What Is A Good Customer?
From time to time I write about my experiences with the various credit card issuing banks. Whether it be in posts about Citi or Chase retention or a terrible customer service experience with Amex, I often describe how I try to be a good customer to the banks. More often than not someone chimes in saying that I am not a good customer or they ask what that phrase means to me.
To start, I’m quite sure I know who the banks feel are the very best customers. You probably know someone like this. They habitually have debt, but probably have a decent job and a good credit score. In other words, they pay all of their bills, but they carry a balance and pay interest. Yes, those people are the bread and butter for the banks. The banks make money on the swipes and even more money on the interest. I will never be THAT good of a customer.
“Bad Customers” (From the Bank’s Perspective)
On the opposite side I sort of think I know the kind of customer that the banks do not like. It is the person who is completely gaming them. The bank may feel that these people “abuse” loopholes or rules. In many cases what these people do is legal, but perhaps in an ethical grey area. Normally when the banks learn what these customers are doing, then their accounts are shutdown.
For example, lately Citi has been shutting down quite a few people’s accounts for abuse. Some of these people applied for multiples of the same card to get a bonus over and over while only keeping the card a month or two. Some of these people used “blind payment methods” where you pay your credit card through a 3rd party such as a bill pay service.
“Good Customers”
The vast majority of the people who read this site don’t fall into either of the above categories. Most of you have excellent credit, love to travel and have spent a lot of time learning the rules of the various programs and the details of the offers that the banks have for credit cards. You are the 1% of credit card consumers. You fit the profile of the bank’s biggest and best customers, but you don’t pay interest and you sign-up for a lot of cards.
So if you actually learn how to maximize the programs, strategically apply for cards within the bank’s published rules and don’t pay interest are you a bad customer? Some people would and have said yes. I say their line of thinking is ridiculous. So should you not maximize your return on the banking relationship? The truth is the bank’s have the house advantage and we should absolutely look out for our interests as long as we stay within the law and our own moral compass.
Being An Even Better Customer
I’ll admit that with certain banks I try to be an even better customer than is described above. For example, with a few cards I have small recurring charges (think Netflix) that don’t earn category bonuses. I’ve also been known to use a non-bonused card for small purchases when I am out and about. Maybe this makes no difference at all, but I feel it makes me a better customer.
I am also a customer of some of the bigger banks when it comes to other products. The truth is I need these other products anyway, so I might as well use the banks with good credit cards as long as it doesn’t cost me a premium. Yes, Chase has the best card lineup, so why wouldn’t I use Chase as my bank as long as I am not paying huge fees?
Your Value As A Customer
Awhile ago I wrote about how technology is our enemy in this “hobby”. That is simply the truth. The banks and all businesses for that matter are now collecting more and more data about us that can be used to evaluate our value as a customer. Technology is both helping businesses collect more data and helping them to analyze it quicker and more efficiently. Do we lose the banks money? Well, yes some of us do and they are now able to find that information out much quicker.
So what then can we do to stay on the bank’s good side? I don’t know the answer to that other than to say have a good faith relationship. I know that I will never be the very best customer of the banks since I refuse to pay interest, but I won’t be the worst either. Personally, I think that leaves me in a good place. On paper my credit and other factors make me an ideal customer. The truth is I am a statistical outlier because I study and maximize everything. I win more than most at the credit card game, but looking at earnings reports reminds me that the banks win too! If they find out we are winning more than them (i.e. losing them money), then the rules change. We have seen that quite often this year including last week with Citi’s churning change.
Conclusion
This is a topic that interests me a lot because some people think we are gaming the banks, but the truth is we are not. (Or most of us are not.) We are simply maximizing our return while playing their game with the rules they set. Yes, you are a customer and they make money off of you. Yes, you should expect good service or for them to honor what they promise and yes, you should be a good customer whatever that means to you, but remember that loyalty is not loyal. The banks are out to maximize your value to them and you should do the same.
What do you think? How do you try to be a “good customer” to the banks or do you not care! Let us know in the comments and please be respectful to others when sharing your opinions.
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[…] personally try to be a good customer and use my Chase cards for normal purchases. This is a personal philosophy, but I think using them […]
Aside from people who pay interest, but don’t default, “Good” customers for the banks are people who have relatively high incomes and use their banks as a one stop shop for mortgage and retirement products. This is where they can make real money. Checking accounts don’t earn the banks anything. Rewards credit cards are probably break even for the bank for people who don’t carry balances.
You are definitely not being a profitable customer for a bank if you throw them a bone by putting a non-bonused Netflix charge on the account every month. I would guess $5-10k of unbonused spend a year is probably the break even for them on most cards.
I am definitely not a good customer for banks. I rarely spend on cards outside of signup bonuses or 5x/3x categories. I have no moral qualms about this because I am playing by the rules that they set and they would screw me over at the first chance they get.
Very well said!
[…] Are You the “Travel Hacker” A Good Customer of the Banks & How to Improve Your Banking Relat… […]
While Chase does have plenty of cards they tend to alienate themselves (in my eyes) with their new rules. Chase specifically, while being one of the largest banks in the country doesn’t have branches in the mid-atlantic region of the U.S. Therefore someone like myself who lives in Maryland (and before N.C.) can’t really benefit from a banking relationship and since I don’t have a banking relationship and choose to use a better card for normal spend, I’m not a good customer. I get it, but if you truly want to be the best then you should have a larger presence in more places and not be salty when people look for loopholes.
To be honest, everyone attempts to take advantage of loophoples and advantageous situations and as much as banks screw over the Average Joe they should just let the whole “credit card churning” situation go.
awww poor multi trillion $$ banking industry…for every person that pays no interest and scores a few hundred bucks worth of points as a sign up bonus, there are 10 that struggle to pay the interest that can be incredibly high on some cards….so many that the government required banks to show how long making minimum payments will take. People pay more in interest than any other business has in profits yearly….people even justify paying mortgage interest because there is a small offset in the tax writeoff.. amoritization tables are the biggest ripoff scam in history, followed closely by insurance policies…..I’m sorry but if chase offers me $500 to open a business checking account, and their savings and CD rates are next to nothing, I’m being a smart consumer by opening the most lucrative account. If they make it a repeatable thing by only limiting it to once per calendar year, once again I am a smart consumer to shut it down for the required 90 days and open one per year for as long as the bank will allow it….there are enough people (expecially the current generation) that are taking on debt, throwing away money on renting and leasing things, have hardly any savings They will be the bottom class in a 2 class system that exists in many countries, where the rich and the banks make money off interest and the poor continue making payments but don’t really own anything…..the middle class will be squeezed out in this country by banks and politicians….so don’t feel bad at all if they throw us some scraps and we feed at the trough, don’t be a greedy hog and force them to tighten up the rations.
They make the game, if we read all the fine print and play by the rules, there is no need for a guilty conscious.
I feel a moral obligation to screw over the banks in any way possible. Sure, this makes me a bad customer. But in my eyes, a good global citizen.
[…] Are You the “Travel Hacker” A Good Customer of the Banks & How to Improve Your Banking Relat… by Miles to Memories. There is no way I’m a good customer to banks, a good customer is any customer that makes money for them. I chase sign up bonuses and category bonuses and never pay interest, I imagine I’m a big net negative for all credit card issuers but I’m not going to complain they keep giving me new cards. […]
[…] Are you a “good customer” of a bank? Or are you the kind of person they are trying to get rid of? […]
[…] post about how to be a good customer of the banks and improve your banking relationships. You can’t play if you get shut down […]
I actually hate traveling but I love the destinations. If I can eliminate the plane ride even if it’s first class I would. Thanks for pointing out that thing about who are good customers for the bank.
After 60 some cards I still find the banks love me.
Any thoughts regarding Citi shutting down accounts when bill is paid with another person’s debit card…for ex. I paid my husbands Citi bills with my debit card.
If I’m a “bad” customer because I never pay interest and never carry a balance, so be it. I’ve been taught to only spend what you can pay and that includes paying my balance in full every month.
I like to think of it as being a free agent. Many people think that you should sign up for 1-3 cards when you become an adult and those are the cards you will use for the next few years or decades.
As a free agent, I’m legally allowed and do try everything on the market. If the card doesn’t entice me to use it for more than the signup bonus, nothing says that I have to. It is the banks job to keep me engaged. If they have a shitty product with a good sign up bonus, then they shouldn’t be surprised if I took the hook but spit out the bait.
I’d love to have somebody who actually knows the real numbers modify my assumptions, but this runs through my head:
The average interchange “swipe” fee is (or was) about 1.79% for VISA/MC. Assuming, with absolutely no justification, that 75% of that is gross profit, the bank’s grossing 1.34 cents on every dollar I spend.
So I get a card with a signup bonus valued at $400, which the bank gets at a discount of $200. Ignoring the acquisition cost of opening my account, for them to break even that means they need me to swipe $15K. Even assuming I manufactured $5K of spending to get the bonus, my few small non-bonused spends will never get there…
Unless I continue to spend pretty heavily on that card, calling myself a good customer seems like so much self-justification…
Visa & MC are actually transaction-processing companies. They are like clubs, and banks are “members” of the club. The club charges the members for the services they provide (txn processing, settlement, various cardholder benefits). If you are a large bank or merchant, you might be able to negotiate your way to less fees (the $1.79 is an inaccurate figure, as there are different fees assigned to different types of transactions (fuel, grocery, travel, atm witbdrawal, etc). Each bank can also choose the percentage of cards they will issue to get favorable fees. It could be 70-30. So you might notice that certain banks issue more Mastercard, or vice versa. It means they are getting a better rate from that company. This is a long way of saying the banks don’t get the inteechange fees.
Hi Kristen. The payment networks actually get a very small percentage of interchange fees with the majority going to the issuing bank. You are correct that this amount is negotiated, but the fees that Visa/MC charges are a percentage of the interchange. Wikipedia has a very good article explaining it and other info can be found on the web as well if you are interested in learning more.
https://en.wikipedia.org/wiki/Interchange_fee
@Leticia, Perhaps this is true, but when you also have multiple products with the a bank (i.e. a checking account) they like that too. I feel a long account history also helps your standing as well as your credit score and I never revolve balances and the credit score remains high or nearly perfect.
I believe this is a myth that you should revolve a little just to generate interest to make you look better to the bank.
Nonsense. Citi has repeatedly changed its T&Cs (as have most banks) to try and prevent churners gaming them. Reality is if you haven’t been closed by a few banks, you probably are a piker in the MS/churn world and would never likely run afoul of their algorithms.
I with you. I see myself as a decent customer. I don’t carry a balance or pay interest, but I use my cards for every possible purchase. At the very least, they make merchant fees from me. If I don’t use every card regularly, I spread my spending around to give business to each bank. I see that as my part of the deal. They give me points and miles. I give them merchant fees. That seems fair in my little world.
On the cards that you only use to get the sign up bonus and then rarely use again you are not a good customer. Do you think the NBA card bank makes any money off of you only spending when it is 5x? The cards you keep long term and use on a regular basis like a prestige or sapphire may make you a good customer for those cards but for most of us – I would say 75% of the cards we get we are bad customers (losing them money on).
Good that you mention that the best costumers are those that pay their bills but carry some balance, thus paying interest. I always figure that the banks don’t want you to carry a huge balance in fear that you may stop paying them but they do love when you pay some interest.
Shawn, great post. I think putting in a little effort to avoid getting singled out by an algorithm at a bank is well worth it in the long run. Do blind payment methods include payments from prepaid cards such as GoBank or Serve? Or are those other methods that don’t correspond to an account with your name on it? Do you know of banks shutting people down for paying credit cards with prepaid cards?
There is some speculation that Citi shutdown some people because of this.
I find this subject really interesting as well. Thanks for the great article. Any more information on 3rd party payments would be greatly appreciated, since that’s how I pay my mortgage and some cards. For instance, does an occasional 3rd party payment trigger problems, or just paying that way consistently?