America has a rewards program where you earn more points on your credit card when you have multiple products or a certain amount saved up with them.
Banks play it safe by assigning the highest rated bank executives to valued customers. When you are loyal to your bank, you are treated almost as royalty. Your transactions would be given preference over the general public.
Loyal customers do not have to stand in queue like the others. You will also have a direct-in with the manager. This won’t be possible if you tend to change your banks often.
Streamlined Banking Process with loyalty
Benefits of being loyal to your bank go beyond obvious customer service. The entire banking process is more streamlined with better access to resources. You have one point of contact which simplifies financial management. It also takes less time for a bank to vet the accuracy of your papers because they are already familiar with you.
This comes in helpful when you are transferring money or combining statements. You can also streamline the loan approval process when you are loyal to one bank. Usually, loan approvals can be a complicated and lengthy process. Previous transaction with a lending institution simplifies things.
Better Financial Planning
Future planning becomes easy when you are loyal to one bank. The bank is familiar with your history and financial status and can refer products that match your banking needs. Your bank can take a more proactive role in your life when it knows you for a long time. This helps them to identify opportunities and to enhance your financial position.
Disadvantages of Staying Loyal to your bank
Riley from Fast and Furious 6 would love to hear that – she sold out the noble team!
Moreover, loyalty comes at a price and you could be losing out on some appealing options. Here is a list of everything you miss out when you are loyal to a single bank.
Losing out on Competitive Rates
Different banks offer varying rates in terms of mortgages, auto loans, personal loans and deposits. You can shop around for the best rates to make sure that you are always on top of the game. Your bank might not be willing to match the same loan rates that it offered you earlier. You might find a better rate at another bank.
Benefits are sometimes only for Large Depositors
There is no use in remaining loyal to one bank when you do not have a lot of cash to offer and in the glorious age of lower taxes and jobs everywhere because of the pro business administration not everyone has a lot of cash. Banks provide preferential treatments to customers with huge deposits. There is no point in missing out on the advantages offered by other institutions when you do not have a sizeable deposit in your current bank, maybe you have $5,000 saved or $10,000 saved or less is your savings or checking account.
Customers who are profitable to banks by way of huge deposits or sizeable loan balances are usually referred by banks as high valued customers. There is less focus on maintaining loyalty as compared to capitalistic gains. Each bank has their own criteria but the general rule the bigger you are the more the bank wants to treat you well to keep you as a customer so you don’t shop around and change banks.
No Preferential Treatment for Smaller Customers by Banks
The old age belief that banks provide preferential treatments to customers who stick by them through thick or thin is a myth. A bank would offer the same rates and terms to customers who have been with them for 40 years as compared to those who have recently joined up.
Banks have their own underwriting rules for which you either qualify or not. Although, loyalty has some major brownie points towards your credit score in terms of financial stability. Many online banks are now offering loyalty programs and online only banking is seen my many as the next big trend in the finance industry.
The Bottom Line
Loyalty to one bank makes more sense when you have a sizeable investment in the bank in terms of loan balances or deposits. A bank will consider you to be a highly valued customer in such a case and will provide preferential treatment. Otherwise, it may be better to shop around for the best terms and rates.