Credit Cards Plus

A cross product discount on a credit card is when another financial product is bought in conjunction with a credit card and this means that the credit card becomes eligible for a discount on the interest rate or on the annual fee.

This will mean that the interest rate if the card is taken on its own can be somewhat higher than the advertised interest rate.  Care needs to be taken to make sure that a card is still a best buy if the other financial products are not available.

With annual fees there are sometimes what are called “package fees” when banks like Wells Fargo will charge the same monthly or annual fee to a customer for all their goods.  This can involve substantial savings if a number of different products are bought together.

Annual fees may also be waived if another product is taken out.  Due to the profitability of home loans, this most often occurs when a home loan is taken out with the bank.  It may however be the case that there is a good no annual fee card available with a lower rate on the credit card.

Another advantage of having a number of other products with a bank is that the bank may be more lenient with a customer with several products partly because they know the customer better than if they relied on statistics about behavior and partly because they are slightly afraid that the customer will get another bank account.

Another enticement that can be used with a credit card is to lower the interest rate if a home loan is taken with the same bank.  It may be cheaper to take a more flexible mortgage and to charge card spending to the home loan but this can be dangerous for people who do not have good control over spending.

Banks do this because they are the people who are lending on the credit cards and they are therefore simply selling different products to the same people. It is far cheaper to sell to existing customers than it is to sell to new customers, and a customer with three products is cheaper to administer than three customers with one product.

A fully flexible mortgage will have a higher account fee (and for a mortgage a higher interest rate) and will have all the products, credit cards, home loan, mortgage and car loans.  However the overall interest rate is higher for savings and lower for credit cards.