To Move or Not to Move: Choosing Between Being a New Customer and an Existing Customer
So you current have a current account in a specific bank. Because you are a good customer—you fulfill the requirement monthly minimum deposits, you pay your overdrafts on time—your bank offers you a promo that you think you shouldn’t afford to miss: a credit line with interest rates lower than the industry standard. What do you do?
This isn’t a unique instance. Banks and other financial institutions really offer good rates to existing customers who have been good clients. The rationale here is obvious: since you were a good current account holder, you will probably be a good borrower as well. What they’re trying to do is attract good business by giving you good rates. And, of course, good rates should never be disregarded. Unfortunately, good rates are not the only factors at play here.
This one is the easiest of all. You need to go with the new provider if the new provider offers better rates. There are small benefits when you remain with the same provider for a long period of time. However, most of the benefits can now be carried over or passed over from the old provider to the new one. There isn’t an inherent need to move, however; if you are satisfied with your rates and you think you will no longer get anything better, you’re better off sticking around.
Credit cards and loans
Consider getting credit cards in the same bank you have a current account or a saving account. Having both current account and credit account in the same bank is convenient, especially if you do a lot of bank transactions. However, there are certain dangers to be considered here.
First, you should know that banks have the right to set off payments in case you fail to pay your credit card bills after a long period of time. The procedure here is simple. Say, for example, you currently have a 50,000 Singaporean dollar credit card debt and funds in your saving account worth 5,000 Singaporean dollars. You have missed 5,000 Singaporean dollars worth of payments on your credit card debt over the last five months. The bank has the right to take your 5,000 Singaporean dollar deposits to offset your late payments.
The right to set off does not differentiate between bank accounts—saving accounts, current accounts, and even fixed deposits accounts can be accessed by this bank right. Of course, your funds are safe as long as you pay on time. Generally, the right to set off is used as a last resort by banks, in case their clients suddenly go delinquent for a long period of time.
Bank loans are pretty much the same. As with credit cards, banks can set off payments in case you go delinquent on loan payments.
An additional condition: when the bank falls. What will happen to your deposits in your bank accounts in case the bank files bankruptcy?
Imagine this: you have 10,000 Singaporean dollars in your VIP banking account. In the same bank, you have a balance of 10,000 Singaporean dollars as well (for a car loan, perhaps, or a home loan). You are always on time when it comes to payments. Yet, when the bank falls, it can take your deposits on the bank account to pay off your remaining 10,000 dollar debt.
Current accounts and saving accounts
How about bank accounts with no credit line? Is it safe to get a current account from the same bank you have a saving account, and vice versa?
The appeal of getting a current account in the same bank you have a saving account in is definitely strong. Banks are likely to offer a linking bonus in case you plan to have both accounts in one bank. A linking bonus is basically in the form of a better interest rate. After all, saving accounts do have better interest rates. Your current account may not get the same full benefit of your saving account, but there is an improvement—and any improvement should be good, right?
Unfortunately, that isn’t always the case. Most of the time, the special interest rates for the linking service are usually lacking; you might be able to find better rates elsewhere. Therefore, it is essential that you look at the specifics. The rate advertised may not be the rate that will be given to you. Also, be reminded that you are not likely to get these benefits if you simply opened a current account and a saving account at the same time. These benefits are for existing customers. Your history with the bank plays a huge part here. If you want to get these benefits, wait until you have a deep history with your bank (a year or two of being a good customer will do).The same idea works when getting a saving account from the same bank.
If the rates of the accounts are satisfactory and the bonuses for linking are above par, you need to assess the service of the bank. Are you satisfied with their overall service? Do you think there is a need to move? Look at the specifics of their services.
What about the right to set off when it comes to overdrafts? This right only applies to credit lines—and a current account (the bank account that makes overdrafts possible) is not a credit line despite the fact that you can get money from your account beyond what it actually has. You do not have to worry about the bank setting off from your saving account when you have unpaid overdrafts.
In the end, it’s pretty much about the services you are getting now and what you could be getting from another provider. Follow what many experts say all the time: shop around and always—always—look for better deals. Doing business with an institution or company you’ve been with for a long time does seem appealing because it is familiar, but there is definitely a better option out there if you try to venture out of your box.