Credit card loyalty: Stick to one issuer, or mix it up?

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3 reasons to use cards from the same bank, and 3 reasons to diversify

Staff Reporter
Focusing on credit scores and what consumers can do to improve them

Credit card loyalty: Stick to one issuer or mix it up?

Credit card rewards are all about customer loyalty, but the
array of options in the market today can make it hard for consumers to stick to
one card issuer.

But whether you stand by your issuer or diversify your
wallet, each strategy has advantages and drawbacks.

For instance, if you use cards from only one bank, you could
miss out on more valuable rewards programs offered by other issuers. On the
other hand, your favorite bank may offer a wide variety of rewards cards that
cater to all of your spending needs, and you may be able to combine your points
onto one card for maximum value.

“It really depends on your individual spending habits,” said
Kevin Morrison, senior analyst for retail banking and payments at Aite Group.

Many millennials stick
with their banks, despite hot rewards market

There are signs that customer loyalty is tough to come by in
the card industry. Card churning has gained popularity among rewards-savvy
cardholders. And major issuers have been in a heated race to offer consumers
the most generous introductory offers and reward spending with the hottest
consumer brands over the past few years.

“The rewards market in the U.S. is extremely competitive,”
Morrison said. “It is becoming more difficult for financial institutions to
find ways to keep loyalty with customers.”

But not all evidence points to a total decline in customer devotion.
Aite Group’s February 2018 report on loyalty and rewards showed 45 percent of
millennials applied for a new rewards card in the past year, and half of them
said their newest rewards card was issued by their primary bank.

Of course, there are other benefits that come with either
strategy that aren’t related to rewards.

Here are three reasons to mix up your
wallet with different issuers’ cards, and three advantages of staying loyal to
one bank.

3 reasons to use
cards from various issuers

1. You can tailor
your rewards earning to your spending patterns

Many major card issuers cover all the bases when it comes to
reward types, such as cash back cards, travel cards and bonus rewards for dining, groceries and business
expenses. However, only a handful of them issue cards that offer more rewards
value (such as 5 percent cash back instead of 1 percent) for specific spending
categories at certain times during the year.

And many issuers are luring customers to their cards by
partnering with specific brands in their rewards programs. American Express’s Platinum®
Card
offers $200 for Uber rides each year. The Chase
Freedom
card’s third quarter 2018 5 percent cash back bonus
categories include Lyft and Walgreens purchases, and the Discover
it® Cash Back Card
 will reward Amazon purchases from October through December. 

See related: 8 tips for choosing bonus categories on your rewards card 

2. You have more
‘card churning’ options

Card churning – signing up for a card and then ditching it
as soon as you earn its sign-up bonus – can be a lucrative way to earn rewards, but
only if you’re flexible on what banks you’re willing to work with. Major
issuers routinely try to outgun one another with generous sign-up bonuses, so
it’s best to shop around if you want to maximize your haul.

And a churning streak that relies on one issuer could quickly
come to a screeching halt. Some issuers
have enacted
policies designed to deter card churning
, including limits on how
many of their cards or sign-up bonuses you can obtain within a given time
frame. 

3. You can reduce
your interest rate on a high card balance

If you’re carrying a large balance, a balance transfer card allows
you to pay a lower APR on your debt by moving it from one card to another that
has more favorable terms. But most issuers won’t allow you to transfer balances
between their own cards.

3 reasons to stick
with one issuer

1. It’s easier to
manage your online accounts

If you have five different credit cards from five different
banks, you’ll have to set up separate online accounts for each. Trying to
remember log-in details and payment due dates for each card can get
overwhelming.

However, if all of your cards are stored in one online
account, it’s easier to keep track of your spending and how you’re earning and
redeeming your rewards. 

2. You can pool
rewards from different cards

Some issuers allow you to combine or transfer rewards you’ve
earned with different cards they offer.

For instance, under Chase’s Ultimate Rewards program, you
can transfer cash back and points from a Chase Freedom account to a Chase
Sapphire Preferred
or Sapphire Reserve
card. From there, you can either redeem them at a higher value or transfer the
points directly to a travel partner program. Citi and Wells Fargo also let you
pool rewards you earn from different cards.  

3. You can focus your
reward earnings

Diversifying your card mix can be great for racking up
different types of rewards, but too many cards can dilute your overall earnings
power.

“If you use multiple rewards cards, you’re going to have a
tough time building up any one area,” Aite Group’s Morrison said. “It kind of
defeats the purpose, depending on your lifestyle and where you spend.”

Rewards-savvy
consumers say ‘mix it up’

Ben Meredith, CEO of online shaving supply store Lather and
Blade, said he mixes up his card collection to earn sign-up bonuses and target
his spending for maximum reward earnings. Meredith said he owns a Capital
One Venture Rewards
card and two American Express cards – a Hilton
rewards card for personal spending, and a Business
Platinum®

for business expenses.

“I have hit the bonus miles on all my cards because I focus
my spending when necessary,” Meredith said. “We typically use the Capital One
Venture every day to earn double miles on normal purchases. However, when
applicable, we may use the AmEx for travel because it earns more miles than the
Venture card.”

See related: How to avoid credit card sign-up bonus bait and switch

Matt Ruley, who operates an online office supply store, used
only Capital One cards for years, until he started taking advantage of cash
back rewards. Ruley said his favorite cash back cards include the Discover it® Cash Back Card
and the Capital
One Quicksilver
.

“I stick with whatever card has the best offer, and then I
pick up a new card or wait until I find an attractive offer,” he said.

Travel rewards consultant Jason Decker said there is “no
advantage” to using cards from only one bank now, unless you are trying to
build or repair your credit.

“For the rest of us, in order to get the best rewards, you
should sign up for credit cards with the best offer regardless of bank or card
issuer,” Decker said.  


“You should sign up for credit cards with the best offer regardless of bank or card issuer.”

Your strategy should
reflect your financial needs   

Whether you stay true to one issuer or play the field, your
card strategy should reflect your financial needs. If you’re not interested in
chasing many types of rewards, one or two cash bank or points-earning cards
from your primary bank could suit you just fine.

Additionally, if you find that having extra cards in your
wallet tempts you to overspend or you find it hard to keep on top of multiple
balances, you may want to keep your card ownership to a minimum (perhaps no
more than one or two, if any at all). After all, if you carry balances on a rewards
cards, any savings you earn may be canceled out by interest charges.

But if you have the means to pay off your monthly charges in
full, a mixture of different banks’ cards could help you pay off a big balance
at a lower interest rate or book a dream vacation without plunking down any
cash.

 




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