In my last post: Credit cards for credit builders: what are your options? – Part 1, I talked about the option of being added as an authorized user to someone else’s credit card. Unfortunately for international students like me, this option rarely exists. The next best option is to try to obtain a credit card through your bank.
Option 2 for credit builders: Credit cards with banks where you have been a good customer.
Isn’t it convenient that we have a financial system where banks are not only asset managers but also creditors? You keep your income in a bank account, and you also have a credit card from the same bank. Then you may have a car loan with them, a brokerage account with them, essentially you entrust your entire financial life to the same financial institutions. Banks would love this to happen; loyal customers bring in the most revenues and profits through many different channels. The reality is quite the opposite. Andy has a checking account at Chase, a credit card from Discover, a car loan from Digital Credit Union (DCU), a brokerage account with Scottrade. Heck, why not one of each? What about 3 checking accounts at 3 banks? This is an awesome strategy, because if Chase goes bankrupt tomorrow, at least you still have money from the other 2 banks.
Financial institutions are smart; they realize there is a lot of potential for providing multiple services to the same clients. Apple is a great analogy for this. If you own an iPhone, you likely also have an iPad, an iPod, a Mac, millions of Apple Store apps and songs, etc. If one of your devices gets broken, you know exactly where to go every time. You trust Apple. Apple makes money off of you. Win-win. There you go. This is exactly what banks are striving for.
So, once you have a long relationship with a financial institution, it becomes significantly less difficult to obtain other financial products from them. In fact, it is common practice for these institutions to send targeted promotions to their clients for other products. Chase sent me a savings account opening bonus offer because I already had checking account with them.
If you have a lot of assets with a bank or credit union, it does not hurt to try applying for a regular credit card with them through a personal banker. Usually the cut-off is $10,000 total in checking and savings accounts or $25,000 in total assets including investment assets; if you reach this level you become a preferred customer. My personal banker told me when I applied for a Bank of America’s Bankamericard Travel Rewards card that since I was a preferred customer I would have very high odds at being approved for the Visa Signature version, a higher level card than the normal Visa.
Your personal banker usually can make a good prediction through his personal experience about your chance of being approved. Even if you do not get approved, you don’t have anything to lose: the application will result in a credit inquiry, but you will not be applying for another credit card in 6 months anyway, at which point the credit inquiry won’t hurt your credit profile as much. It’s a good idea to consolidate your assets in the bank where you are going to apply for your credit card. The more assets the better your odds.
Some people maintain a checking account at a credit union instead of a traditional bank. While I do not yet have personal experience with credit unions, I have heard that they are more generous with credit than banks. You’d have to be a member with a credit union to apply for their credit cards.
I wish I had tried this path before turning to the secured credit card option. Bank of America had denied me an Alaska Airlines card, but this is one of the 3 most selective cards in their range of products. I might have been approved for a less selective card, but my odds may not have been high since I had a lot less in my checking account than I do now, and I had been banking with them for only half a year. But again, had I been better informed I would have applied for a regular card; a year ago I was just too scared of being denied.
The bottom line is, if you have a banking relationship with a financial institution, you should try applying for a non-secured credit card with them. If that works, great! If you hit the wall, make a turn and try the next option.