You might be hearing about “bundling bank accounts.” What does that financial concept mean and what are the possible advantages for you?
“Bundling” essentially entails packaging one bank product such as a checking or savings account with other financial products or services. Those others could be a student or consumer loan, mortgage, certificate of deposit, credit-monitoring, credit card, and/or individual retirement account. Each bank creates its own kind of bundle with its own very specific terms and condition. There is no standard package. Consumers interested in finding out about bundled offers have to do this on a bank-to-bank basis.
Banks have introduced packaging because it’s proven profitable to them. For consumers, there could be three key benefits. There is the convenience of one-stop shopping. You are also building a relationship with a financial institution. That can be useful for advice and risky kinds of borrowing. But the most important benefit from bundling could be the possibility of better terms and conditions for any or all the transactions. For example, the mortgage interest rate might be a quarter of a percentage lower and the certificate of deposit interest a quarter percentage higher, when part of a package.
However, all financial products and services are, by their nature and because of regulations, complex and filled with fine print. When there are several of them in a bundle, the complexity and the fine print also increase. That means you have to pay attention to every aspect of the terms and conditions for each product. The fine print might state that the relatively low interest rate on the credit card is for six months and then it will be adjusted according to market rates and other factors. Or there could even be the disclaimer that the rates could be changed at any time. You might have access to better terms and conditions outside the bundle. That is, through selecting your financial products and services on a la carte basis.
In addition, there could be a provision or provisions in the bundle which conflict with what works for you in managing your funds. For example, the provisions indicate you have to maintain a certain balance in the savings account in order to have the benefits of the package. If it’s likely you won’t need access to that balance, then the deal is a good one for you. But, if your balance tends to fluctuate, then this particular package isn’t for you. Another example of a “deal breaker” could be if the interest rate on a loan is higher than what you could negotiate with another financial institution. In that situation, you can try for a better rate in the bundle at that bank or walk away.
Like many other businesses, banks keep changing their promotions, adjusting them to market demand. That’s why it’s in the consumers’ self-interest to monitor what types of bundles are being offered. The right fit could come along at exactly the right time.