Getting Credit Card From Your Local Bank May Be Best Bet

Assuming you don’t keep your money under your mattress, you may have noticed that the flow of credit card offers from banks where you have accounts has been getting heavier. Rather than chuck these offers unopened, it could pay to take a look.

Some of the nation’s biggest banks are focusing on building up their credit card portfolios by getting their plastic into the wallets of existing customers. To make the sale, they’re revamping their cards and offering extra rewards.

“I am not going to be satisfied until every creditworthy customer who calls us their bank carries our credit card,” Wells Fargo WFC -1.54% CEO John Stumpf said during a recent conference. At last count, only 37% of the bank’s 70 million customers had a Wells Fargo credit card. So to turn things around, the San Francisco-based bank is developing a new line of cards with American Express AXP -1.85% (available mid-2014) and Visa V -2.47% Signature, in addition to completely revamping its credit card rewards program.

“We want to get [customers] excited and give them products that are financially helpful,” said Brent Vallet, Wells Fargo’s Head of Consumer Credit Card, Lines and Loans business, during a phone interview. “We know there’s a tremendous opportunity within our base.”

Similarly, U.S. Bancorp will unveil a brand new line-up of American Express EXPR -1.2%cards later this year, and has said it will focus on marketing them to existing customers.Bank of America BAC -1.06%, which has steadily rolled out cards with (banking account) customer-only perks over the past two years, has announced a strategic and renewed effort to get these into the hands of existing customers.

Before these recent initiatives, the big banks’ in-house credit card businesses were generally pretty stagnant. Bank of America, for instance, didn’t see a spike in new credit card sign-ups until the last quarter of 2013, when it issued more than 1 million new cards, the majority to existing customers, according to a spokeswoman.

The timing of the new big bank push is hardly surprising. After the financial crisis hit in 2008, consumers went on a debt reduction diet. Banks, too, sheltered in place and avoided taking on new risk, particularly as they focused on cleaning up their balance sheets.

Now consumers are re-gaining the confidence to borrow; credit card debt surged $3.98 billion in October and $457.8 million in November, reaching the highest level in three years. With credit card delinquencies and charge-offs down across the board, banks are also exhibiting a growing appetite for this type of lending, Indeed, for many banks, credit card revenues have helped offset losses in mortgage holdings, recent earnings reports show.

Which brings us back to the banks’ push to peddle credit cards to existing customers, and why those consumers should actually consider such offers. For banks, the advantage is obvious. “They know the good guys,” says payments industry researcher Robert Hammer, CEO of the Card Knowledge Factory. “They know who is good and who is bad risk, from card usage to repayment behavior.” Existing customers also represent an opportunity to save on marketing costs and build on the relationships they’ve already cultivated. “Many [customers] have mortgages with us, so we have some knowledge of the mortgage relationship, and also the deposit relationship. They’re doing business with us,” said Vallet.

Banks stand to make money from credit cards in two primary ways: the interest on carried balances (at an industry-wide average rate of 15.06%) and swipe fees on card purchases. So even if you’re the type who pays in full every month, selling you a credit card can be profitable.

So should you take the bait? If it’s a card that meets your needs and is competitive in its own right, as many are, the extra rewards can be a final selling point. To help you decide, here are the perks that your regular bank will throw your way if you sign up for their card:

Bank of America:

• BankAmericard Privileges with Cash Rewards promises 50% greater cash rewards if you deposit the rewards into a Bank of America account. This turns your $25 cash back into $37.50.
• BankAmericard Travel Rewards touts a 10% bonus points award for existing customers. It’s based on your total spending: by charging $10,000 to the card in a year, you’ll get an extra 1,000 points added to your account.
• The BankAmericard Cash Rewards line offers 10% greater cash rewards for existing customers. This boosts your $25 cash back to $27.50.
• BankAmericard Better Balance Rewards gives existing customers a $20 annual bonus.

Chase

• Chase Freedom offers checking account holders an extra 10% bonus on all cash back earned at the end of each year.

PNC:

• All three of PNC’s credit cards — the PNC CashBuilder, PNC points and PNC Flex — offer extra perks (like better rewards rates or bonus points) if you have a qualifying bank account.

U.S. Bank:

• The $49 annual fee for FlexPerks Travel Rewards is waived for two years if you have a platinum checking package; other folks only get one year off the hook.
• The Cash+ card offers an introductory cash bonus exclusively for platinum checking customers. Collect $50 in cash back if you spend $2,500 in the first four months of having the card.
• FlexPerks Reserve and FlexPerks Travel Rewards have extra bonuses for high net worth clients who have a financial advisor at U.S. Bank. For FlexPerks Reserve, expect a 50% points bonus on the amount spent each month. For FlexPerks Travel Rewards, there’s a 25% points bonus on the amount spent each month.

Wells Fargo:

• The new suite of American Express cards will feature incremental rewards based on the level of spending you do with the bank, according to Vallet.

The last thing to consider — if your only credit card is with your primary bank — is whether you’re asking for trouble if the rubber ever meets the road. Say your bank decides to cancel your card without notice, which they reserve the right to do, whether you’re a loyal, longtime customer or not. Suddenly you’re left in a lurch until you can get another card. Or, say your bank tells you they’re going to hike your interest rate or lower your credit line upon a reassessment of your risk. This could be because they’ve adjusted their risk formula or you’ve gotten riskier. Maybe you recently missed a mortgage payment — on a mortgage carried by your bank. They have direct and speedy access to that information, rather than having to get it through a credit bureau, at least “assuming there’s communication between the lending arm and the banking arm,” said Ruth Susswein, Deputy Director of National Priorities at Consumer Action.

What it boils down to: Think about keeping a card outside your bank, too, just in case. “You wouldn’t want to only rely on one friend your whole life, you want to have options available to you…so it might be helpful to do business with more than one company,” said Susswein. “Two is better than one.”

Article Source:  McGrath, Maggie. "Why It Could Pay To Get A Credit Card From Your Regular Bank."Forbes. Forbes Magazine, 23 Jan. 2013. Web. 23 Jan. 2014.