They know all about you…and it’s not the government

electrodeThey know everything about you.  They use sophisticated databases and enhanced psychological techniques to bend you to their will.

“They” are the credit card industry.

Award-winning investigative reporter Charles Duhigg (an Albuquerque native and Valley High School grad) has the incredible story in Sunday’s New York Times Magazine — What Does Your Credit-Card Company Know About You?

Learn how the industry peers through the window to your soul:

The exploration into cardholders’ minds hit a breakthrough in 2002, when J. P. Martin, a math-loving executive at Canadian Tire, decided to analyze almost every piece of information his company had collected from credit-card transactions the previous year… Martin could often see precisely what cardholders were purchasing, and he discovered that the brands we buy are the windows into our souls — or at least into our willingness to make good on our debts. His data indicated, for instance, that people who bought cheap, generic automotive oil were much more likely to miss a credit-card payment than someone who got the expensive, name-brand stuff. People who bought carbon-monoxide monitors for their homes or those little felt pads that stop chair legs from scratching the floor almost never missed payments. Anyone who purchased a chrome-skull car accessory or a “Mega Thruster Exhaust System” was pretty likely to miss paying his bill eventually.

(The industry) began using Martin’s findings and other research to build psychological profiles… A few firms began sending offers to people who had registered for baby showers or weddings, for example, since data showed that getting married or having a child — in addition to making people buy lots of new stuff — often also makes them more responsible. Other companies started cutting cardholders’ credit lines when charges appeared for pawnshops or marriage therapy because data indicated those were signs of desperation or depression that might lead to job loss.

… Data-driven psychologists are now in high demand, and the industry is using them not only to screen out risky debtors but also to determine which cardholders need a phone call to persuade them to mail in a check. Most of the major credit-card companies have set up systems to comb through cardholders’ data for signs that someone is going to stop making payments. Are cardholders suddenly logging in at 1 in the morning? It might signal sleeplessness due to anxiety. Are they using their cards for groceries? It might mean they are trying to conserve their cash. Have they started using their cards for therapy sessions? Do they call the card company in the middle of the day, when they should be at work? What do they say when a customer-service representative asks how they’re feeling? Are their sighs long or short? Do they respond better to a comforting or bullying tone?

Duhigg’s story couldn’t be more timely. Push back against the industry is building, as borne out by President Obama’s recent visit to New Mexico to urge congressional support for the Credit Card Accountability and Disclosure Act.

For more information on credit card reform, check out Americans for Fair Lending.

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One Response

  1. Ha. Charlie used to to take over the history class in high school and give light-hearted, but intellectually sound, lectures and basically school the teacher.

    Charlie is still ever the valedictorian… awesome.

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