Wednesday, May 13, 2009

What Does Your Credit-Card Company Know About You?


Whether it be debt collection or credit-card solicitation, those in the card industry know everything about you. They know where you shop; they know what you buy; and they know what each purchase means. The card industry has built psychological profiles to figure you out. And figure you out it has.

From the New York Times Magazine:

The exploration into cardholders’ minds hit a breakthrough in 2002, when J. P. Martin, a math-loving executive at Canadian Tire, decided to analyze almost every piece of information his company had collected from credit-card transactions the previous year. Canadian Tire’s stores sold electronics, sporting equipment, kitchen supplies and automotive goods and issued a credit card that could be used almost anywhere. Martin could often see precisely what cardholders were purchasing, and he discovered that the brands we buy are the windows into our souls — or at least into our willingness to make good on our debts. His data indicated, for instance, that people who bought cheap, generic automotive oil were much more likely to miss a credit-card payment than someone who got the expensive, name-brand stuff. People who bought carbon-monoxide monitors for their homes or those little felt pads that stop chair legs from scratching the floor almost never missed payments. Anyone who purchased a chrome-skull car accessory or a “Mega Thruster Exhaust System” was pretty likely to miss paying his bill eventually.

And this one:

Data-driven psychologists are now in high demand, and the industry is using them not only to screen out risky debtors but also to determine which cardholders need a phone call to persuade them to mail in a check. Most of the major credit-card companies have set up systems to comb through cardholders’ data for signs that someone is going to stop making payments. Are cardholders suddenly logging in at 1 in the morning? It might signal sleeplessness due to anxiety. Are they using their cards for groceries? It might mean they are trying to conserve their cash. Have they started using their cards for therapy sessions? Do they call the card company in the middle of the day, when they should be at work? What do they say when a customer-service representative asks how they’re feeling? Are their sighs long or short? Do they respond better to a comforting or bullying tone?

Enjoy the rest of the story here.

Related Articles:

When it Comes to Your Credit Card Company's Web Site, You're Not Anonymous

Are Your Shopping Choices Hampering Your Ability to get Credit Line Increases?

Are You A Bankruptcy Risk? Enigmatic Score May Tell Lenders

American Express Will No Longer Use Spending Patterns To Slash Credit Limits

Merchant Codes Make It Easier To Rate Credit Risk By Where You Shop

28 comments:

  1. I'm absolutely sure this psychology theory technics will never work for me or for any of my friends.If you have nothing to lose and credit score is ruined anyway,you'l never pay a single penny to the bank...

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  2. Just wait till this stuff gets included in your FICO.

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  3. That's why I'm prepared for banks knowledge,before they even realized this...

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  4. By the way, I hope that no one thinks that data mining and psychological profiling only started in 2002. This has been going on for a lot longer than that.

    What I'm also interested in is what other tools the card issuers are using -- in conjunction with the direct purchasing that they see.

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  5. "Drewbert said...

    Just wait till this stuff gets included in your FICO."


    Ya, just make sure you don't log into your myfico account at 1:00 a.m or your score will take a hit :)

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  6. Hey, what if online banking systems start looking at your cookies to see if you frequent CMB, CB, FW etc...?

    Yikes!

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  7. I posted a comment a couple weeks back about how Capitol One took almost two weeks to apply a payment to my available credit. After reading this article as well as several of the related articles....I think I may have an idea as to why they did that. The payment was made shortly after I returned from a trip to Las Vegas. A trip that I paid for with my credit cards. I have a feeling now that they saw a trip to Vegas in my profile and freaked a little. I didn't even think that credit card companies were THAT data addicted. Thanks for posting blogs like this, I really appreciate being as informed as you have helped me to be.

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  8. OwduaNM, glad I could be of a service (in pointing to the article).

    Clutch, I assume everything.

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  9. CM, you sound mysterious and scary today.

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  10. Clutch, I am wearing my Darth Vader costume. That's probably why. Ha!

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  11. I'm logging in right now, when I "should be" at work. Conundrum--I am at work, but working from home today. What does that say?

    Also, I thought frugal people paying down their debt bought generic? And night owls login at 1 a.m. It seems to me that these statistics screw the people who do the same "risky" behaviors for different reasons.

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  12. It was interesting to read about the breadth of crap that Canadian Tire carries in its stores. It reminded me a lot of American drugstores, except that our drugstores don't carry tires. For all I know, Canadian Tire doesn't carry tires either. In that case, Canadians are just as lamebrained as we are -- a comforting thought.

    In our last episode, I offered a puzzle for a once-popular song. The puzzle went like this:

    if MALE_SIBLING = true then_
    OVERWEIGHT = false

    One Clutch Cargo of Fort Lee, New Jersey, offered the following correct answer:

    He Ain't Heavy, He's My Brother

    Clutch is now 11 questions away from being a mooyunaire!

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  13. Spooky, YAY.. bring 'em on!

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  14. "Are cardholders suddenly logging in at 1 in the morning? It might signal sleeplessness due to anxiety. Are they using their cards for groceries? It might mean they are trying to conserve their cash."

    I have to give them a big WTF???

    I use my credit card at grocery stores for the rewards. Did the bozo who came up with the profile figure in people like me? I've NEVER missed a payment on any credit card.

    "His data indicated, for instance, that people who bought cheap, generic automotive oil were much more likely to miss a credit-card payment than someone who got the expensive, name-brand stuff."

    What about people who shop at outlets? Is it risky to buy the expensive, name brand stuff at 50% off MSRP? Do they profile people who make wise buying choices?

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  15. I've made many purchases at Amazon late at night. I wonder how they will profile me? Maybe I should stick with the brick and mortar stores and make purchases between the hours of 9am and 9pm.

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  16. Suppose I'm on a credit monitoring site, and test the 'bad' option: "Skip payment on every bill, what happens to my score"? (FICOs near 810, I can pay all my balances with the cash in my wallet, don't worry!) But I'm curious about the other side ...

    Does this mark me as "more likely to default"? Are they selling this information about me?

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  17. It is rather disturbing just how much records are kept about an individual in general and moreso on how each record is carefully scrutinized and analyzed.

    Nevertheless, the way things are structured right, I think it's still advantageous (overall) to take advantage of the potential perks while keeping in mind that you are being watched. Of course, once that situation changes, you can bet that I'll jump ship.

    It's very safe to say that anything you do not want on the record, don't use/participate in any source that could eventually be traced back to you.

    I personally don't really care if my creditors scrutinize my purchases. As an undergrad, I think my spending patterns are quite obvious (and there's very little to hide, in my opinion). In terms of the dollars spent on my credit cards, a good bulk goes towards textbooks, office supplies (moreso in my case, as I also student teach and I have to bring my own materials from time to time) and since I don't dorm, transportation (a good $81 every month here in New York City).

    Of course, like any other undergrad, a good volume of my overall transactions take place in fast food, fast casual and the occasional fine dining.

    Some of my mannerisms are a little different from the rest of my undergrad colleagues. They know and I'll let them work to find them ;-)

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  18. CM, aren't you data-mining us for your "10 Credit Questions & Answers" feature?

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  19. A little bit, V. I know the search words that folks use to find me. And I know that I have more readers from the east coast than the west coast, which explains why I try to keep a posting a schedule that caters more to those who live east.

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  20. azntg wrote: "It is rather disturbing just how much records are kept about an individual"

    I agree. Perhaps we need new privacy laws for the 21rst century. Americans should have a right to privacy.

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  21. I dont think there psychologists did to well look where they are now :) lol

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  22. I wonder if they take into consideration that not everyone works from 9 to 5. Just because you are home during the day doesn't make you a deadbeat. I recently switched from a 3 year stint on a swing shift to straight nights. I miss alot of aleep, but never a payment!

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  23. They did not even need to compile the data to figure this out. Any items that are typically associated with the lower social classes are going to be associated with higher default rates.

    This just confirms the obvious.

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  24. TU did an interesting study of actual risk by state. The ENTIRE Southeastern US and most of the Southwest has a lot more defaulters living in those states than elsewhere.

    The least likely to default state in the US is North Dakota.

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  25. I just canceled my Amazon.com Chase credit card because of their high interest rate which they refused to reduce or remove because of my excellent credit record. Considering that today 4/23, Congress is reviewing the credit industry is being investigated regarding unfair consumer practices with credit card companies charges. Since I have other credit cards I don’t need Chase Bank or their credit cards.

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  26. There are a million credit transactions everyday; and it’s probably not surprising that credit card companies collect all data and monitor spending patterns to determine how credit-worthy a consumer is.
    Credit card companies utilize spending information using your credit card as it gives them an idea about your financial stability. A sudden change in your spending information may imply that you might be facing financial dilemmas. This can make the company decide to either decrease your credit limit or increase your interest rate. It is not yet really certain how much of a factor what type of changes in spending behavior can determine which ones are great credit risks; but there’s a likelihood that expenditures on second-hand stores, casinos, or bail bond services can raise the red flag.

    Card companies also use this information for other purposes as well also like marketing other bank products or detect suspicious activities on your card. Doesn’t this sound too much of an incursion to your privacy? It smacks of too much Big Brother, I’d say!

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  27. Credit card companies know way too much, and if they don't know they'll find out. A while back I got into trouble with one of my accounts, and they had the gall to call up my ex-wife looking for me. We've been divorced for 17 years; I didn't even know where she was. (I got the message through a brother-in-law whom she was able to contact).

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