Cross selling for credit card issuers

Credit card issuers will often cross sell other financial services to their credit card clients.  This takes a number of forms.

To a bank, a credit card is simply another financial product among many.  It is essentially a loan facility that has a greater flexibility and administrative overhead than other loans tend to.  The fact that a large part of it is administered by a credit card provider such as VISA or MasterCard does not change the essential nature of a credit card.

This means that a credit card is seen as an opportunity to cross sell a large number of other products.  Banks and other financial institutions will rarely specialise in providing credit cards alone, they will provide a range of other services such as loans, mortgages, transactions accounts and savings and investment vehicles.

One crucial concept in cross selling financial products is that of the financial lifecycle.  Simply put, it is the idea that as a customer stops needing one type of account then they start needing another type.  So a student who is graduating will want to switch from a student loan to a graduate package with a personal loan and an overdraft, after this has been paid off there will be a need for savings products.  This is also the case with credit cards, as customers need certain credit cards at certain points in their financial lifecycle, so they need certain other loan products and certain savings products.

The logic behind cross selling has been that it costs far less to sell a product to an existing client than it does to a totally new client.  This is for various reasons, such as that the client is largely pre-qualified, a large amount of client data already exists and the brand already has a certain amount of trust attached to it.

Package fees are a logical extension of the cross selling idea.  For a fee that is larger than the administrative fee for a couple of stand alone accounts the client can have access to any of the accounts offered by the bank.   Another variant is the current account mortgage where all the transactions – mortgage, unsecured loans, credit cards, transaction accounts and savings – are consolidated into one account.  This saves a large amount of money overall.

One area where cross selling is discouraged is when credit cards only have introductory offers for new users.  This is often the case with interest free credit cards, which tend to have the zero rate of interest for only a few months before reverting back to the standard rate.  In these cases there is actually a discouragement of cross selling.