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Credit Card Applications » News » Other » Credit card providers admit profiling of users

Credit card providers admit profiling of users

June 16, 2010 | Updated on June 16, 2010
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The content is accurate at the time of publication and is subject to change.

In recent times, almost all consumers using credit cards for their purchases have been profiled by the credit card providers. The most recent federal report, released on Friday, mentions that the profiling is done based on the purchases made by the customer, the shops they made the purchases from, the location of the purchase and also the companies that held their mortgage.

Based on the profiling done by them, the credit card companies increased the interest rate, reduced the credit limits and even closed the credit cards of some consumers. The providers wrongly stated that it was the loan data and customer spending that led to this move. The main factors that led to these changes being made by the credit card companies are:

- The place where the purchases are being made
- The merchant processing the purchase
- Credit card type used
- Mortgage lender's identity

The Federal Reserve Board report that ran into 72 pages clearly pointed out that it was rare for issuers to profile customers based on their spending habits. In fact, only a small number of consumers were affected by this. Despite this, the report shows the first traces of predicting possible default consumer accounts by gathering data from the purchases made by a process called behavioral modeling.

The negative changes of the card are triggered by a range of behavior types and include the spending habits of the customers. The banks start keeping a check on your account when you start spending at places like casinos, pawn shops, low end retailers and discount stores which they consider to be early warning signs of the defaulters. Using your cards to buy used tires is also an early warning. Be prepared to notice negative changes on your card if your mortgage lender is in troubled waters and has a lot of foreclosures to their credit.

The critics, analyzing the report said, the spending behavior changes could also mean that the consumer is going through a rough patch currently or found themselves an irresistible bargain or was just out shopping with a new friend.

The practice of profiling users by credit card providers that has been repeatedly condemned by various consumers groups has now been confirmed by the Federal report. One of the providers, who wished to remain anonymous said, "In considering whether to reduce the credit line of a given cardholder, this issuer considered the performance and spending patterns of other cardholders with similar credit-related characteristics who shopped at the merchants where the given cardholder had made purchases."

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
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