Dubai: If you’ve banked with an institution for a while, while there are some upsides to staying loyal, are there any benefits, in terms of cost, when it comes to using a credit card from the same bank?
There is a clear advantage of familiarity, with a clear understanding of the services and policies of your current bank. You may also know what to expect after having visited a few of the bank’s branches.
However, while sticking with the same bank might offer convenience, you could miss out on more competitive deals from other providers.
By branching out to other banks, you can find products with attractive introductory interest rate periods, signup bonuses, rewards and travel benefits.
Key advantages of using both cards from the same bank
“Since you have an existing banking relationship with the bank, the spending limit (or credit limit) is usually set higher than if you were to take the credit card from another bank,” said Dubai-based banking and credit analyst Rupesh Naish.
Repaying your credit card dues is rather simple when you deal with the same bank. You login to the net banking and there is an option to check your credit card balance and either pay off full amount or minimum amount or any other amount (greater than the minimum amount due).
“You could sign up for auto debits to pay-off your credit card dues. Though it’s possible to sign up for auto debits with other banks, having it within the same bank is easier to execute,” Naish added.
Another key advantage is that if you already have a credit card with your current bank, opening another card with the same institution most likely won’t give you access to balance transfers. If you open a card with another provider, you can move your balances to that card.
There are two things to keep in mind: Firstly, you won’t be able to link a debit card to a credit card account, even if it’s from the same bank. Secondly, a debit card from one bank can’t be cross-linked to an account at another bank. You can use it at another bank’s ATM (teller machine), but with a fee.
Benefits of having a credit card and debit card of different banks?
For most people, it's typical to use credit cards for the bulk of their purchases, and evidently using a different bank has its advantages in terms of the extent of varying benefits different credit cards offer.
“When comparing credit cards with debit cards linked to the same bank account, it’s important to consider the fees and benefits,” Naish further noted. “However, currently even newer debit cards too offer more credit card-like add-on features. So one cannot write off either of the cards just yet.”
For example, the choice of having a credit card from a different bank allows you to take advantage of better consumer protections against fraud compared with debit cards linked to a bank account.
“Now the downside to using cards of multiple banks is that each bank does things differently, like charges, minimum balance, with different logins,” Naish explained. “So it can be convenient to have have a single place to login, but you’re giving up other things which may be more important.”
Why do banks give more offers on credit cards rather than debit cards?
Banks give more offers on credit cards rather than debit cards, primarily because the debit card is used against the credit balance in your account and there is no earning for the bank.
“As far as the credit card is concerned, most of the banks are charging 24 to 36 per cent interest on the outstanding unpaid amount over the minimum payment required to be made,” explained Naish.
“If you make full payment which is due, the bank will not charge any interest but if you chose to make only the minimum payment due which is generally 5 per cent of the due amount then the bank will charge above mentioned interest on the remaining 95 per cent amount which is unpaid.”
People get into credit card trap by making purchases they can’t afford and then by opting to pay minimum due amount they pay huge amount of interest to the bank which is evidently a source of revenue for the bank.
With a credit card you are not out any money directly. You are billed on a monthly basis and for anything that is not correct you can dispute the charge with the credit card company. Also, with a credit card there might be benefits that are more valuable to you, such as miles, cash back or points.
While there's no reason you shouldn't get a credit card from the same bank as your debit card if you like their products and customer service, when looking for a credit card, there are a few factors to consider before deciding if you’re going to stay with your current bank.
“Even if you’re content with your current bank, compare cards from other providers before settling on your final choice,” added Naish. “Doing can possibly land you with a credit card that better matches your spending style.”
So while it’s not inherently bad to have multiple cards from the same bank, another reason experts believe it’s preferable to get cards from different banks is have cards from different networks (e.g. Visa, MasterCard).
This is because a handful of retail merchants or shops only accept one or the other. A given bank could offer both, but with multiple banks, it’s easy to get two different card networks.
“Also, if the bank takes some kind of negative action (e.g. close your credit card because you’ve been delinquent in some manner), then there is a possibility of it affecting the other account in the same bank; if your accounts are at different banks, it’s less likely this would happen,” added Naish.
Additionally, if you’re interested in promotional offers or just getting rewards points, you have a bigger choice by not limiting yourself to the same bank.
“By using different banks, you may also discover variations in terms and features that you would otherwise be unaware of; essentially, you become a better shopper because you’re aware of pricing, practices, services, etc., because of the fact that you’re dealing with more than one bank,” said Naish.
Regardless of you choosing one bank or different bank for your cards, each credit entity you take a new card from will have an impact on your credit score whether it is from the same bank or from multiple banks. So it really doesn't matter, when it comes to the overall impact on your financial health.