In today’s world, it’s common for businesses to gather as much data on their customers as possible. Big data and related analyses have the potential to help companies develop new, better products for their customers and provide more unique experiences for those customers. And for financial institutions, those data are even more precious, since they have the power to tell them whether or not a person is trustworthy—i.e., whether they’re worthy of receiving a loan or a line of credit.
For credit card companies especially, it’s important to keep track of customers’ and potential customers’ buying habits. And maybe their credit scores. And maybe even their relationships.
So just what information does your credit card company have on you, and why is it so important?
Why Credit Card Companies Care
Let’s start by looking into why credit card companies care so much about you and your habits in the first place. Credit card companies have several goals, including attracting more customers, ensuring they can balance their own risks by lending credit at appropriate rates and with appropriate terms, and keeping valuable customers for as long as possible.
For that, they need data to consider:
- Trustworthiness. When getting approved for a credit card, a credit card company needs to know how trustworthy you are. If you have a long history of making payments, and you always make your payments on time, they’re going to be more likely to grant you access to a new card, and they might toss you a better annual rate or a higher credit limit while you’re at it. “Trustworthiness” can come in many different forms, however, so your credit card company needs to know how you’ve historically performed in a number of different categories.
- Value. Credit card companies, like all businesses, are incentivized by profitability. They need to know which of their customers are most valuable, and which ones are less so. Valuable customers are ones who are both trustworthy and willing to use their card regularly, and credit cards will do whatever it takes to keep them happy.
- Preferences. It’s also important to learn about customer preferences, including which stores they shop at and how they like to spend money or collect rewards. This is crucial for designing new products and services for customers, and can help them win over new audiences.
- Patterns. Credit card companies also like to observe the patterns their customers participate in, and study when those patterns diverge. It helps them not only better understand their target demographics, but also helps them identify when something isn’t right—like when a credit card has been stolen or is being used inappropriately.
Now, let’s turn our attention to some of the data your credit card companies can gather on you to accomplish these goals.
Your Credit Score
This one should be obvious. One of the first things a new credit card company will check on a new credit card applicant is their credit score. This score, calculated and kept by the three major credit bureaus, is a relative measure of a person’s financial history and trustworthiness. It’s the sum total of your actions and habits in each of several categories, including how consistently you’ve made payments (on anything—not just credit cards), how much debt you’re using, and how long your oldest account has been open.
Payment History and Reliability
Credit card companies also care a lot about how you’re paying their bills, and how you’ve acted in the past. If you’ve historically always made the minimum payment, but keep a moderate balance on your credit cards, you’re practically the ideal customer; you’re paying off your debt consistently, but you’re always accumulating more interest, increasing the company’s profitability. This makes them incentivized to keep you, and may give you more negotiating power if you want to get a better rate. If you miss too many payments, don’t expect much sympathy or extra perks.
Income and Debt Ratios
Your income and debt ratios are also likely known by your credit card company. You may need to report your income when applying for a credit card, and they can use a credit check to see how much standing debt you have. From there, they can calculate all kinds of statistics, including your debt to income ratios, how much debt you’re utilizing, and other considering factors for whether or not to lend credit to you.
Daily, Weekly, and Monthly Habits
Your credit card provider is also likely paying attention to your daily, weekly, and monthly habits. For example, it probably knows about your weekly trips to the grocery store and that you regularly go to the gym. These data are important for two big reasons. First, it gives them the chance to market specific products to you, such as coupons for your most commonly-frequented sporting goods store, or new credit card rewards that allow you to shop at your favorite places. Second, it lets them know something’s off if those patterns are broken.
They also keep track of how you take vacations—natural and recurring deviations from your spending patterns. For example, if you take a trip at the beginning of each June for a decade, it won’t raise any red flags when your credit card is being used across the country on June 3rd one year.
Your Personal Responsibility
Some credit card companies may also take note of the purchases you make related to your home, and living a responsible lifestyle. For example, if you make frequent trips to the home improvement store and invest in things like carbon monoxide detectors and fire extinguishers, it shows that you’re a responsible homeowner—and an enlightened consumer. These purchases may increase your perceived trustworthiness as well as your reliability as a consumer.
This piece is a bit trickier. Most credit cards don’t have a built-in feature that allows them to track your location, but if you’re using the credit card company’s signature app, you may be giving them more data than you realize. Merely having the app installed (with permissions granted) may be enough for your credit card company to track your travel and commute habits on a regular basis, which they can use to give you smarter, more personalized rewards.
How You Communicate
Chatbots haven’t completely taken over customer service (at least not yet), but your credit card company can still gather information about how you’ve spoken to customer service representatives in the past. When talking to another person, they usually have the ability to jot down notes about how you’re speaking—so if you start yelling and using profanities, they can take note for future interactions. Accordingly, it pays to be as kind and polite as possible; not only is it more respectful to the person at the other end, it will probably make you seem like a better overall customer, and get you better service when you need to make a change or request.
The combination of big data and AI means that credit card companies have access to more data than ever before—and they’re using those data to their advantage. While at first you might be somewhat creeped out that your credit card company is following you so closely, there are actually many practical benefits for you as a consumer. For starters, you’ll have access to better financial products and more appropriate access to credit. You’ll get perks better-suited to your lifestyle and interest rates that reflect your previous habits. On top of that, when there’s a strong deviation in your typical habits, your credit card company will know—and they may be able to take action, like suspending credit card activity if it looks like your card was stolen.
In any case, it pays to be aware of how you’re being tracked (and why you’re being tracked). The more knowledgeable you are about the modern world of consumer data, the better you can protect yourself—and the more you can tip the odds of financial success in your favor.