I’ve got to thinking recently that we really are starting to lose touch with reality when it comes to the subject of Status. In many senses it comes down to the ancient and controversial matter of Class. Can an external title, or level of prestige really create differences of opportunity? Certainly. But is the real meat of the matter the need for us to feel better than our fellow man, to have us acknowledged as being more important, indeed Very Important People.
It is interesting that Status when it comes to Loyalty Programs often comes in highly prestigious levels, such as Gold, Platinum, Diamond and something so exclusive that the normal measures don’t apply, such as Executive Platinum, and Premier 1K (a one-percenter?) and really shiny Silver instead of the normal stuff.
We pay for this status, for this acknowledgement, we pander to the loyalty programs, when booking a flight we might not pick the cheapest option anymore, since we get one step closer to an even loftier title, this is such an abusive symbiotic relationship that rationality becomes secondary to the pursuit of the next tier. There are people who actively seek to obtain 100K bum in seat flown miles, that they pay for, and suffer for, just to achieve the status they want, they would mileage run the entire thing and pay thousands of dollars to do so just to be called an ‘Elite’.
Certainly there are those perks that come with being an ‘Elite’ but are they really the reason for these dysfunctional habits, or is it just the desire to be recognized that people are seeking?
We have this too with banking. When I first moved to the US I signed up with HSBC and was offered their ‘Premier’ account which is reserved for their most important customers. The difference between this account and their Choice Checking account? The Premier Account comes with free international debit card purchases, and a relationship manager… the price for that – $100,000 in Assets or $600 per year. The Choice checking, $1500 in Assets (both are average balance per month) or $180 per year. So, they are in other words saying that your Free Debit Card Transactions and the Relationship Banker are worth $420 per year.
Are they? Would you pay $420 per year for a bolt on feature for your account that allows you to use a debit card for free? If so, might I suggest getting the Chase Sapphire Preferred card and earning Ultimate Rewards whilst also not paying any foreign fees. No, I think that is a simple decision, people wouldn’t really pay for the ability to not pay for debit card fees.
So is it the Relationship Manager? Here we are onto something… they would treat you the way you deserve to be treated, with class and distinction (from the average customer) you deserve this. Also, there are some other things that such a relationship manager could do, such as help you get the best mortgage rates (just kidding – I mean the best HSBC mortgage rates, which aren’t anything close to being the best mortgage rates you can get). Or is it the best savings account interest rates (whoops, they are less than a quarter of what you get at Ally).
Is it the International Banking Relationship? They offer this too, but really, as a person who has actually lived in 4 countries over 3 continents I can tell you setting up a bank account isn’t going to kill you overseas, and if you are working for a company that takes you there then their HR team takes care of all this for you anyway.
But its Free for Balances over $100,000!
Yes, free for its most prestigious clients, people like you who are wealthy enough to have $100,000 sitting in checking/savings earning between 0.01% (checking account interest for Premiers) to 0.2% (saving account interest for Premiers). The actual opportunity costs of that, just taking a like for like Savings/Checking combination from an online bank like Ally and you could get the following:
By parking $100,000 in HSBC and being recognized for being an Elite you are losing out on hundreds of dollars in interest. In fact, in the example where I split the balances between the two as $25,000 in Checking and $75,000 in Savings accounts you are losing $617.50 per year by being ‘Elite’. Which is more than the cost of buying HSBC Premier Status. You could actually put all your money into Ally, and $1 into HSBC, and then wire them their $50 per month service fee and still come out ahead of the game by $17.50 per year.
The real problem, they are trying to hook you in and then use the Relationship Manager to sell you HSBC products that are not beneficial for your finances, these will be ‘exclusively for Premier Customers’….
There could be some argument for having a bricks and mortar account and comparing HSBC and Ally is unfair, since Ally doesn’t have branches. But as the example outlines above, you could do all of your major transactions, such as autopay, billpay etc through Ally, and keep a small balance of $1500 in a more traditional bank, allowing you teller access, and still be so much better off in the process.
Until we can free ourselves of the psychological need to be endorsed by others as being superior, we will constantly fall into the Elite Status trap, and use any method we can to justify the sacrifices and costs that are associated with the ‘Free and Prestigious’ levels of service we obtain. The root of this need to be acknowledged is a lack of confidence in our own worth and value, we feel the burning need to have our ‘status’ in life, in airlines, in banking ‘upgraded’ in order to feel comfortable. It is a lot healthier and a lot cheaper to simply accept who we are, and think of our fellow man as our equal, rather than someone we must seek to trump with external validation.