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Now that credit flows less freely, and customers are struggling to pay off debt in a tough economy while Congress has taken a tougher stance with credit card companies, the companies are mining the data available to them about how and where we spend. Then, as this fascinating New York Times Magazine story shows, they are using some very basic psychology training to figure out what it all means when dealing with customers one on one.
Have you ever gotten one of those calls from a credit card company to alert you to an unusual purchase out of concern that a thief had gotten hold of your card and was using it for ill gain? How nice, you thought. Isn't that great. They are keeping an eye to make sure my card and credit are secure. Well, think about it. The same data-profiling metrics used to spot an unorthodox purchase can be used to assess all of your spending habits, and any changes that may trigger concerns about money problems and risky behavior.
Data profiling allows credit card companies to judge whether your spending indicates you are having money trouble. They are using the info gleaned from your purchases to decide whether your credit limit should be reduced or, more seriously, you need to be targeted for some heavy-handed collection calls. It is not a perfect science, so often the judgments reached will be unfair. Alcohol purchases, according to this NPR piece, are top of the list for triggering concerns that, say, maybe you're letting off steam because you're worried about losing your job.
Being frugal doesn't always put you in a good light, either. Say you usually shop at mall department stores then start shopping regularly at Wal-Mart. Yep, you could very well receive notice from a credit card company that your credit limit has been reduced soon after the switch.
NPR rounded up 10 purchases to avoid (or at least think twice about) putting on your credit card because they are just the kind of thing data-mining programs pick up on. Number one: traffic tickets. "You look reckless. And tickets can push up your insurance rates, which could put a strain on your finances, which could make it harder for you to pay your bills. A lot of people who have charged traffic tickets have defaulted on their cards," NPR reports.
The other purchases, beside alcohol, include:
- marriage counseling
- lottery tickets
- income tax payments
- retreading tires
Does any of this come as a surprise? Or do you make all of your purchases knowing someone is watching?
