Robert Manning, author of "Credit Card Nation", says that banks and card companies are keeping an eye on cardholders and what they're buying. According to Manning, card issuers are paying close attention to the spending habits of many Americans. Increasing defaults and rising charge-off rates are forcing many banks to be even stricter with consumers.
The worsening economy is also making hard for many Americans to pay off credit card debts. Because of this, banks and card companies are looking for ways to slash credit limits or even take cards away from consumers, Manning says.
Experts add that cardholders should be aware of what they buy with plastic and how they buy them. For instance, many card companies consider some products and services as forms of escapism. Most banks and card issuers actually have special departments that handle and analyze their clients' purchases. Specialists often try to figure out what consumers buy the most when faced with financial problems.
To avoid losing their credit cards, consumers are advised to avoid paying for some items with plastic. Paying with cash is always the safest way to prevent card companies from becoming suspicious.
Most card companies look for signs of stress and impending financial problems even before they happen. They can do this by poring over the purchases of their cardholders. Experts say that cardholders should avoid paying for alcohol using their cards. Banks often consider drinking as a sign of depression or frustration over personal problems or even financial distress.
Even simple pleasures like massages and spas should be paid for in cash. Charging them to plastic can send the wrong signal to card companies. Massages can be misinterpreted as de-stressing activities. Stress could indicate financial problems and a higher possibility that cardholders will fail to pay on time or worse, default on their credit card debts.
Manning and other industry experts say that the process of collecting and analyzing data based on the consumers' spending habits and behaviors is called data profiling. Large corporation also use data profiling to maximize sales. Manufacturers actually pay supermarkets to place their products at eye-level. Researchers also conduct regular studies to discover the preferences of many consumers.
The same also goes for the credit industry, experts say. In fact, data profiling is now a $25 billion business. The latest figure is a 50 percent increase over data profiling amounts last year.
Experts contend that to avoid being tagged by card companies as high-risk cardholders, consumers should pay for alcohol, massages, and similar products and services with cash.