Banking has become an essential part of our life. Money matters everywhere. It’s the lifeline for banks. The dealings with banks and conduct of accounts go a long way in determining the benefits a person derives from them.
In a world where banking products with low fees and decent interest rates are few and far between, most bank customers can’t afford to stick with one institution. After all, one bank offering great home loans may not be able to compete with the savings account rates offered by another. Conducting business with multiple banks means taking advantage of more opportunities to save and grow your money.
However, there is something to building a strong relationship with one bank. Just like a relationship between two people implies an expectation they’ll receive a higher level of trust and priority in each other’s lives (in theory, anyway), committing to a single bank can provide many of the same benefits.
Financial institutions often push away unprofitable customers, which means becoming BFFs with just one bank may prove difficult if you don’t have a lot of cash to offer. But those bank customers who actually add to bank revenue — through large deposit and loan balances — can reap numerous rewards from this win-win situation.
What Is Relationship Banking?
Relationship banking refers to the marketing of financial “packages” to customers, rather than one-off accounts or loans. By cross-selling banking products, institutions can increase total assets per customer and subsequently, total revenue per customer.
However, relationship banking isn’t just about the bank’s bottom line and can beneficial to the customer, too. For one, building a relationship with your bank means establishing trust on both ends. Your bank trusts you to meet your financial obligations, and you trust them to meet your financial needs. The stronger the bond of trust, the more financially beneficial that relationship becomes for both parties.
As Peter Koh, Senior VP at Wilshire State Bank explained to the Smart Business Network, “Trust is the foundation for all banking decisions.”
That trust can exist on a more personal level as well. Joanne Cleaver, who recently bought a condo with her husband in the small west Michigan town of Manistee, attributes the strong business relationship they built with their Northwestern Bank loan officer, Laura, to the overall smooth home buying process they experienced despite hangups along the way.
“Because my husband and I travel a lot, we found that on our closing date he would be in Dallas and I would be in Minneapolis. We thought we were on top of it with getting all the papers notarized and over-nighted to the title company, but on the Friday morning of closing one set of papers was nowhere to be found,” recalls Cleaver. Nonetheless, Laura was quick to help and had all the needed paperwork “signed and delivered for the next Monday morning — by 1 p.m.” In fact, Cleaver said it was the least stressful closing the couple had experienced in 30 years of homeownership.
Five Reasons to Build a Relationship With Your Bank
1. Access to better interest rates and loan terms
Greg Meyer, banking expert and founder of The Credit Union Guy Blog, notes that financial institutions “concentrate their sales efforts on bringing in a larger share of the customer’s wallet,” which can work to the customer’s advantage. Namely, more affluent bank customers can gain access to better interest rates than what is advertised to the general public.
Meyer calls this “relationship pricing” on loans and savings products, explaining “depending on the size of your overall relationship, you may be able to get higher rates on your time deposits and lower rates on your borrowing.” He adds that the benefits increase with the size of the customer’s total deposits, often tiered to kick in at $10,000, $25,000 and $50,000.
2. Fewer fees
Because you’re considered to be a highly valuable customer, things like checking account overdraft fees are easy to …