Diversification and Obscurity

[Anonymous]

Diversification is an important aspect of our credit portfolios for all of us. As we all look at increasing diversification, especially with this uncertain economy, are there more obscure or different, less mainstream lenders you would like to share for the rest of us to be aware of?

Last night a few of us were discussing World's Foremost Bank (Cabela's Visa), so that is one of the more obscure credit card lenders that can help with diversification as we all review our profiles. Please list any others you may be aware of. Thanks.

[ddemari]

UMB Financial Corp. has some pretty obscure cards like Hello Kitty Visa. They also have some regular cash back cards, too. I hear they are way conservative. 

[SunriseEarth]

---

@Anonymous wrote:

Diversification is an important aspect of our credit portfolios for all of us. As we all look at increasing diversification, especially with this uncertain economy, are there more obscure or different, less mainstream lenders you would like to share for the rest of us to be aware of?

Last night a few of us were discussing World's Foremost Bank (Cabela's Visa), so that is one of the more obscure credit card lenders that can help with diversification as we all review our profiles. Please list any others you may be aware of. Thanks.

---

You might consider a title change to "Obscure Credit Card Providers" or something to that effect.    There may be interest in getting credit products away from large lenders as a means of diversification, but the title may apply to all financial products.  

That said, the only "obscure" credit product I have is my Visa issued by Wescom CU.   I get good BT offers, but the rewards program isn't very notable.   However, I think there may be other CUs that offer good products.  

[happypill]

I don't think finding obscure lenders are the key to diversification.  I'd say its more about finding lenders that operate in different segments of the economy.  The recent financial crisis brought down Lehman & Bear and forced Merrill, Wachovia & Wamu into others arms because (in large part) of their trading portfolios and/or their exposure to real estate backed securities.  Wells Fargo was little affected because they didn't really play in that arena, while BofA came out pretty well because they really really wanted to play in the same markets as Lehman, Merrill & Bear but weren't successful in growing those lines of their business even though they desperately wanted to.

When (not if) the next financial turmoil hits, whataver it is, you can imagine that Chase, Citi, BofA and Barclays are all going to react pretty much the same way.  OTOH, I think Amex and especially Discover will react differently because their businesses are different.  Credit Unions are in a different sector entirely as they do their business primarily based on the spread between the interest they collect on mortgages, car loans, CC, etc. & the interest they pay out on deposits and savings, a very traditional & basic form of lending.  So, if the next shock hits higher risk areas like trading & underwriting M&A, CUs would barely notice.

So, to diversify, I'd suggest finding several different lenders operating in many different sectors of the market.  If you have 10 cards from Chase with $200k in total limits, just bear in mind that they could all get axed at the same time through no fault of your own if Chase gets hit by something.  If all your cards are with Chase/Citi/BofA, a single event could lead to changes across the entire portfolio.  Personally, I like having a card with my local bank, with some regional lenders, federal CUs and some big financial supermarkets as well.  So, if something happens that affects major banks & regional banks & local banks and federal CUs & card only vendors & Synchrony & Comenity, then it's time to head for the hills.

[FinStar]

---

@happypill wrote:

I don't think finding obscure lenders are the key to diversification.  I'd say its more about finding lenders that operate in different segments of the economy.  The recent financial crisis brought down Lehman & Bear and forced Merrill, Wachovia & Wamu into others arms because (in large part) of their trading portfolios and/or their exposure to real estate backed securities.  Wells Fargo was little affected because they didn't really play in that arena, while BofA came out pretty well because they really really wanted to play in the same markets as Lehman, Merrill & Bear but weren't successful in growing those lines of their business even though they desperately wanted to.

When (not if) the next financial turmoil hits, whataver it is, you can imagine that Chase, Citi, BofA and Barclays are all going to react pretty much the same way.  OTOH, I think Amex and especially Discover will react differently because their businesses are different.  Credit Unions are in a different sector entirely as they do their business primarily based on the spread between the interest they collect on mortgages, car loans, CC, etc. & the interest they pay out on deposits and savings, a very traditional & basic form of lending.  So, if the next shock hits higher risk areas like trading & underwriting M&A, CUs would barely notice.

So, to diversify, I'd suggest finding several different lenders operating in many different sectors of the market.  If you have 10 cards from Chase with $200k in total limits, just bear in mind that they could all get axed at the same time through no fault of your own if Chase gets hit by something.  If all your cards are with Chase/Citi/BofA, a single event could lead to changes across the entire portfolio.  Personally, I like having a card with my local bank, with some regional lenders, federal CUs and some big financial supermarkets as well.  So, if something happens that affects major banks & regional banks & local banks and federal CUs & card only vendors & Synchrony & Comenity, then it's time to head for the hills.

---

Well summed up happypill.

[Anonymous]

Thank you for posting this! I too am looking for diverse lenders to expand my profile.I recommend FirstMerit Bank if you are looking for a regional bank with some flexibility. Have gotten some great rates through them and my banker looks out for me.

I'm interested to see which obscure banks or niche banks others recommend, too. Read an article yesterday stating that obscure banks are jumping to the top of the best buy tables with better rates than some other institutions.

I have never heard of World's Foremost Bank, but this gives me another one to check into.