Chase just announced that the sign up bonus on the Chase Sapphire Reserve would be decreasing on January 12th for online applications, but the bonus will be staying at 100,000 points if you apply in branch. Citi also does and so do a lot of other financial institutions.
I thought it might be useful to explain why a bank/credit union/card issuer might decide to offer a higher bonus in branch than online. There are three main reasons I know of:
- Inability to process online applications. Obviously this doesn’t apply to companies such as Chase, but smaller credit unions might not have the resources/software (or want to pay the fees to license such software) needed to process applications online so they simply don’t offer online applications. This is especially common when it comes to bank account bonuses.
- Lower marketing costs. When an application is made in a physical branch, the financial institution doesn’t have to pay any referral/affiliate fees. When an application is made online, they often need to pay the website/person who referred the person making the application. These fees can range from $25-$500+ so significant savings can be made here. Obviously branches still have costs associated with them, but the majority of these costs are fixed (e.g building itself, maintenance etc) rather than variable (e.g affiliate fees). Keep in mind we don’t use credit card affiliate links, this why we have no incentive not to tell you about higher in branch offers.
- Increase products per customer. Financial institutions are obsessed with customers having multiple products, they want their financial institution to be a consumers hub where they hold their credit card, deposit accounts and any loan products. Wells Fargo got into trouble for creating fake accounts and that all came about due to financial incentives that branch employees received for signing customers up for accounts (and minimum sign up requirements as well). Enticing a customer into a branch gives branch employees an opportunity to build a relationship with new customers & recommend other products. It also displays the fact that they have a physical presence in the area (competitive advantage against online only financial institutions)
Chase & other financial institutions believe that by offering an in branch bonus that they can lower their variable costs and increase the average amount of accounts each customer has. There is a real obsession with accounts per customer at the moment in the banking industry (and there has been for a long time). I’m not personally convinced that these types of offers actually help drive additional account openings of profitable customers. I’ve heard anecdotally from personal bankers that a lot of the time they don’t like when offers are split this way as savvy customers (such as Doctor of Credit readers) are more likely to open that single account and leave.
