In August I wrote a story (link here) about shopping choices hampering someone's ability to get a credit-limit increase. Because American Express is well known for employing shopping choices in its risk-management model, I used an American Express example to make my point. Many readers, not surprisingly, were angry that American Express would use this metric to assign credit limits. Which brings me to today's story.
When I wrote my story back in August, I was only talking about credit-limit increases. Since then, American Express has been using shopping habits to whack credit limits (story link here) as well.
A reader of mine, Sean, sent a list of merchant category codes to me this morning. When you look at the codes, you can see just how easy it is for card issuers like American Express to keep track of our spending. Some of the categories, as Sean pointed out to me, are quite granular. Indeed, there are plenty of subcategories, within one industry, to give card issuers plenty of information about our shopping choices.
Take, for example, some of the codes associated with medical treatment. There are codes for doctors (8011), dentists and orthodontists (8021), osteopaths (8031), chiropractors (8041), optometrists (8042), opticians (8043), chiropodists (8049), nursing/personal care (8050), hospitals (8062) and so on and so forth. It's easy to segregate our spending when the merchant categories are chopped up that fine.
Indeed, have you ever been arrested? Ever posted bond? Did you use a credit card to make the bond payment? The bond company used merchant code 9223 when you swiped the card for payment. After getting arrested you felt like unwinding? Headed to a massage parlor, did you? Well, if you didn't use cash (but instead used your card), the massage parlor flagged your purchase under the merchant code of 7297. You get the picture. Some of these codes are quite specific.
Merchant category codes can be used to tell American Express and other card issuers a lot about us. I imagine that card issuers are pretty good at interpreting the data. Given what they have to work with, though, it wouldn't surprise me if some decisions are easier to make than others.
Take a look at the merchant category codes (link here). Notice the particularity that some of them have. I was intrigued by the entire list, quite frankly.