Can Your Spending Patterns Affect Your Credit?
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.
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.