Why Polygamy is Good… When it Comes to Your Banking Relationships

Traditional viewpoints about banking were that a monogamous relationship is the best: Way back in the day when neighborhood banks leant to people they knew and trusted, and bank managers would lend money to people based solely on a handshake, it made sense to build up a trusted relationship with just one banker.

But today, things are a bit different. And when I say “a bit different” I mean “way, way different”. You’re a number, in spite of what the feel-good banking commercials tell you. You’re a customer number to the minimum-wage bank employee and you’re a credit rating number to the lending manager who has never met you and has no power to make lending decisions.

As banks consolidate and evolve, as they drop bad credit customers and good-credit-but-non-profitable customers, it makes sense for business owners to branch out and hook up with more than one bank.

In doing some research on this, I found a short but insightful article on exactly this topic in BusinessWeek.  They suggested that customers have a depository relationship with one bank and a long-term lending relationship with another. This is not a bad idea.

It seems counterintuitive because you would think that we should have one good business relationship with one financial institution, and banks market to current customers to convince them of that. However, if your lending habits aren’t in their best interest, they won’t think twice about cutting you out. And when it comes to your credit rating, it doesn’t matter how many financial institutions you’re with. What matters is your debt load, so spread it around!

Take it upon yourself to proactively diversify your banking relationships so that, should one of your banks fold or cut you loose, you’ll be inconvenienced but not down for the count.

Jessica Routier, IAC-EZ