Credit card loyalty: Stick to one issuer, or mix it up?
3 reasons to use cards from the same bank, and 3 reasons to diversify
Personal finance journalist with an eye for industry news
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.
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.”
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.
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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