Case

INTERACTIVE SESSION: ORGANIZATIONS

HOW MUCH DO CREDIT CARD COMPANIES KNOW ABOUT YOU?

When Kevin Johnson returned from his honeymoon, a letter from Am erican Express was waiting for him. The letter informed Johnson that AmEx was slash­ ing his cre dit limit by 60 percent. Why ? Not b ecause Johnson mi ssed a payment or had bad credit. The letter stat ed: "Other custom ers who have used th eir card at establishments where you recently shopped , ha ve a poor repayment history with American Express ." J oh ns on had started sh opping at Walmart. Welcome to th e new era of cre dit card profiling. Every time yo u m ake a pu rchase with a cre dit card, a record of th at sale is logged into a massive data repository maintained by th e card issuer. Each purchase is assigned a four-digit category code that describes the type of purchase tha t was made. There are separat e codes for groce ry stores, fast food re staura nts, do ctors, bars, bail and bond payments, and dating and esco rt services. Taken together, th es e cod es allow cre dit card compan ies to learn a great deal about each of its custom ers at a glance. Credit card com panies us e th es e data for multiple purposes. First, th ey use th em to target future promotions for additional products more accurately.. Users that purchase airline tickets might re ceive pro motions for frequent flyer mil es , for example. The data h elp card issuers guard against credit card fraud by identifyin g purchases that appear unusual compa re d to a cardholder 's no rmal purchase hi story. The card compa n ies also flag use rs who frequently charge more th an th eir credit limit or demonstrate erratic sp ending hab its. Lastly, these records are us ed by law en forcem ent agencies to track down crim inals. Credit card holders with debt, th e on es who n ever fully payoff th eir balances entire ly and thus ha ve to pay monthly interest ch arges and other fees, h ave b een a major source of pro fit for credit card issu ers. How...