Can Your Spending Patterns Affect Your Credit?

By Silicon Valley Blogger. Last updated 30 May 2014. 11 comments

I am one who prefers to use credit cards over cash for the convenience and ease of use of dealing with the plastic. Since I always pay my monthly bills in full, using credit cards has never been an issue for me. In fact, I'm always on the lookout for good credit card rewards programs and I readily take advantage of those 0% interest credit cards that allow me to take out free loans for a limited period of time. No worries since I always pay off my balances in full before the intro periods are up.

But regardless of how fiscally cautious and responsible you are as a credit card holder, you may still be curious to know just how much credit card companies know about you through your card use. The truth is, our card spending patterns provide information that is monitored by issuers; and this data has been used to affect our credit ratings.

This article from CreditCards.com is quite telling: credit card companies are interested in where we shop, how much we earn (which they may try to verify based on activity in our accounts), where we live, how much we normally spend per year and even what nationality we are. So it's not just how you pay your bills that goes on record, but also how and where you use your money. These companies keep their eye on how you shop, and use this data to determine your financial health. Certainly, they are mining a lot of our personal information for a variety of purposes. Here are a few of those reasons.

To know which products to market to you

I've been receiving a lot more telemarketing calls from my credit issuers lately and it's no doubt linked to what they know about me as a customer. This is nothing new though, as many retailers use the information they get about you to pitch more products your way. If you use sales and store catalogs, then you know what I mean!

To monitor your account for possible fraud

I've been contacted more than once for possible suspicious activity in my credit card accounts. This kind of free monitoring is something I appreciate from the credit card companies. At least they're putting their information gathering to good use this way.

To manage risk

Here's where a lot of consumers may feel a bit uncomfortable about the extent of tracking that their credit card companies are doing. The truth is, these companies watch your FICO score and credit report like a hawk to gauge your credit-worthiness. Even financial accounts you have at different institutions may be subject to scrutiny by credit companies and agencies such that any financial transactions you make may influence your credit rating. You may be paying your card bills on time but if you're late on your mortgage payment, watch out! That just may be grounds for your card rates to go up or for your credit limit to get cut. It's therefore important to check your credit score on a regular basis to keep abreast of what it is that is visible to lenders and credit watchers. You'll want to ensure that these reports are accurate.

What type of credit card are you interested in?
How much do you spend per month?
Do you carry a balance?

To monitor information that may be used for law enforcement.

If need be, financial data may be used for legal situations and cases. Our financial records may be utilized and entered as potential evidence in disputes, reviews or investigations of any sort.

That said, I'm not at all surprised that our financial behaviors are easily monitored by those we go into business with. When you enter into a relationship with a financial institution such as a credit card company, bank or mortgage lender, you should assume that your data is being tracked to form your profile as a debtor or consumer. It's the tradeoff we make to become borrowers or customers of companies that offer us the privilege of being part of a financial system that helps us thrive and prosper in the material sense.

Can You Avoid Being Monitored?

While it may be concerning that banks and credit card companies are aware of just how and where you spend your bucks, the good thing is that there have been steps taken by the government to pursue reform and regulate the card industry further. The Credit CARD Act has been put together to address the "abuses" that have been rampant in the industry for some time now. By early next year, the full effect of this legislation will be in place and may hopefully make a dent on some of the undesirable practices that card companies have been imposing upon their customers, including unpredictable rate increases, unfair changes in credit limits, and unfavorable adjustments to terms and conditions.

While the government is pushing for change in this area, there are things that consumers can do to protect themselves from this kind of scrutiny, if they so choose. It's always our prerogative to limit the use of credit cards when participating in financial transactions. It's simple: if you use cash, there won't be any data to track. As it stands, this could be one more reason for why using cash-only rocks.

So are you at all surprised by how much your spending behavior can affect how your lenders and card companies are viewing you? The bottom line is that there are both good and bad implications for having "big brother" watch how you shop. Well nothing's for free. In this case, we give away some of our privacy for the convenience of using the plastic.

 

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

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Guest's picture
Robert

Talk about Big Brother! We can't even spend our hard-earned money the way we like without being "graded" on it.

Guest's picture

Note: The practice of credit card companies being able to jack your rate because you are late on another card or your mortgage is coming to an end. In addition, any prior balances are not affected unless you paid more than 60 minutes late.

Unfortunately, Congress gave the companies ample time to jack everyone's rate before the February effective date. While a change to the law to make it immediate has been passed in the House of Reps, it hasn't been heard yet in the Senate.

Good article on the increases that are going on now in the NY Times

What the credit card companies have done for decades is milk those who had trouble paying on time or were a day late paying their bills. That got them in huge trouble as defaults on risky borrowers surged to 10% of their portfolios. Now they want to lend responsibly, not because its ethically what they should do, but because not doing so will bankrupt them in our current economic climate.

Guest's picture
valletta

As a former business owner, we paid over $3000 PER MONTH to the merchant services dept of the bank JUST TO ACCEPT credit cards! It used to kill me every month. That was our potential profit/reduced prices going to the credit card companies. And they don't even have a fair method of charging fees; why should you pay more in fees to charge a $100 dinner versus $20 at the gas station?! You are swiping a card. It's a HUGE scam and most people are unaware of it.

I am going to pay off our remaining card and use cash (debit in emergency/rentals/online) and move to a credit union. I'm done!

Guest's picture
Stacey Marcos

It should be obvious to everyone how monitored we are. I'm not even talking conspiracy theory stuff here. It's just common business sense. If it's electronic and your identity is know you are being tracked. From what you charge at the supermarket, what watch on cable, the websites you visit, the e-mails/texts/voicemails you send, the train/bus passes you swipe, the e-z pass in your car, your cell phone, etc. All of this info is tracked, stored and processed for someone's profit. It all falls under "market research" or "customer demographics". The more a corporation knows about you the better they can pitch products to you. Think Google and all it's ventures(Wave, Cloud Computing, Navigator, etc). They handle countless volumes of data, about you, for "free". Nothing is free. Think about it.

Should you put on your aluminum foil hats and crawl into a cave? No, of course not. Just be aware that the world is smaller then you realize.

Guest's picture

They are watching and analyzing everything we do now. Trying to overcharge us for things all the time.

John DeFlumeri Jr

Guest's picture
Felicia

I completely agree that this shouldn't be too much of a surprise to people. Everything today is done digitally and there is a footprint with every digital step you take; credit cards are the most obvious of all tractable data but really just one of the many ways consumer's data can be collected. It seems that people do not care though. According to StackMeUp.com, the average American's credit card debt is $5,200.

Guest's picture
sararay

I just wanted to comment on using credit cards instead of cash. I'm not sure if you have considered using a charge card, but I have been am American Express charge card holder for some time now and the perk of this card vs. debit and even credit is that you HAVE to pay your bills on time and they have the richest rewards program in the US. I earned thousands of dollars this year for everyday spending on essentials like groceries.

Guest's picture

wow I had no idea! Thats actually kind of scarey and isnt it invasion of privacey?

Guest's picture

So why exactly do we need credit cards? Even if you pay your balance in full every month, why not just pay for whatever you are buying immediately?

I have 2 credit cards. I decided to put them in a zip-lock bag with water and freeze them in my freezer. Interestingly, I have been a lot happier and have had more money to spend on things that I want. I am a big believer in debit cards. I just blogged about a debit card that I think is amazing: The Citibank AAdvantage Debit Card.

Guest's picture

Yesterday I came home and missed a voicemail blinking on my phone. When I finally picked it up all it said was, "Please enter your pin number." Had I 1)Not been cautious, 2)confused as to which one? I may very well have entered the pin number to my ATM card.
When I called the FBI, I was forwarded to ICE.gov as was I when I called the local sheriff's department. When I had done a reverse phone number lookup it was a cell phone number that I did not recognize and here right in the same city I am located in.
I just wanted to alert people to another one the things going out there...Thanks for all of the good articles you have...

Guest's picture
Guest

why do you put a post as gest huhu tell me wHY????????????