In 2015, a study conducted by the Massachusetts Institute of Technology found that scientists were able to use the information from credit card purchases to correctly identify the names of the consumers making the charges. Their accuracy was a staggering 90% — and they only looked at four transactions.
These scientists could do this even after credit card companies anonymized the transactions, erasing the names and other personal details of the cardholders doing the buying.
You might be surprised at just how much your credit card provider knows about you, and has known for a while. Take for example the 2008 case of Kevin Johnson, who received a letter slashing his credit limit by $7,000 because his credit card provider didn’t approve of the stores he frequented. These stores, they claimed, were common shopping hot spots for people with poor repayment histories. This kind of profiling ignored Johnson’s solid 760 credit score in favor of the data it was secretly gathering. And although Johnson’s card provider later abandoned the policy, the question of ethics had been raised.
Though the concept of credit card data sharing can be a little unnerving, it’s not all harmful, either. Over time, your credit card provider can piece together a detailed history of your spending habits to help you find relevant sales, coupons, or services. If you charged the purchase of a new couch, for example, you might suddenly see advertisements from stores selling home furnishings. You might even receive a mailing from a mortgage lender wondering if you want to refinance your mortgage loan.
So, exactly what information is your credit card collecting and how does it affect you?
1. The Type of Food You Like
Do you eat at the same four restaurants each month? If you charge these meals, your credit card provider will take notice. You might start receiving coupons for discounts at these restaurants.
2. Where You Like to Grocery Shop
If you do the majority of your shopping at one grocery store, don’t be surprised if you start receiving mailings informing you of weekly specials. You might even be asked to join that store’s preferred shopping program, which could save you even more money. (See also: 9 Store Loyalty Programs That Are Worth It)
3. What You Like to Buy Online
Many of us are turning to online shopping as a way to beat the stress of visiting brick-and-mortar stores. Just know that your credit card provider will be happy to share your online shopping habits if you pay with plastic. If you buy flowers for every Valentine’s Day, birthday, or anniversary, local and national florists might start targeting you with advertisements boasting of their own specials.
4. Details About Your Financial Health
Your credit card provider can glean much about your financial health through your transactions. If you are constantly shopping at thrift or secondhand stores, this could be a sign that you are struggling financially. If you decide to request a credit line increase, or an APR decrease, you might not be approved. Or even if you decide to apply for a new credit card with the same bank, they might use this information in their decision. Of course, you might also start getting advertisements from companies who target such consumers — everyone from mortgage lenders eager to refinance your home loan to a lower interest rate, to insurance providers eager to get you into what they consider a lower-cost auto insurance policy.
5. The Medications You Need
Ever charge your visits to the doctor or dentist? Maybe you also charge your prescriptions? Don’t be surprised if this information is shared, bringing advertisements from a host of medical providers. If you prefer that your medical histories and treatments remain private, you might want to pay with cash instead.
So — What Are the Privacy Rules?
Thanks to the Gramm-Leach-Bliley Financial Modernization Act of 1999, you’ll receive a privacy letter from your credit card provider when you first open your account and, in most cases, once every year thereafter.
The letter will state how your credit card provider intends to use your personal financial information. It might state that your provider uses information from your transactions for its own internal purposes.
Your credit provider usually will state that it might share your financial information as a way to market its own products and services to you, and that it will share your information with affiliated businesses. Maybe the parent company behind your credit card also runs a mortgage business. It might share your information with this affiliated business unit, meaning that you might be targeted for refinance and mortgage advertisements.
The letter might also mention that your provider will share information about you with nonaffiliated companies. These are outside companies that aren’t a part of your credit card provider’s family of business units.
How Can You Limit What’s Shared?
You do have some control over how your credit card company shares your information. Read the privacy statement you receive each year. It will tell you how to opt out of some of this info-sharing. You might have to call your provider, write a letter, send an email, or fill out an online form.
You can’t opt out of all sharing, though. The Consumer Financial Protection Bureau says that you can stop your credit card provider from sharing information with nonaffiliated companies. You can also stop your provider from sharing information that appears on your three credit reports — one each maintained by Equifax, Experian, and TransUnion — with affiliated companies. The bureau, though, says that you can’t stop your provider from sharing information with affiliated companies when that information is based solely on the transactions you have made with your credit card.
If you are uncomfortable with the information that credit cards gather about your spending, make sure to read the privacy notices carefully and follow the instructions to opt out, and then try to make your purchases in cash.