Over the last week, I have received three different letters from my credit card and debit card companies – all of them “Updates to Our Privacy Policy”. Just like you may have seen in the news with Google updating their privacy policies, all your credit cards and financial firms maintain privacy policies as well.
First, I wasn’t shocked by the fact that credit card companies share my information – I figured that out already given the fact that I get a bunch of random credit card offers in the mail, and coupons with my statements. I was shocked, however, by what Federal law protects and doesn’t protect.
Here are some interesting things to consider with Credit Card Privacy Policies:
What Do Credit Cards Do With Your Personal Information?
First, it is important to note what information credit cards collect:
- Personal Contact Information, such as name, address, phone number, and even employer
- Social Security Number and Income
- Purchase history and payment history (including, what, when, how much, how paid, etc.)
- Credit history and credit scores
Some of this information seems pretty straight forward – a lender will want to know my contact information for billing, and for recourse in case I don’t pay. They would also want to be diligent in lending to me, and as such, would run my credit scores and credit report.
However, what I don’t think they “need” to collect is purchase history. This is where the personal information collection gets murky and I disagree.
Why Do Credit Card Companies Collect Your Purchase History?
The sole reason credit card companies look at and use your purchase history is to try to make more money off you by marketing directly.
Federal law only requires two things:
- The company tell you exactly how they are using the information they collect (although many use odd jargon and long legal agreements to do this, so you still won’t understand)
- Allow you to opt out of information sharing with “non-affiliate” companies – which is pretty broad, but essentially meaning outside companies not related to the credit card company (but this does allow affiliated cards to share information with their companies, such as retail cards sharing information with the retailer they are affiliated with)
So, how do they use this information they collect:
- For marketing purposes (to offer products and services that may be relevant to you)
- For joint marketing with other financial companies (if they are a part of the marketing, it is not illegal to share information)
- For affiliates business purposes (this pretty much gives the retailer of a retail credit card free reign to do anything they want with your information)
Can You Limit What Information is Collected and Shared?
In simple terms, NO. If you want to use a credit card, you must agree to their terms and conditions, and acceptance of the privacy policy is one of the terms. The only information that you can limit sharing is information to true “non-affiliate” companies, which most card companies don’t do anyway because they view their customer purchase information as proprietary stuff and don’t like sharing it.
So, bottom line, if you don’t want the companies you shop out to know your spending habits and other information, pay with cash or check, and stay away from credit cards, especially affiliated retail card. If you don’t care, then use them all you want!
Readers, what are your thoughts on credit card privacy? Do you agree with what credit card companies are currently doing, or do you expect a right to privacy with your purchase history?
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here and here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.
Taline says
Wow…and here I though the “opt-out” was protecting my information from being shared. Never read all the fine print (as it is like a boring novel).
Good to know. Unfortunately, I like my rewards card and I earn about $1000/year off of it. I guess it is the price I pay for my information being out there.
funancials says
Tell me you didn’t read all of those privacy policies I was bombarded with! I’ve gotten to the point where I just accept it.
Good clarification of “affiliated companies.” Extremely broad. I have seen cases where a customer applies for a credit card at company x. The application is declined but passed onto company y without the customer’s knowledge. Customer receives a credit card from company y but with company x’s name on it. Company y actually services the account though and company x has nothing to do with it. Did that make sense?
Robert says
I write for a PF blog – of course I read the privacy policies! Your example makes no sense, but it describes exactly what these companies are doing!
funancials says
haha – let’s say I apply for a CC at Wells Fargo and end up getting a Bank of America CC instead! It actually has Wells Fargo’s name on it but it is serviced through Bank of America. These weren’t the actual banks involved…
Robert says
Wow, that is pretty crazy!
Darwin's Money says
I read something recently about how America’s productivity would be impacted by several Billion dollars each year if Americans actually read each and every privacy policy they encounter. Pretty funny (and ironic) study. If it weren’t for the lawyers, these policies could be a paragraph or two. Instead, they are made to be so arduous to read, nobody bothers.
Robert says
They really could be one sentence – “We’re going to share your information and there isn’t anything you can do about it!”
femmefrugality says
I really feel like this is an area that needs to be more strongly regulated. Majorly. For oh, so many reasons…privacy being one of them.